Wayfair: Citron is listening to the smartest guys in the room. First stop back to $100

Since first writing on Wayfair, Citron has acknowledged the breadth of the moviepass economy (click the link), and we’ve refrained from commenting further on Wayfair, as the market continues to reward top line growth … at all costs.


We also understand how quickly stories can change. Last year, a team of data scientists and Wharton professors ran a study that included 2500 simulations only to find that Wayfair is running a terminal business

The team has updated their research one year later. A lot has changed.

Before we dive in, Citron would like to congratulate the professors on the sale of their analytics company to Nike, a company that understands the importance of data in customer retention: Nike Data Analytics.

The team’s new report, authored by professors Daniel McCarthy and Val Rastorguev, can be found here: Theta Equity Partners Wayfair Update

Professor McCarthy and Rastorguev compared their findings today to when they first published. Their conclusion is pretty astonishing:

We estimate that the unit economics of newly acquired customers have actually gotten worse – from a $10 average loss per customer we estimated back in 2017, to $19 per customer in Q2 2018.

What is interesting about the situation at Wayfair is that the complete opposite is true: every single profit-related measure has come in worse than we had anticipated, both in terms of absolute dollar amount and as a percentage of sales. 

In sum, when we look at where Wayfair’s underlying financials are now relative to where we thought we would be, the situation at Wayfair has actually been worse than we had predicted.

Citron will now add some thoughts to the professor’s work: