My firstminute | Niraj Shah, Wayfair

What is the recipe for successful co-founders? 👨🏻‍🍳🥣

How do you make marketplace economics work? 🔂

We dig into all this as well as the future of commerce, contrarian ideas, COVID tailwinds, how to make marketplace economics work with Niraj Shah, Co-founder, Co-Chairman & CEO of Wayfair. 

Niraj co-founded the company with Steve Conine back in 2002 and the pair rapidly grew the business to become one of the largest online destinations for home furnishings, housewares, home improvement goods and more, generating around $14 billion in revenue.

During the session from Friday 26th June 2020, we explored the many aspects of Niraj's journey as well as, e-com defensibility and the role of private label brands, and finally, why a US company should or shouldn’t expand internationally.

Transcript

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First minute capital is $100 million seed fund, proudly

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backed by a number of tech founder LPs, including 30 unicorn founders.

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Part of our DNA is to take wisdom and lessons learned from one generation

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of successful entrepreneurs and share those lessons and pieces of advice

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with the next generation of successful founders.

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And that's really what this webinar series is all about.

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My first minute is a fun opportunity to speak informally

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to some of the world's top founders on the first minutes of their careers,

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how they see the world and general leadership advice.

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My name is Clara Lindbergh and Dawes.

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I'm an investor in First and Capital

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and today I'm speaking with Marriage Shop

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and the Crash.

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As you all on this call know, is the founder and CEO of Wayfair,

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one of the world's largest online destinations for all things for the home

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and not only one of the largest, but it's really

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one of the fastest growing e-commerce sites right now.

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Your 2020 numbers are absolutely astonishing.

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It seems like, as we all are spending more time at home,

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we're also spending more money on our home

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as evidenced by your earnings.

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Q1 You saw 20% revenue growth and since March your share price

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has gone from $27 to $211

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and your market cap is now exceeding $20 billion.

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So I think it would be almost a crime to to start this conversation

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in any other way than to ask what the last couple of months have been like.

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I can imagine super exciting on the one hand, but on the other

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it must be operationally challenging to try to keep up

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with literally billions worth of new demand on a monthly basis.

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Tell us about. That.

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Thank you for thank you for having me here.

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Yeah.

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Well, so, you know,

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on one hand, we've been a company that's been accustomed to growing quickly

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for the last five years.

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Our compounded annual growth has been 42% per year.

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So we've been doubling at a rate of every two years, being twice as large,

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and last year were just shy of 10 billion in revenue.

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But I would say what's been a challenge is that since, you know,

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in the quarter a couple of weeks ago, we gave an update in quarter to date.

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So the last two or three months, we've been growing 90% year over year.

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So just growing from, you know, adding, you know, basically doubling in size

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is put a lot of strain, as you said, on the physical operations.

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Think about supply chain, transportation and customer service.

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There's just a tremendous volume

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that on one hand, we have a very nimble and agile team.

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On the other hand, it took us it took us obviously by surprise,

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and we were growing at a good rate, but then all of a sudden super fast rate.

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I would say that it

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probably took a month

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to feel like we had kind of adapted to efficient processes

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around social

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distancing and safety and health in the warehouses and transportation,

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and kind of figure out how to make sure that we can handle that volume

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more consistently.

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And then on the customer service side, where, you know, we have 3000 people

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that we're constantly hiring and trying to grow that can handle the volume.

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But it's it's it's been a fun challenge, but it's been a challenge nonetheless.

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So it really is one of the biggest success stories of of 2020.

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How much should we attribute this to to lockdown?

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And what's going to happen to Wayfair post COVID?

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Well, I think the reason we've been able to grow

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at that 42% per year when you look at the last five years,

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is simply that even at the nine

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plus billion that we did last year,

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that's still a pretty small percentage of that market.

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So when you think about HomeGoods, we're only in HomeGoods.

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But HomeGoods is everything from furniture and décor to the finished parts of DIY

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or home improvement.

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So lighting and plumbing

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and flooring and tile white goods and you know, everything.

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Your garage, your backyard front of your house and housewares, that's about a $400

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billion market in the US and Canada and about a 400 billion market in Europe.

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And so we view it as us only having a little over 1% share with a lot

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more for us to do and our ability to grow pretty, pretty uncapped.

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And so even with double that, you know, say we have 2% share now or what have you.

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We believe this is a category that's going to increasingly move online.

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And by having a platform that's very focused on only on home,

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all the things that matter around the esthetic

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and browsing the selection and getting educated about the item

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and then the kind of complex nature of the deliveries.

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These are big, bulky items

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prone to damage, generally deliveries a hassle, making that easy and convenient.

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We think that we can be the go to platform.

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And so what's happening now is I think while we were going to continue to

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get these customers over time and continue to grow for years and years to come,

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I think you probably have a few years worth of growth just compressed

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into a very short period of time where customers who are bound to tip

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in sooner or later are all giving it a try now.

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And similar to online grocery, it's a category that is done very well online.

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But for a customer, there's various forms of fear

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or uncertainty that prevent them from perhaps starting.

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And once they try it out, though, they have a strong point of view

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and what you really financial, let's say try it up and say,

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hey, this is pretty convenient, this pretty good selection is great.

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And they kind of stayed with a portion of their spend online

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and the portion of the spend that's online grows and that is basically what gives

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us a bright

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future and keeps us very excited.

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And I think that's such an important point to to make as well, that even if you're,

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of course, experiencing COVID tailwinds, that type of growth, would it be

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would it be possible if it wasn't for all the thoughtful work preceding it?

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And in a way, I think that actually reminds me a little bit about the way

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your situation back in 2011, when, again,

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a lot of people were referring to Wayfair as this overnight success story.

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But that wasn't really the case at that time either, because 2011 was on

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the one hand that the year that you took the name Wayfair

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and the year that you brought on venture capital for the first time,

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but at that time you had been operating the company for something like

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ten years already, and we're doing around 500 million in revenue.

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But you were operating not as one site the way we know it today,

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but as 250 individual websites.

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So clearly the first iteration of the company was quite different.

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Can you take us on that, that journey back to 2002 and and the very first website?

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Yeah.

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So so Steve Conine and I, who are the two co-founders of Wayfair,

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we actually started our first Internet business right out of college in 1995,

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and we had sort of the good fortune in the super early days of the Internet

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to really get kind of firsthand experience with various different Internet

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businesses and the technology and what have you.

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And so by the time we were starting at the time was called CSM stores obviously

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now today called Wayfair in 2000, two, we already had a pretty good

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understanding of the Internet

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and we certainly were in the group of folks

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who thought that the future was incredibly bright.

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And at the time, though, in terms of figuring out what our next idea

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was, e-commerce was an interesting one because it was not viewed

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as a particularly good sector because of the dotcom crash in 2000 2001.

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And so we ended up coming across a bunch of data

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that basically showed that eCommerce was actually doing

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just fine as continuing to grow and just keep ticking away.

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And then while the stock market had gotten very, you know, exuberant

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and then crashed, the actual consumer demand had not done that.

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Consumer demand was just kind of continuing to grow.

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And so we ended up picking you know, our view was that

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national retailers had a lot of the major categories covered,

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but there were niches that were not covered.

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And, you know, so certain of them had complexity.

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And so there was opportunity.

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And so the first one,

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the first website we launched

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was called Racks and Stands, and the first category was TV

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Stand Speaker

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Stands and basically entertainment, furniture and entertainment furniture.

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And in the United States is about a $3 billion a year annual category.

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So it's not particularly large, not particularly small,

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but there was

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no one who would be a specialist in it is a hard category and was very short.

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Our idea was that, well,

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we could keep launching these different narrow websites

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in these types of categories and we could be the place

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you would find online when you decided we wanted access to selection,

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what have you.

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What ended up happening is just in the first few months,

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we ended up becoming one of the larger sellers of of TV stands.

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So our supplier started to hey, we have, we have these other categories,

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other online guys sell more beds or more desks.

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And so what we did over that

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first decade is we started going category by category through furniture,

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then we category by category through décor, then then home improvement

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housewares.

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And so we ended up, as you said, with 250 sites.

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And through that, we sort of realized that we really could

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provide a great experience.

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But the challenge we had was just customers wouldn't remember who we were.

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They didn't realize we had all these other sites.

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And that's what led us to the point of realizing that with a brand,

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we could potentially become the go to place for all things home.

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And in many ways we had built a lot of the infrastructure for it

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in terms of supply relationships and delivery infrastructure.

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But, you know,

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we were going to be captive with the size would be in it and that's what led to the

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to launch in Wayfair.

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I love the first and

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back in 2002 everyone say e-commerce is dead.

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You're saying it's not so much that e-commerce is dead.

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It's just about identifying the right category where it stands.

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And clearly you found you found the category.

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But how did you then go about building defense ability?

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Yes. So what's interesting,

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the the home category, when you think about retail goods,

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most retail goods are more or less branded commodities.

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And so there's quite a few different people who sell branded commodities.

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So if you think about like Double-A batteries, well, you know, Walmart

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or Target or Amazon, they all have the same Energizer, Duracell, same brands.

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And you can buy it from any one of them.

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You can buy any of these brands.

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They're basically identical products and that's about 60% of total

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retail sales are in those categories and about 20% are in grocery.

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Grocery obviously being different.

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But again, in the middle of the store,

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more or less looks a lot like what I just described on the 60%

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and then the outer rim where you get to the perishables and meat

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and the fruits and vegetables, there's more complexity.

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And then there's two pieces left in terms of the big markets.

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And one is fashion, which is about 10% of total retail and one is home.

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And what's interesting about home is it doesn't really have brands

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in the same way only until you get to the luxury end of their brands.

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And then it has a lot of delivery complexity.

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But the damage issues are in complexity.

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The cost of delivery and making it easy for a customer is a complexity.

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And then a product.

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Discovery for a customer is the third big, big issue

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because they crave selection,

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because they don't actually want the same item as everyone else.

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They actually want a unique item

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that they want the perfect, unique item because they're not going to buy

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that particular type of item again anytime soon.

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And so what we've done over time is our competitive

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advantage has basically come out of

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that with the largest selection while still making it navigable

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and helping you find that perfect item and have confidence that it does.

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It will work the way you want.

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It will be the quality you want.

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It is the item in your envisioning.

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The second thing is basically around how we handle the delivery

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in the service too, to really make make the experience

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quick.

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Quite good for you.

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And the third is the way in which we work with the supply side to really facilitate

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that, the whole relationship because it's not, it's the suppliers

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tend to be small to medium sized companies and there's many, many of them.

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And so being able to get that to work is

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quite a specialized type thing.

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And am I right that quite, quite

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a big portion of your selection is private label brands as well.

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So what we do so we don't actually design product

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and we don't actually carry our own inventory, but what we do do

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in the non-branded portions of our category,

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so that's about 80% of our categories are non-branded.

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We'll actually create our own brands or collections

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will then curate in items that come from the various suppliers

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into collections that are style and price point quality oriented.

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And we'll do the merchandizing work to tell the whole lifestyle story.

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So instead of you having to go to a much higher priced specialty retailer

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to get that level of merchandizing, you can actually get it from Wayfair.

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And it makes again the concept of you

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finding an item you're looking for and then envisioning it in your own space.

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It makes that much easier.

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And all different sorts of price points.

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Was that key to, to your strategy from the from the very beginning to be able

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to serve such such a diverse target market?

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Yes. So

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our goal in an ideal world, our goal would be

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to have the entire selection available in the whole world.

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All right.

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Now that there's various frictions that prevent that.

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But the basic idea is that if you have everything

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you then on one hand, you definitely have what the customer wants.

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But you've created a complication of how do you help the customer

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find that item.

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So the way we think about is let's let's try to have everything

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and take on that challenge then of also how do we then also make it easy

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for someone to find what they're looking for?

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And by doing both, you end up offering the customer the best experience.

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And so Wayfair is meant to have everything from the opening price points

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all the way up to the beginning of premium.

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And then we have a luxury

00:13:59:06 - 00:14:02:16
platform called Paris Gold, which basically is only luxury.

00:14:02:19 - 00:14:05:23
It's only the premium end of the market, the brands

00:14:05:23 - 00:14:08:04
you tend to find in the design centers and so on and so forth.

00:14:09:07 - 00:14:10:28
And to solve curation for

00:14:10:28 - 00:14:15:03
that, for the customer there, I heard that is pretty important.

00:14:15:03 - 00:14:18:08
Do you want to talk a little bit about the emerging tech tech trends

00:14:18:08 - 00:14:21:18
that you've been kind of at the forefront of and and that you find

00:14:21:21 - 00:14:25:02
that you think are critical to to Wayfair being where it is today?

00:14:26:00 - 00:14:26:08
Yeah.

00:14:26:08 - 00:14:30:15
So I think that's one of the things that's given us a big advantage is being always

00:14:30:20 - 00:14:33:07
thinking about how to use technology in an innovative way.

00:14:33:09 - 00:14:37:13
So today, even out of the 16,000 plus people at Wayfair, there's about

00:14:38:04 - 00:14:38:28
3000 people

00:14:38:28 - 00:14:42:25
in customer service, about 5000 people who work in our logistics operations.

00:14:43:07 - 00:14:44:26
And of the 8000 people

00:14:44:26 - 00:14:48:25
who work in our corporate offices, 3000 of them are building software.

00:14:49:01 - 00:14:54:19
So 3000 of them are software engineers, product managers, designers.

00:14:54:29 - 00:14:57:15
And then we also have hundreds of data scientists as well.

00:14:57:15 - 00:14:59:09
And by having this team

00:15:00:08 - 00:15:01:06
very tight knit, working

00:15:01:06 - 00:15:05:06
on each area of the business, you're able to really do things that others can't do.

00:15:05:20 - 00:15:09:06
And from your point about AI and machine learning

00:15:09:06 - 00:15:11:26
data science, you know, in March, it's a pretty

00:15:13:20 - 00:15:15:28
you're able to use that

00:15:15:28 - 00:15:19:14
kind of complicated approach in quite a few areas of our business,

00:15:19:14 - 00:15:21:28
given the amount of data we have access to.

00:15:21:28 - 00:15:25:02
But in merchandizing, it's one place, for example, that you're able to get

00:15:25:07 - 00:15:29:01
tremendous gains and wins everything from identifying new items,

00:15:29:01 - 00:15:33:02
being able to predict which new items might become the popular items

00:15:33:13 - 00:15:36:14
so you can know which items perhaps to kind of get more of a

00:15:36:23 - 00:15:40:21
more of a push for to how do you a lot of the different

00:15:40:21 - 00:15:44:14
tagging and nomenclature of how you help customers navigate the catalog.

00:15:44:25 - 00:15:47:16
You find that these algorithms can outperform what you could do

00:15:47:16 - 00:15:48:16
with human tagging.

00:15:48:16 - 00:15:53:03
And so there's a lot of ways that we use AI and everything from how we do marketing

00:15:53:03 - 00:15:56:27
to how we do merchandizing, to how we run our operations in our supply chain.

00:15:57:15 - 00:16:00:09
And we're constantly trying to make that better because just the,

00:16:01:10 - 00:16:04:03
you know, I think some folks look at it as an expensive investment area,

00:16:04:06 - 00:16:05:22
but when you look at the unlocks

00:16:05:22 - 00:16:07:05
and what you can do for the experience, it's

00:16:07:05 - 00:16:09:09
actually one of the most productive things you can do.

00:16:09:25 - 00:16:10:02
Yeah.

00:16:10:06 - 00:16:11:24
It seems like that has been your

00:16:11:24 - 00:16:15:21
your strategy to really invested in in-house teams and building

00:16:15:27 - 00:16:20:05
bringing things like logistics and, and technology in-house.

00:16:20:05 - 00:16:24:07
So maybe you can talk to us a little bit about your your vertical integration

00:16:24:07 - 00:16:28:05
strategy over the last eight years and how you've gone about deciding

00:16:28:05 - 00:16:32:10
whether to build these competencies in-house from scratch

00:16:32:10 - 00:16:37:10
or to to acquire businesses with these competencies.

00:16:37:10 - 00:16:41:27
So we've definitely been more on the organic path and the acquisition path.

00:16:41:27 - 00:16:43:12
And generally

00:16:43:12 - 00:16:47:04
it's because our core philosophy at the end of the day is we want to be

00:16:47:04 - 00:16:50:13
very oriented around our customers and be as ambitious as we can be.

00:16:51:16 - 00:16:53:28
But at the end of the day, we we of course have competitors

00:16:53:28 - 00:16:57:00
who are in a similar market and have a similar view.

00:16:57:00 - 00:16:59:24
And so we think the reason we outpace our competitors

00:17:00:01 - 00:17:01:14
really comes down to our team.

00:17:01:14 - 00:17:05:04
So it's sort of the caliber of the team, it's the culture that that empowers

00:17:05:04 - 00:17:07:11
that team, the way in which they work together

00:17:07:11 - 00:17:10:08
and to accomplish things, the way in which we keep a very entrepreneurial

00:17:10:21 - 00:17:12:26
view of the world regardless of our size.

00:17:13:12 - 00:17:15:14
And so at the end of the day, what we found

00:17:15:14 - 00:17:19:08
is that we invest so much in the culture and in the ability to find and attract

00:17:19:08 - 00:17:21:00
and retain great people.

00:17:21:00 - 00:17:23:15
It's a lot harder to do an acquisition and feel like you're

00:17:23:15 - 00:17:26:05
going to get further than just adding people to the team.

00:17:26:18 - 00:17:30:02
Because if you do it in a organic way, you already have a culture

00:17:30:02 - 00:17:32:25
that you really think is powerful and you can progress it.

00:17:33:12 - 00:17:36:23
And if you make acquisitions, you generally will not have an ideally

00:17:36:23 - 00:17:39:01
similar culture. And so it can be more challenging.

00:17:39:16 - 00:17:42:16
But we do think as we grow, acquisitions

00:17:42:16 - 00:17:45:18
will definitely play a role as we continue to expand it.

00:17:45:18 - 00:17:47:16
So is it's a question of like how do you

00:17:47:16 - 00:17:50:08
how do you do that in a way that it's really helpful for both businesses?

00:17:50:08 - 00:17:51:05
And that's something that I think

00:17:51:05 - 00:17:54:03
we're in the early days of really learning about, you know,

00:17:54:05 - 00:17:57:04
five years ago we made a big commitment to expanding in Europe.

00:17:57:25 - 00:18:00:14
Four years ago, we made a big commitment to building out our end

00:18:00:14 - 00:18:02:22
to end physical logistics infrastructure.

00:18:02:22 - 00:18:05:20
A lot of today is not necessary about new commitments like that,

00:18:05:20 - 00:18:07:13
but it's really all the things we have underway.

00:18:07:13 - 00:18:09:23
How are we really pushing those forward very aggressively

00:18:10:00 - 00:18:11:11
because there's just so much more room.

00:18:12:29 - 00:18:16:00
And you mentioned you are your international strategy there.

00:18:16:00 - 00:18:18:28
And I always find it fascinating when

00:18:19:07 - 00:18:21:15
when us entrepreneurs go to go

00:18:22:16 - 00:18:24:25
go abroad, given how large

00:18:25:12 - 00:18:27:15
that market is in the US alone,

00:18:28:03 - 00:18:31:03
how did you decide when the time was when the time is ripe for Wayfair?

00:18:32:20 - 00:18:37:00
Well, to be honest, we you know, I wouldn't say we were perfect on that.

00:18:37:03 - 00:18:41:17
We started with an effort in Europe in 2008, 2009.

00:18:41:17 - 00:18:44:20
With the benefit of hindsight, I would say that that was too early.

00:18:44:20 - 00:18:48:01
You know, we basically we didn't have the resources to really commit enough

00:18:49:05 - 00:18:52:19
to the market to really be successful in the way that we wanted to be.

00:18:52:25 - 00:18:55:26
And so for a few years, our efforts there just didn't achieve.

00:18:55:26 - 00:18:56:21
You know, they grew,

00:18:56:21 - 00:18:59:07
but we didn't really achieve the potential that we knew was there.

00:18:59:22 - 00:19:03:27
And we really didn't have the confidence that the approach we had was going to win.

00:19:04:17 - 00:19:05:17
And so then by the time

00:19:05:17 - 00:19:09:16
we got to the summer of 2014, we then we'd grown significantly.

00:19:09:16 - 00:19:12:05
We had a lot more resources. We really made the decision.

00:19:12:05 - 00:19:14:24
We said, well, you know, we don't want to dabble.

00:19:14:24 - 00:19:16:14
We want to be the leader in everything we do.

00:19:16:14 - 00:19:19:28
So if we really want to be in Europe, we really need to commit to building out

00:19:19:28 - 00:19:23:19
a really strong team and really resource that business.

00:19:23:19 - 00:19:26:28
And so that's when we started ramping up the team.

00:19:26:28 - 00:19:29:08
I think in the summer of 2014 we probably had

00:19:29:08 - 00:19:32:18
less than 100 people in Europe and we were, you know,

00:19:32:19 - 00:19:35:07
sort of a bit player in both the UK and Germany.

00:19:35:21 - 00:19:40:27
Today we have over 2000 people in Europe were the leader in home in the UK where

00:19:41:19 - 00:19:45:22
we have a well-known brand in the UK and Germany where maybe a year

00:19:45:22 - 00:19:47:14
and a half into building the brand there

00:19:47:14 - 00:19:50:00
usually takes about three or four years, but it's growing quite nicely.

00:19:50:09 - 00:19:52:20
So now we're seeing the real results.

00:19:52:20 - 00:19:55:23
But it took us a while to really understand that

00:19:56:20 - 00:20:00:07
expanding into a new market, really the kind of commitment it takes.

00:20:00:07 - 00:20:02:29
And so today that's a lot of how we think about things

00:20:03:01 - 00:20:05:23
upfront when we have an idea, well, what would it take to win?

00:20:05:23 - 00:20:08:00
Are we ready to commit to that or not?

00:20:08:00 - 00:20:11:04
And if we're not, then maybe now's not the time to start it.

00:20:11:05 - 00:20:13:15
Wait till we really are willing to commit.

00:20:14:00 - 00:20:16:21
And it's not like you do everything all at once, but you just you want to have

00:20:16:21 - 00:20:19:24
an understanding of what it would take and make sure you're willing to keep

00:20:20:03 - 00:20:23:05
and you have the capability of investing along that journey.

00:20:24:08 - 00:20:25:17
Well, selfishly, we're

00:20:25:17 - 00:20:27:20
really happy that you have a big office in London,

00:20:27:20 - 00:20:28:28
and it would make it easier

00:20:28:28 - 00:20:32:21
for us to convince you to come and visit us off the road.

00:20:32:21 - 00:20:36:04
Let's zoom out a little bit for a second and talk

00:20:36:04 - 00:20:40:18
about your relationship with Steve, which I find fascinating.

00:20:40:18 - 00:20:44:13
You guys have been co-founders for something like 25 years now

00:20:44:22 - 00:20:48:29
and three ventures, as you mentioned before, I think you met already at high

00:20:48:29 - 00:20:52:26
school, started your first venture in in university, as you said.

00:20:53:14 - 00:20:57:07
What's the recipe for a successful co-founder relationship?

00:20:57:12 - 00:20:59:25
You say?

00:20:59:25 - 00:21:02:21
Well, I think you need

00:21:02:21 - 00:21:04:28
to have someone who shares your

00:21:08:00 - 00:21:10:21
excitement and view of what you want to do.

00:21:11:11 - 00:21:15:11
And then you need to make sure that you both have significant amounts

00:21:15:11 - 00:21:18:12
of mutual respect in terms of listening to each other, because needless

00:21:18:12 - 00:21:21:14
to say, there'll be items you disagree on or one of you has a stronger

00:21:21:14 - 00:21:24:22
point of view or different point of view or understanding of an item.

00:21:25:15 - 00:21:26:15
I think the other thing

00:21:26:15 - 00:21:29:21
which ends up being a challenge sometimes for co-founders is

00:21:30:15 - 00:21:33:13
and this just worked out for us, it just happened by happenstance, but

00:21:33:26 - 00:21:36:15
it works out very well when you have complementary skills

00:21:36:15 - 00:21:39:25
and you're drawn to different areas of the business because any time

00:21:39:25 - 00:21:42:22
you sort of have to carve up who's going to do what

00:21:42:29 - 00:21:46:19
and both of you want to do something, and neither of you won't want to do

00:21:46:19 - 00:21:47:15
something else,

00:21:47:15 - 00:21:48:17
it gets very difficult

00:21:48:17 - 00:21:50:27
because I think people really it's very hard to be very happy

00:21:50:27 - 00:21:54:18
unless you're really working on things that you're particularly excited about.

00:21:54:23 - 00:21:56:15
You say you also need to be good at them.

00:21:57:14 - 00:21:58:09
And for us we

00:21:58:09 - 00:22:01:11
had quite complementary skills, which in the beginning we didn't realize that.

00:22:01:11 - 00:22:03:18
But you know, I was generally more

00:22:04:20 - 00:22:06:20
oriented around the general management of the business,

00:22:06:20 - 00:22:09:27
the commercial side, Steve was more oriented around the technology side

00:22:10:09 - 00:22:12:21
and that partnership, that was really the basis, you know,

00:22:12:22 - 00:22:15:07
and then we knew each other well and we trusted each other.

00:22:15:07 - 00:22:16:07
And that was really the basis

00:22:16:07 - 00:22:19:02
of which we really built the whole business partnership, which is,

00:22:19:03 - 00:22:22:27
as you said, you know, after 25 years, it feels very, very natural at this point.

00:22:24:02 - 00:22:27:02
That I've said I've heard that when when you guys started out,

00:22:27:12 - 00:22:29:00
you thought that you were going to lead

00:22:29:00 - 00:22:31:26
the technical side and that Steve was going to be done on

00:22:31:26 - 00:22:34:01
marketing and business. Is that is that right?

00:22:34:01 - 00:22:35:20
Or is that just a rumor?

00:22:35:20 - 00:22:37:01
No, that's the plan we came up with.

00:22:37:01 - 00:22:39:26
And that lasted about three months into our first business.

00:22:39:26 - 00:22:42:13
And ever since then, it's sort of reversed course

00:22:42:13 - 00:22:45:09
and we've stayed on the alternate course the rest of the time.

00:22:45:25 - 00:22:47:18
Well, what was that conversation like?

00:22:47:18 - 00:22:51:01
Was it just one day you, Steve, shows up and says,

00:22:51:01 - 00:22:54:08
This code is really shit, I got to do it all over again.

00:22:54:08 - 00:22:56:18
Let me take over or the other way around.

00:22:57:20 - 00:22:59:03
You know, it was pretty natural

00:22:59:03 - 00:23:02:12
because we just sort of gravitating to being interested in the other thing.

00:23:02:12 - 00:23:04:21
And and it kind of worked out well because we were both,

00:23:04:21 - 00:23:06:27
you know, gravitating to being interested in the other thing.

00:23:07:00 - 00:23:09:08
Right. And so that's what made it easy.

00:23:09:08 - 00:23:12:15
Would you say that the recipe for a very successful marriage

00:23:12:15 - 00:23:15:07
is the same as for a successful co-founder?

00:23:15:23 - 00:23:17:24
I mean, there's a lot of similarities, right?

00:23:17:24 - 00:23:21:19
Because I think, you know, learning how to work with someone else.

00:23:21:19 - 00:23:21:22
Right.

00:23:21:22 - 00:23:23:22
Because you're not always going have the same views and making sure

00:23:23:22 - 00:23:27:14
you can listen and you're not so confident that you're always right, that

00:23:27:15 - 00:23:31:14
that you do, you lose the ability to listen and that matters.

00:23:31:14 - 00:23:35:01
And so I think there's a lot of the same principles, right, that let you succeed.

00:23:36:11 - 00:23:38:01
We that we know that your

00:23:38:01 - 00:23:41:12
your wife is an entrepreneur herself as well.

00:23:41:28 - 00:23:45:04
What's the division of labor like at your home in Boston?

00:23:45:04 - 00:23:47:09
Who is who who's decorating the home, for example?

00:23:48:15 - 00:23:50:13
My wife is definitely the one decorating the home.

00:23:50:13 - 00:23:51:10
She has the eye.

00:23:51:10 - 00:23:52:18
She has the eye for the product.

00:23:52:18 - 00:23:55:23
I if I decorated the home, I am not sure

00:23:55:25 - 00:23:58:25
it would have quite the same character that it does now and it's fantastic.

00:23:58:25 - 00:24:01:22
So I'm very happy to just be the beneficiary.

00:24:02:12 - 00:24:04:19
Is she using Wayfair furniture?

00:24:05:18 - 00:24:08:04
Absolutely. Everything is from Wayfair.

00:24:08:05 - 00:24:08:28
We have five brands.

00:24:08:28 - 00:24:11:23
Wayfair just in Maine, all modern Birch Lane and Paragould.

00:24:11:23 - 00:24:15:12
And you know, for years, everything we buy is from from us.

00:24:15:21 - 00:24:18:07
And it's you know, it ends up

00:24:19:06 - 00:24:21:27
when you shop for yourself, you know, when you're in e-commerce,

00:24:21:27 - 00:24:24:00
it's really an interesting spirit when you're shopping for yourself.

00:24:24:00 - 00:24:24:29
That's really when you get a feel

00:24:24:29 - 00:24:29:16
for whether or not the product you built is is really good or not.

00:24:29:16 - 00:24:31:29
And you certainly find the problems when you shop for yourself,

00:24:31:29 - 00:24:34:22
when you get frustrated that you can find this or find that.

00:24:35:17 - 00:24:39:03
I'm just looking at all the other faces on this call

00:24:39:03 - 00:24:42:10
and there's really a lot of future ecommerce thought leaders

00:24:42:10 - 00:24:46:00
and I want to make sure that we get to Q&A as soon as we can.

00:24:46:00 - 00:24:47:22
We can hear from them.

00:24:47:22 - 00:24:50:07
But before that, I wanted to revisit

00:24:50:07 - 00:24:53:11
something that we talked about in the very beginning of this call,

00:24:53:11 - 00:24:57:19
which was your kind of contrarian view in 2002,

00:24:58:02 - 00:25:02:02
when you went against the saying about eco being being dead.

00:25:02:02 - 00:25:07:02
And I'm wondering if you're holding a kind of similar contrarian view today,

00:25:07:02 - 00:25:07:29
something you believe

00:25:07:29 - 00:25:11:21
to be true about the world, that other people just don't seem to see that

00:25:11:21 - 00:25:15:29
if you were to start a venture in 2020, you kind of double down on.

00:25:16:28 - 00:25:17:07
I don't

00:25:17:07 - 00:25:20:07
know that this is one that people don't see per se,

00:25:20:07 - 00:25:23:03
but I think an average people sell at short, which is

00:25:24:16 - 00:25:27:21
if you think about the Internet, it's fundamentally transforming.

00:25:27:21 - 00:25:31:27
It's really Internet combined with the with smartphones.

00:25:31:27 - 00:25:34:10
So the fact that you're carrying a computer in your pocket or your purse,

00:25:35:08 - 00:25:36:17
the combination of the two.

00:25:36:17 - 00:25:39:07
So the global network coupled with the device,

00:25:39:24 - 00:25:44:06
I think it's more or less transforming virtually every industry one by one.

00:25:44:15 - 00:25:47:14
And I think what happens is, okay, they believe that.

00:25:47:14 - 00:25:51:02
But then when they get into the details, they take something that exists today

00:25:51:02 - 00:25:53:10
and they only project it forward a little bit.

00:25:53:10 - 00:25:56:19
And if you can, I think if you look at the biggest businesses in

00:25:56:19 - 00:25:57:21
the world, they're built

00:25:58:25 - 00:26:01:08
in a way that while they initially solve a problem,

00:26:01:08 - 00:26:04:16
they then keep compounding that gain over time and they keep evolving

00:26:04:16 - 00:26:06:22
because they're fundamentally going after something very large.

00:26:07:13 - 00:26:09:29
And I think there's still tremendous amounts of opportunity

00:26:09:29 - 00:26:13:13
because if you look at the evolution kind of pre-internet to where we are

00:26:13:13 - 00:26:15:15
today, it's still very modest relative

00:26:15:15 - 00:26:18:04
to where things will be when you roll forward through time

00:26:18:24 - 00:26:22:09
and you have, you know, the generation of folks who've grown up

00:26:22:09 - 00:26:26:15
with, you know, that the Apple iPhone was only launched in 2007.

00:26:26:28 - 00:26:29:27
So if you think about the iPhone, so I 13 years old and so you think

00:26:29:27 - 00:26:33:00
about the generation of folks who've now grown up with this type of technology.

00:26:33:10 - 00:26:33:23
You know,

00:26:33:23 - 00:26:36:25
they're basically they're still you know, they're not out of their twenties.

00:26:36:25 - 00:26:39:21
And so there's just so much change that's going to continue to occur

00:26:40:02 - 00:26:42:21
as you have more and more folks are effectively using this technology

00:26:42:21 - 00:26:45:29
as a native, you know, natural, original experience.

00:26:45:29 - 00:26:48:12
So I tend to think people under

00:26:49:00 - 00:26:51:21
under envision what the future will be.

00:26:51:21 - 00:26:55:19
And on that note, I think we should open it up.

00:26:55:20 - 00:27:00:05
As I said, that this is a really impressive group on the line today.

00:27:02:03 - 00:27:03:05
And now

00:27:03:05 - 00:27:08:27
we're going to turn to Q&A.

00:27:08:27 - 00:27:15:23
And maybe we start with Annabel Jack, who is the chief commercial officer

00:27:15:24 - 00:27:18:04
at Meetup.com, and

00:27:18:23 - 00:27:21:13
that was at my deco with with friends.

00:27:21:13 - 00:27:25:02
So Annabel definitely knows a thing or two about the home as well.

00:27:25:08 - 00:27:26:12
Thank you so much for that.

00:27:26:12 - 00:27:29:22
Niraj obviously made Dotcom look to Wayfair

00:27:29:22 - 00:27:32:25
for a huge amount of inspiration all the time.

00:27:33:25 - 00:27:37:04
And similarly, when we're at my desk as well, I have very fond memories of us

00:27:37:22 - 00:27:39:26
trying to grab loads of domain names, looking at what

00:27:40:06 - 00:27:44:01
and stores have done and all of us big accounts like big.

00:27:44:01 - 00:27:46:21
It's all ten domain names it's sort of a. Really.

00:27:46:21 - 00:27:50:15
Try to follow your strategy that but I was I guess I was most interested

00:27:50:15 - 00:27:51:24
to understand

00:27:52:25 - 00:27:55:09
what excites you most

00:27:55:09 - 00:27:58:26
in your kind of role at Wayfair today to keep you as CEO?

00:27:58:26 - 00:28:02:05
Definitely kind of 20 years, which kind of feels like a long time

00:28:02:14 - 00:28:04:08
and understandably is a fantastic business.

00:28:04:08 - 00:28:05:05
But I want to kind of know

00:28:05:05 - 00:28:08:00
what is the one thing that kind of most excites you, that

00:28:08:00 - 00:28:12:22
that keeps you in your role that for such a long time yet?

00:28:12:23 - 00:28:16:17
So to me, it's the fact that, you know, despite

00:28:16:17 - 00:28:20:22
the size we're at on an absolute, you know, dollar

00:28:20:22 - 00:28:24:10
or whatever basis, we still view it as a super early days.

00:28:24:14 - 00:28:27:15
So when you at the plans when I when I talk to different groups

00:28:27:15 - 00:28:30:22
in the company about the plans we have or think about what we're investing

00:28:30:22 - 00:28:33:29
in, what we're trying to do, it just feels like the whole,

00:28:34:07 - 00:28:37:22
you know, we're still, you know, kind of the very beginning of the journey.

00:28:38:04 - 00:28:41:22
And that is just gets to me, that's what's really exciting.

00:28:42:03 - 00:28:45:18
I think if we viewed it as, Oh, we have a mature business and it's very large,

00:28:45:18 - 00:28:49:05
very profitable, but just ticking away, you know, a few percent per year,

00:28:49:14 - 00:28:50:28
I do not think

00:28:50:28 - 00:28:53:11
that might be a great business, but I wouldn't be particularly excited

00:28:53:11 - 00:28:54:19
to spend all my days on it.

00:28:54:19 - 00:28:57:01
It's it's the fact that we're still so early

00:28:57:05 - 00:29:00:09
and so we have the entrepreneurial sort of opportunity in front of us,

00:29:00:09 - 00:29:03:12
but we also have the resources to kind of pursue it with ambition.

00:29:03:12 - 00:29:05:22
And then that that's the combo.

00:29:06:04 - 00:29:07:29
Of what makes me feel really entrepreneurial then,

00:29:07:29 - 00:29:11:24
because that's quite an amazing thing to do when you've got 16,000 US still in

00:29:11:24 - 00:29:12:14
the business.

00:29:13:22 - 00:29:14:10
So what we try to

00:29:14:10 - 00:29:16:17
do is we try to take an approach of

00:29:17:10 - 00:29:20:21
we try to prioritize what we want to do, but then what we do is we'll

00:29:21:25 - 00:29:25:21
pick or hire a really strong leader to pursue that agenda

00:29:26:08 - 00:29:27:22
and we'll try to have each area

00:29:27:22 - 00:29:31:15
run fairly autonomously, kind of orchestrated around the strategies

00:29:32:08 - 00:29:35:09
kind of being collectively tight,

00:29:35:24 - 00:29:39:07
but the actual execution be such that they can run

00:29:39:07 - 00:29:43:01
parallel paths so that and then what we do is we have about 100 of these teams.

00:29:43:09 - 00:29:46:29
We every six months we do a business review of each of these efforts

00:29:46:29 - 00:29:50:03
to figure out if we have problems or if we need to resource things

00:29:50:03 - 00:29:51:19
more or what have you.

00:29:51:19 - 00:29:54:18
But this allows us to kind of parallel path more things.

00:29:54:25 - 00:29:56:23
And then as we feel like

00:29:56:23 - 00:29:59:28
we can take on more things, we'll just start an incremental new team.

00:30:00:06 - 00:30:04:00
And so rather than having kind of the traditional sort of

00:30:05:08 - 00:30:06:08
kind of

00:30:06:17 - 00:30:09:16
structure of you know, a lot of companies have like

00:30:09:16 - 00:30:12:17
committees and reviews and all these types of things, annual budgets.

00:30:12:24 - 00:30:15:26
We try to not have any of that because we think it'll stifle innovation.

00:30:15:26 - 00:30:16:20
Would rather

00:30:16:20 - 00:30:19:21
have these teams have a lot of autonomy, be able to drive things forward

00:30:20:07 - 00:30:24:08
and just bet on that team being really smart about making good decisions.

00:30:24:29 - 00:30:28:15
Thank you so much for that for that question, Annabel.

00:30:28:15 - 00:30:33:16
I think we have another question for it from our LP test Mulvany,

00:30:33:16 - 00:30:36:29
who is also the CEO of FINA Biotics, which is

00:30:37:13 - 00:30:41:06
of course Europe's largest vitamins and supplements company.

00:30:41:23 - 00:30:42:11
Hi. New

00:30:42:11 - 00:30:46:14
evaluations of your success firstly and extremely well done and rapid growth.

00:30:46:14 - 00:30:49:01
It's really, really amazing.

00:30:49:01 - 00:30:51:23
So my questions in two parts, but I'll start with the first bit.

00:30:53:09 - 00:30:55:15
Obviously the lockdown has been great

00:30:55:15 - 00:30:58:28
for businesses which have a good direct to consumer model.

00:30:58:28 - 00:31:01:20
And with furniture,

00:31:01:20 - 00:31:04:12
some people find it easy to shop online, some people find it difficult.

00:31:04:12 - 00:31:07:19
They need to physically see the furniture and then buy it.

00:31:07:19 - 00:31:12:04
But with with the lockdown, it's sort of forced people into having to buy

00:31:12:04 - 00:31:15:27
things online and reduce the friction, which means a lot of new

00:31:15:27 - 00:31:19:09
customers will come in to your business and you've seen that growth

00:31:19:26 - 00:31:22:00
and moving out of the lockdown.

00:31:22:22 - 00:31:27:19
How do you plan to retain the the customers?

00:31:27:29 - 00:31:30:04
Obviously, you have got new customers. They've come in.

00:31:30:04 - 00:31:34:13
But what would you be doing to be able to to build on that and to ensure

00:31:34:13 - 00:31:37:26
that you still have that sort of traffic and volume in digital?

00:31:38:06 - 00:31:39:04
What we find is

00:31:40:07 - 00:31:42:06
once customers

00:31:42:06 - 00:31:45:18
spend the time to find an item they like and buy it

00:31:45:18 - 00:31:49:10
and then have it delivered to them, we find that their excitement

00:31:49:14 - 00:31:53:17
about having being an online purchaser in the future is actually very high.

00:31:53:21 - 00:31:57:04
And so a lot of the friction is around making that initial leap

00:31:57:10 - 00:31:58:20
to giving it a try.

00:31:58:20 - 00:32:02:08
And so the big things we focus on are how do we just make every part

00:32:02:08 - 00:32:03:14
of the journey better and better?

00:32:03:14 - 00:32:05:20
So in other words, how do we make product discovery

00:32:05:20 - 00:32:08:00
better and better, whether that's with visual imagery,

00:32:08:00 - 00:32:10:20
whether that's with the personalization algorithms, whether that's with what

00:32:10:20 - 00:32:13:08
we're doing with email and app notifications, you know,

00:32:13:25 - 00:32:15:06
there's a whole lot of efforts there.

00:32:15:06 - 00:32:17:00
How do we make the delivery experience, you know,

00:32:17:00 - 00:32:20:26
whether it be faster or easier to schedule or have you make that better and better?

00:32:20:26 - 00:32:24:05
And so the idea is if you keep improving all those key things

00:32:24:17 - 00:32:26:27
each time someone buys from you, hopefully the experience they have

00:32:26:27 - 00:32:28:21
is a little better than the last time.

00:32:28:21 - 00:32:30:21
And each time a new customer buys from us.

00:32:30:21 - 00:32:34:00
Hopefully they have such a good experience that they're in that large cohort inside

00:32:34:00 - 00:32:35:25
to try it again into the future.

00:32:35:25 - 00:32:38:11
And so we have this kind of idea of continually

00:32:38:11 - 00:32:43:00
improving everything with there being no end in mind.

00:32:43:01 - 00:32:45:07
Like you can just keep driving up that.

00:32:45:07 - 00:32:48:23
And the basic concept is, as you would think in most Internet

00:32:48:23 - 00:32:50:09
business, like how do I reduce friction?

00:32:50:09 - 00:32:52:22
So just assume there's friction in every step.

00:32:53:08 - 00:32:55:26
What is the most obvious thing that we could do to reduce friction?

00:32:56:05 - 00:32:57:09
Maybe top three things.

00:32:57:09 - 00:32:57:28
How do we do that

00:32:57:28 - 00:33:01:20
there and just take a view of assuming that there's friction everywhere

00:33:02:07 - 00:33:04:26
and just that's the idea of why we had so many teams.

00:33:04:26 - 00:33:08:06
Each team is tackling an area and we assume that that area can drive

00:33:08:07 - 00:33:09:06
benefit.

00:33:09:11 - 00:33:12:01
And then you can sometimes measure exactly what that benefit is

00:33:12:01 - 00:33:13:20
and sometimes you can sometimes you can tell

00:33:13:20 - 00:33:16:29
how much better it got, but you can tell what return you're getting due to it.

00:33:17:16 - 00:33:19:29
But we have this innate belief that if you reduce friction

00:33:20:16 - 00:33:23:26
in the way of helping the customer, you're going to get paid back.

00:33:23:26 - 00:33:26:04
So you just sort of just keep working at that.

00:33:26:04 - 00:33:30:20
And we think that you can then measure the result in totality by just seeing

00:33:30:20 - 00:33:34:18
customers repeat rates rise and seeing customers conversion rates increase.

00:33:35:13 - 00:33:38:25
And that, you know, unless you run out of market share to get

00:33:39:07 - 00:33:41:18
you know, there's no reason why that wouldn't keep powering you forward.

00:33:42:07 - 00:33:45:09
Yeah, I think that makes total sense because I also believe that

00:33:45:23 - 00:33:48:15
the phrase that if it ain't broke, don't fix it doesn't apply today.

00:33:48:15 - 00:33:49:27
You really have to keep having

00:33:49:27 - 00:33:53:05
that incremental improvement all the time continuously.

00:33:53:05 - 00:33:54:20
So the other part of the question was,

00:33:56:11 - 00:33:59:02
well, it must be with what's happened with the pandemic.

00:33:59:02 - 00:34:01:02
It's affected retail hugely,

00:34:01:02 - 00:34:04:20
and which means it could be opportunities in terms of getting retail space.

00:34:04:20 - 00:34:08:14
So I'm sure you've thought about this, but would Wayfair be

00:34:08:14 - 00:34:11:19
a brand that could work at retail level and having that touchpoint,

00:34:11:29 - 00:34:14:29
which could engage customers even more to then we want you online experience.

00:34:16:02 - 00:34:17:04
Yeah, yeah.

00:34:17:04 - 00:34:20:06
So yes, we do.

00:34:20:06 - 00:34:21:17
And the way we think about it,

00:34:21:17 - 00:34:24:25
if you go back in our history, the the early days of our history,

00:34:24:25 - 00:34:27:27
we built the company really off quantitative online advertising,

00:34:28:03 - 00:34:31:25
a highly measurable, very transactional, focused.

00:34:31:25 - 00:34:34:27
Then over time, as we had a brand, we started doing other things,

00:34:34:27 - 00:34:36:02
whether it be display

00:34:36:02 - 00:34:40:10
and other types of brand oriented advertising or ultimately television,

00:34:40:10 - 00:34:44:13
which was a key lever in how we built up our brand household awareness.

00:34:45:11 - 00:34:47:18
We figured out the right recipe for direct mail.

00:34:47:22 - 00:34:52:00
And so today we have, you know, television is around about 50%

00:34:52:00 - 00:34:55:28
of what we spend direct mail is about 10% online, about 75%.

00:34:56:12 - 00:34:57:11
And we spend, you know,

00:34:57:11 - 00:35:02:00
significant amount of money, you know, $1,000,000,000 plus in advertising.

00:35:02:00 - 00:35:05:28
When we think of stores as a capability, that could really add significant

00:35:05:28 - 00:35:06:21
value because

00:35:07:22 - 00:35:09:12
the channels I just mentioned,

00:35:09:12 - 00:35:12:11
you can basically on a television, you can tell a story

00:35:12:11 - 00:35:14:12
that you can't really tell with a display unit.

00:35:14:12 - 00:35:16:25
We can still tell more of a story than you can with the text ad,

00:35:17:10 - 00:35:20:03
but in an in-person or action, there's a set of things you can do that

00:35:20:03 - 00:35:22:16
you couldn't do and really any of the channels I mentioned

00:35:22:25 - 00:35:23:26
and you really couldn't even do

00:35:23:26 - 00:35:26:16
with the phone based customer service and other things that we provide.

00:35:27:07 - 00:35:29:24
And so we actually have one store today.

00:35:30:17 - 00:35:33:00
Well, if we have an outlet store where we sell returns,

00:35:33:00 - 00:35:36:05
but then we have one store that's meant to be like a brand store

00:35:36:16 - 00:35:38:18
accomplishing what I think you're asking about.

00:35:38:18 - 00:35:41:04
And it's sort of like we view it as an R&D test right now.

00:35:41:04 - 00:35:44:02
We're trying different concepts and we're not necessarily

00:35:44:29 - 00:35:47:08
we're trying to understand different things that we have in mind

00:35:47:08 - 00:35:50:16
to figure out what effects they have to find a model that then we will scale up

00:35:51:04 - 00:35:53:02
and we view it as a marketing channel.

00:35:53:02 - 00:35:54:05
And the way I just described the other

00:35:54:05 - 00:35:57:28
marketing channels where it financially would need to be productive

00:35:57:28 - 00:36:01:11
as part of the total mix and we tend to think that we can

00:36:02:16 - 00:36:04:19
by having more kind of

00:36:04:29 - 00:36:08:10
arrows in your quiver, you can basically you're going to basically be able

00:36:08:10 - 00:36:11:12
to reach more customers in more nuanced ways and in aggregate

00:36:11:12 - 00:36:13:27
get them to understand the offering more deeply.

00:36:14:06 - 00:36:15:26
And as a result, you can get much more share

00:36:15:26 - 00:36:19:01
of wallet from them of their total home spend than you will otherwise.

00:36:19:16 - 00:36:21:04
And you can deepen the loyalty.

00:36:21:04 - 00:36:24:22
And so I think it'll just take us some time to figure out the exact recipe.

00:36:24:22 - 00:36:26:21
But I think each of our brands, I think there's a

00:36:26:21 - 00:36:28:04
there's a role for brick and mortar stores.

00:36:28:04 - 00:36:29:22
We just need to figure it out.

00:36:29:22 - 00:36:32:11
And then there'll be a question as to how many stores is the right number,

00:36:32:11 - 00:36:35:03
because I think certain retailers today have a challenge.

00:36:35:04 - 00:36:37:09
You said not just because sales are shifting online,

00:36:37:09 - 00:36:39:05
but I think some stores models, particularly

00:36:39:05 - 00:36:40:24
the United, have been overbuilt.

00:36:40:24 - 00:36:43:29
And so they just have too many locations relative to what's productive.

00:36:44:08 - 00:36:46:10
And so you obviously wouldn't want to end up there.

00:36:46:23 - 00:36:49:01
And would the model work as in

00:36:49:14 - 00:36:52:23
people would come in and see the stuff and then order it online

00:36:52:23 - 00:36:55:00
or would they pick it up and go, What do you think would work with your.

00:36:55:25 - 00:36:56:24
Well, in the one store

00:36:56:24 - 00:37:00:21
that we're piloting now, we have a mix and if there's items you order,

00:37:00:28 - 00:37:03:00
then we have smaller items you can take with you.

00:37:03:00 - 00:37:05:28
That's one of the things you need to figure out because we are

00:37:05:29 - 00:37:07:16
offering is so vast,

00:37:07:16 - 00:37:09:28
there's no way you're going to be able to really showcase everything.

00:37:09:28 - 00:37:11:21
And so how do you really make it immersive?

00:37:11:21 - 00:37:13:20
So someone understands the broad value proposition,

00:37:13:20 - 00:37:16:03
but then perhaps there are some categories of items

00:37:16:03 - 00:37:18:07
you do want them to be able to just take something with them

00:37:18:07 - 00:37:20:17
if it's a more immediate need or a gift or what have you.

00:37:21:20 - 00:37:22:18
Thank you.

00:37:22:18 - 00:37:28:12
Next, we're going to go to Antonio, who is the CEO of Steel and Invest,

00:37:28:12 - 00:37:33:13
a group investing at the intersection of government and society.

00:37:33:19 - 00:37:35:24
Yes, thank you. Hi, how are you? Good.

00:37:35:24 - 00:37:36:23
How are you?

00:37:36:27 - 00:37:38:02
Very good. Excellent talk.

00:37:38:02 - 00:37:40:12
Congrats, of course, on great success.

00:37:40:12 - 00:37:41:14
One of the things that

00:37:41:14 - 00:37:44:25
I was curious about, and of course this is a key question

00:37:44:25 - 00:37:48:28
for any kind of app, any internet business is its retention.

00:37:49:28 - 00:37:54:15
And I mean, I would love to understand, you know, how how was that process of

00:37:54:15 - 00:37:57:19
and how is still that process today of increasing retention?

00:37:57:19 - 00:38:01:00
What do you think are kind of the low hanging fruit that you can tell

00:38:01:00 - 00:38:04:14
anyone starting an Internet business in order to increase retention?

00:38:04:19 - 00:38:06:04
What was specifically for you

00:38:06:04 - 00:38:08:28
and kind of what are the strategies that you think have worked the best?

00:38:09:09 - 00:38:10:02
Yeah. So

00:38:11:07 - 00:38:13:17
at the end of the day, like the single

00:38:13:17 - 00:38:15:29
best set of metrics that we think tell the future

00:38:15:29 - 00:38:18:22
of the business are all the repeat metrics so that, you know,

00:38:19:10 - 00:38:21:28
new customer repeat rate, the repeat indices,

00:38:22:12 - 00:38:24:21
you know, looking at different cohorts and their repeat rates

00:38:25:08 - 00:38:26:29
relative to one another.

00:38:26:29 - 00:38:29:07
And those really fundamentally tell you

00:38:30:02 - 00:38:31:15
whether or not you're going to be successful.

00:38:31:15 - 00:38:35:13
And the reason we've grown so fast is actually that repeat orders

00:38:35:19 - 00:38:37:15
have grown at a faster rate

00:38:37:15 - 00:38:41:00
than our average growth every quarter since we went public five years ago.

00:38:41:08 - 00:38:44:09
And so repeat actually pulls up our growth rate.

00:38:44:10 - 00:38:46:18
You is actually below our overall growth rate

00:38:47:01 - 00:38:49:23
and that's simply because we keep really tight financial guardrails

00:38:49:23 - 00:38:52:22
and how much money will spend on advertising to attract new customers.

00:38:53:06 - 00:38:55:07
And the math works because once we get them,

00:38:55:07 - 00:38:57:16
we know that the quality experience causes them to repeat

00:38:57:20 - 00:39:00:22
and the repeats very inexpensive from an advertising standpoint.

00:39:01:00 - 00:39:02:27
And that's what powers the business.

00:39:02:27 - 00:39:06:26
At the end of the day, repeat is just an outcome of everything you do.

00:39:07:01 - 00:39:08:12
And so that's why

00:39:08:12 - 00:39:12:08
that view I initially mentioned about the customer orientation,

00:39:12:08 - 00:39:14:08
but then that view of kind of constantly

00:39:14:08 - 00:39:17:21
looking to remove friction and improve every area of the experience matters

00:39:18:05 - 00:39:21:07
because they fundamentally they contribute to the satisfaction level

00:39:21:21 - 00:39:23:18
and then the repeat that the customer will do.

00:39:23:18 - 00:39:27:15
So we don't view as a siloed activity,

00:39:27:28 - 00:39:32:06
we view retention as the outcome of the customer experience and we view it

00:39:32:06 - 00:39:35:20
as everyone's responsibility to improve the customer experience.

00:39:35:20 - 00:39:39:08
And so tactically, we measure that by, you know, reducing friction

00:39:40:06 - 00:39:42:21
and the reduction of friction we view as the direct

00:39:44:02 - 00:39:46:11
that directly benefits customers being happy.

00:39:46:11 - 00:39:47:16
And then the repeat.

00:39:47:16 - 00:39:51:06
And I think in any service business, if you don't if you don't focus on that

00:39:51:06 - 00:39:52:22
unless you're in some sort of

00:39:52:22 - 00:39:55:11
kind of quasi monopoly position, you're going to end up getting

00:39:55:11 - 00:39:58:29
disintermediated by whoever offers a better service because customers,

00:39:59:13 - 00:40:02:29
they can be incredibly loyal, but they won't be incredibly loyal up

00:40:02:29 - 00:40:06:00
to the level that they're confident that you're the best place for them, you know?

00:40:06:00 - 00:40:08:09
And if they find somewhere that provides better service,

00:40:08:09 - 00:40:10:04
they're going to go and they're going to tell everyone about it.

00:40:10:04 - 00:40:12:22
So so to us, this is like the lifeblood of the business.

00:40:13:06 - 00:40:16:14
And we have time for two more questions.

00:40:16:14 - 00:40:20:25
So we're going to come to Spencer, co-founder first minutes, and to John,

00:40:20:26 - 00:40:25:15
who is the founder of SwiftKey, which he sold to Microsoft.

00:40:26:09 - 00:40:28:12
John, can we start with you? Great. Thank you.

00:40:29:18 - 00:40:30:07
Thanks so much.

00:40:30:07 - 00:40:32:26
Really appreciate your candor, device and feedback.

00:40:32:26 - 00:40:35:03
I mean, I think one of the things that really about is

00:40:35:03 - 00:40:37:25
you say that we're so big already, but we're only 1% of the way there.

00:40:38:05 - 00:40:40:14
And just how big opportunity is ahead,

00:40:40:14 - 00:40:42:29
I think looking at it kind of a fresh from it from a distance

00:40:43:11 - 00:40:47:09
and one of the things I wonder is, you know, huge trends around Internet, around

00:40:47:10 - 00:40:51:23
smartphones going on at the same time, there's room for disruption within that.

00:40:51:23 - 00:40:53:19
So you've got kind of different needs between

00:40:53:19 - 00:40:55:23
Gen Z coming in and digital natives, you know,

00:40:55:29 - 00:40:58:25
maybe an older generation coming along for the first time doing covers.

00:40:59:17 - 00:41:01:01
I guess it's about what keeps you up at night.

00:41:01:01 - 00:41:06:08
You see, you see so 99% of growing say but it was is fascinating times and others

00:41:06:25 - 00:41:09:08
do you feel you kind of got strong defensive positions

00:41:09:08 - 00:41:11:16
from the network effects in the sky you've got to

00:41:11:16 - 00:41:14:12
or do you see it as opportunity for kind of a large scale disruption

00:41:14:18 - 00:41:18:13
even now when you've got big players like yourself seemingly dominating

00:41:19:03 - 00:41:19:20
the markets?

00:41:19:20 - 00:41:23:18
I'm kind of interested in kind of changing consumer and areas of disruption

00:41:23:18 - 00:41:25:04
that you see in the next 5 to 10 years.

00:41:26:18 - 00:41:29:14
Yeah, so the way the way we think about our business, if,

00:41:29:22 - 00:41:33:21
if we stay agile and nimble and entrepreneurial and very customer

00:41:33:21 - 00:41:37:19
oriented, there effectively will not be room for someone to disrupt us

00:41:37:22 - 00:41:41:00
because effectively those would be the advantages that the disruptor has.

00:41:41:10 - 00:41:44:11
And they would be disrupting us because we were acting in a manner of sort

00:41:44:11 - 00:41:48:13
of being content, happy with the status quo, not necessarily leaning forward.

00:41:48:21 - 00:41:51:11
And so I think in every market you have large

00:41:51:25 - 00:41:55:06
and then the question is how aggressive are they leaning into the future

00:41:55:17 - 00:41:59:13
and therefore, how big is the opportunity for someone to come in and disrupt them?

00:41:59:26 - 00:42:05:00
And I think a lot of large companies basically do act in a slower manner.

00:42:05:00 - 00:42:07:11
They're more content. They're not necessarily yearning

00:42:08:25 - 00:42:10:03
to find a next thing to do.

00:42:10:03 - 00:42:12:29
And that that's where those opportunities exist.

00:42:12:29 - 00:42:15:20
I think what a lot of companies are seeing is that that approach

00:42:15:20 - 00:42:17:20
is increasingly problematic in today's world.

00:42:17:20 - 00:42:19:21
So I think companies are trying to figure out how to move faster.

00:42:20:00 - 00:42:23:03
But I think ones that don't have that culture, it's just hard to change.

00:42:23:03 - 00:42:25:26
And they may not have the right team members to change that.

00:42:25:26 - 00:42:28:02
They may not have the willingness.

00:42:28:02 - 00:42:31:03
We certainly feel like if we, you know, staying entrepreneurial

00:42:31:03 - 00:42:35:01
is not just about how do we try to get more done.

00:42:35:01 - 00:42:38:00
It's it's about, you know, that's that's how you win. Right?

00:42:38:00 - 00:42:41:16
And so the same way we came from being super small to becoming

00:42:41:21 - 00:42:44:04
one of the competitors to becoming the largest competitor,

00:42:44:17 - 00:42:47:14
well, if you give that up, you're effectively starting to decay

00:42:47:14 - 00:42:49:28
and at some point you will be set up to be disrupted.

00:42:50:10 - 00:42:51:18
Thanks for that question, John.

00:42:51:18 - 00:42:54:28
And a little hint, John is also a very active

00:42:54:28 - 00:42:59:04
and thoughtful angel investor at Spencer.

00:42:59:04 - 00:43:03:23
Let's finish off with with your question because we are almost out of time.

00:43:04:07 - 00:43:04:29
Super nice.

00:43:04:29 - 00:43:05:20
Thank you so much.

00:43:05:20 - 00:43:08:14
I was I was really interested when you were speaking about the

00:43:08:24 - 00:43:13:01
the depth of your friendship with Steve and how you move towards

00:43:13:01 - 00:43:14:03
different parts of the business.

00:43:14:03 - 00:43:18:04
Pretty early on, I was just wondering from that from a psychological point of view,

00:43:18:04 - 00:43:23:20
whether you felt the way you and he saw the world was always very complimentary

00:43:23:20 - 00:43:25:25
because obviously a lot of the time as investors,

00:43:25:25 - 00:43:29:07
we try to meet founding teams and understand

00:43:29:23 - 00:43:33:14
how how that adds to to to each other as co-founders

00:43:33:14 - 00:43:37:13
and sort of away from away from product to attack or marketing.

00:43:37:13 - 00:43:40:12
Just was that was it really obvious.

00:43:40:12 - 00:43:43:08
That that that the characters was

00:43:43:12 - 00:43:47:09
was going to be a robust one?

00:43:47:14 - 00:43:50:05
Well, I think, you know, so we had the benefit like we weren't

00:43:50:05 - 00:43:54:02
necessarily out seeking and co-founder trying to think about who that could be.

00:43:54:03 - 00:43:56:19
It was more that we we had been friends.

00:43:56:19 - 00:43:58:05
So at that point we've been friends for

00:43:58:05 - 00:44:01:17
for the entirety of of college of university.

00:44:01:27 - 00:44:05:22
So for four years we've been friends, been roommates for a couple of those years.

00:44:06:07 - 00:44:08:01
And we were actually the way

00:44:08:01 - 00:44:11:01
we got started in our first business was our last semester at college.

00:44:11:01 - 00:44:14:13
We were taking entrepreneurship course and that was the core project,

00:44:15:09 - 00:44:16:20
the business plan that we wrote.

00:44:16:20 - 00:44:18:13
The course is the main project

00:44:18:13 - 00:44:21:14
that was effectively an outgrowth of that, that we started our first business.

00:44:21:14 - 00:44:25:22
And so we had a, you know, we already had that, that comfort with one another.

00:44:25:22 - 00:44:28:29
And so that building up that friendship was a nice, easy way to do it.

00:44:28:29 - 00:44:32:00
I think the challenge of you sort of become co-founders

00:44:32:00 - 00:44:33:09
with someone you don't know well.

00:44:33:09 - 00:44:37:07
You definitely run the risk that perhaps your personalities are incompatible

00:44:37:07 - 00:44:39:01
or you don't really understand the person

00:44:39:01 - 00:44:42:05
because someone you just meet, there's no chance you know them that well, right?

00:44:42:06 - 00:44:43:29
You get to know someone over time.

00:44:43:29 - 00:44:45:17
So I think that is riskier.

00:44:45:17 - 00:44:47:16
But that can work too.

00:44:47:16 - 00:44:50:22
You know, we just had the good fortune of sort of already having known each other.

00:44:51:23 - 00:44:52:20
That's very helpful.

00:44:52:20 - 00:44:53:19
Thank you.

00:44:54:17 - 00:44:56:08
After venture number

00:44:56:08 - 00:44:59:05
one and two wasn't any question that it was

00:44:59:13 - 00:45:03:19
you and Steve who were going to build venture number three together or were you

00:45:03:28 - 00:45:06:26
were you thinking about another co-founder?

00:45:06:26 - 00:45:09:22
No, we were we were clearly going to go do number three.

00:45:10:14 - 00:45:12:21
So the third time's the charm.

00:45:13:12 - 00:45:15:16
It seems again.

00:45:15:27 - 00:45:19:18
And it's been such a pleasure speaking speaking with you.

00:45:19:19 - 00:45:20:03
Huge.

00:45:20:03 - 00:45:24:11
Congrats on an absolutely phenomenal 2020

00:45:24:20 - 00:45:27:17
and thanks to everyone on this call

00:45:27:17 - 00:45:31:10
for the thoughtful questions and.