Shoppers were looking for new couches, beds and decor, remodeling their kitchens and yards, and investing in telecommuting setups. Demand was so hot it disrupted global supply chains and caused long delays in goods.
Fast forward two years. The picture looks completely different now.
Inflation has knocked out low- and moderate-income shoppers, who have given up on discretionary shopping to pay for essentials like groceries, gas and rent. Wealthier customers shifted their spending from furniture and other goods to travel and services. Mortgage rates are rising, so the demand for new homes is falling.
That puts pressure on Wayfair and other chains that have previously seen sales jump during the pandemic.
Wayfair said Thursday that its sales fell 15% in the most recent quarter ended June 30 compared to the same period last year; it also lost 24% of its active customers, a sign that the company is struggling to retain the customers it had at the start of the pandemic. Wayfair suffered a loss of 378 million during the quarter.
“Customers are becoming more mindful of where their dollars are going as prices at gas stations and grocery stores eat up a larger portion [their] wallets,” Wayfair CEO Niraj Shah said on a call with analysts on Thursday.
“We’ve also seen a lot of those discretionary dollars flow out of goods and into services, especially travel,” he added.
Shah said customers were trading up cheaper options, and Wayfair increased stock to stimulate demand.
Shares of Wayfair are down more than 60% this year, while shares of RH are down 45% and Bed Bath & Beyond is down 57%. Williams-Sonoma, which also owns West Elm and Pottery Barn, fell 13%.