Wayfair’s shares rose by as much as 27% Thursday in their first day of trading, giving the online home goods retailer a valuation of more than $US3 billion.
Despite its blockbuster debut, Wayfair is “hardly a household name,” writes MarketWatch.
The Boston-based company became one of the biggest online purveyors of home goods in the U.S. practically overnight, with sales exploding to $US916 million last year from $US601 million in 2012.
Wayfair’s massive growth comes more than a decade after its founding, when it was called CSN Stores and sold speaker and television stands on the website RacksAndStands.com.
Wayfair CEO Niraj Shah founded CSN with his Cornell classmate Steve Conine, in 2002. The generic name was chosen to avoid scaring off manufacturers who were burned by the dot-com crash, Shah said.
“When we started in 2002, manufacturers didn’t want to hear the word ‘Internet,'” he told Business Insider in a previous interview.
Over the next eight years, the company launched more than 270 separate websites, each of which sold a very specific category of home goods.
“Our view was that you just had to pick a category that was off the beaten track,” Shah said. “You couldn’t focus on electronics or, you know, the same items that Amazon and others were selling.”
There was AllBarsStools.com, EveryMirror.com, and BedroomFurnitureDirect.com. Each website offered thousands of selections as well as editorial content on how to pick the right bar stool, or mirror or whatever category the site was selling.
The idea was rooted in search engine optimization. Shah and Conine knew that by offering a huge selection on hundreds of categories, shoppers were likely to stumble their way through a Google search into shopping on a CSN website. By 2010, the company had about 4.8 million customers and sales of about $US380 million.
But CSN Stores was having a hard time growing its repeat customer base, primarily because most shoppers had no idea that the websites were managed by the same brand.
That’s when Shah and Conine decided they needed to build the “ultimate home store” by rolling all of their 270 websites into one. To fund their effort, they raised about $US200 million from four Boston-area venture capital firms including Spark Capital, Battery Ventures, Great Hill Partners, and HarbourVest Partners. It was their first round of outside capital.
Wayfair.com was launched in September 2011 and the company spent the next year in the tedious process of closing each of the standalone websites. In 2011, the company also launched Joss & Main, a home goods flash sales site similar to One Kings Lane and Gilt Home, but with a lower price point.
In September 2012, Wayfair launched its first television marketing campaign and brand awareness rose from 6% to 27% over the next year, Shah said.
The company now has more than 1,550 employees and access to more than 7 million products from 12,000 suppliers.
Over the last year, Wayfair has been focusing on ramping up its merchandising efforts to give customers a better idea of how the site’s products can come together to decorate an entire room.
Executives say their typical customer is a woman between the ages fo 35 and 65 with an income level of $US60,000 to $US175,000.
In a regulatory filing, Wayfair states that the U.S. home goods market is expected to grow to $US297 billion by 2023 from about $US233 billion last year, based on Euromonitor International data.
Online retailers accounted for about 7% of home goods sales last year, the company says.
In the first six months of the year, Wayfair generated sales of $US574.1 million, up from $US383.2 million in the same period a year earlier.
But the company isn’t profitable yet. Wayfair posted a net loss of $US63.2 million in the first six months of 2014, compared to a loss of $US24.3 million a year earlier.
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