Wayfair is an e-commerce furniture and home décor retailer. The company has been built on a thesis that consumers want a lot of selection and variety for home furnishings, therefore it has amassed a catalog of over 8 million items for sale on its website from over 10,000 suppliers.[i] This huge catalog is made possible through drop shipping, in which the supplier of the product ships it directly to the consumer once a purchase has been made. Wayfair has grown to $3.4 billion in revenue while taking very little inventory.[ii]
The furniture and home décor category still has very low penetration in online shopping compared to other categories. Only 9% of home goods are purchased online compared to 20% for apparel and 35% for consumer electronics.[iii] The headroom for further penetration provides a huge opportunity for Wayfair. Critics are skeptical that furniture will ever reach the level of e-commerce penetration of these other categories because of the difficulty envisioning furniture in a room and without the ability to touch and feel the pieces before making the purchase decision. However, augmented reality and virtual reality can provide solutions to bridge this gap for Wayfair.
Wayfair launched an in-house research and development team called Wayfair Next in 2016 to accelerate the category shift to e-commerce by exploring new forms of product visualization.[iv] Wayfair Next is using technology to improve the online shopping experience for the Wayfair products. The team is working on three priorities: 1) 3D modeling and 2D renderings; 2) augmented reality; and 3) virtual reality.
1) 3D Modeling and 2D Renderings
3D modeling of products is the backbone of all three of the Wayfair Next priorities. Without 3D models of Wayfair’s product catalog, the products cannot be represented in AR or VR. In addition to these applications, Wayfair is also using 3D modeling in order to create 2D photos and imagery of the products for their website. With 3D models, Wayfair can create product images and full room lifestyle photos of furniture and décor without needing product samples, physical photo studios, or a photography and styling team. Wayfair has already begun using fully rendered photos on its website as images on the product page for some SKUs. Wayfair is capturing value through these 2D rendered images in the form of cost savings from photo shoots and product samples.
2) Augmented Reality
The 3D images are also driving the ability for customers to visualize products in their home using augmented reality. In 2016, Wayfair launched an augmented reality app, WayfairView, in the Google Play store available on Google Tango-enabled smartphones.[v] WayfairView allows customers to super-impose a product into a room of their home using the camera on their smartphone. Customers can move and rotate products to test layouts and view objects from all angles. Importantly, Wayfair is creating value for customers by allowing them to test out the look and fit of the product before making a purchase, solving a key pain point of shopping online for home goods.
3) Virtual Reality
Lastly, Wayfair has launched two virtual reality apps: 1) Patio Playground for Oculus Rift in August 2016[vi] and 2) IdeaSpace on Google Daydream in November 2016.[vii] These virtual reality apps allow customers to view home furnishing products together to test different styles in a virtual room or backyard. In the future, virtual reality could also enable Wayfair to have virtual showrooms, allowing customers to visit a Wayfair-branded store to browse products in virtual reality and potentially solve the touch barrier by allowing customers to feel the product either through swatches and samples or future tactile technologies.
Wayfair is utilizing augmented and virtual reality to improve the customer shopping and buying process for online furniture and home décor. These and future apps can help Wayfair differentiate themselves from their online and brick-and-mortar competitors, allowing Wayfair to capture more home goods market share and a large portion of the furniture sales moving online. The main challenges that remain are the low penetration of AR and VR devices, the limitation of the AR app to Google Tango-enable smartphones, and the backlog of Wayfair’s 8 million products that will need to be 3D modeled before being available in the AR and VR apps.
[i] Wayfair Investor Presentation, 4Q2016. http://s2.q4cdn.com/848638248/files/doc_presentations/2016NewFolder/W.Presentation_Q4-2016_vF.pdf
Note: I interned at Wayfair in the summer of 2016.