The Wayfair Riddle – WSJ

When

Amazon.com

even nods in the direction of an industry, businesses tremble and investors flee. At

Wayfair
Inc.,


W 1.91%

the biggest online furniture merchant, investors did the opposite.

The company’s shares are up 115% in the last year, valuing it at $8 billion. Since its founding in 2002, Wayfair has mastered the art of selling and delivering furniture online, a logistical challenge, but it hasn’t figured out how to do it profitably. Now new competition, high marketing costs, low customer retention and its need to keep raising cash loom as risks to Wayfair’s future.

Much of its success in undercutting traditional players with faster and cheaper shipping options is due to its investment in its own in-house logistics network. “We were less enamored of its furniture business than its logistics strategy,” says

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