Online furniture retailer Wayfair announced plans to lay off 13% of its global workforce on January 19th, eliminating 1,650 jobs after facing backlash over a leaked internal memo urging employees to work harder and longer hours. The drastic workforce reduction comes amid a turbulent period for the Boston-based company and ongoing economic concerns.
Internal Memo Sparks Controversy, Customer Boycott
In December 2023, an internal memo by Wayfair co-founder and CEO Niraj Shah advising employees to “work harder” and put in more hours went viral online, sparking intense public backlash.
“We find ourselves in an economic environment where success is not assured for even the best-run businesses that deliver desired products at competitive prices,” Shah wrote in the leaked email. He asked workers to “think first about what you contribute to the overall success of Wayfair” before determining appropriate work-life balance.
The memo led to calls for a customer boycott of Wayfair from critics who found the statement insensitive during a turbulent economic period. While the company expressed regret over the phrasing, the public relations damage was done.
Post-Pandemic Revenue Decline Forces Layoffs
Wayfair saw massive spikes in online orders and revenue growth during 2020 and 2021 as homebound consumers invested heavily in home office furniture, appliances, and decor.
The company went on a hiring spree to meet booming pandemic demand, boosting its global headcount from 7,500 in 2019 to nearly 18,000 by late 2022. But as COVID-driven shopping habits faded in 2023, Wayfair struggled to sustain growth.
“We were seeing growth rates of 55%+ coming out of 2020 into 2021,” Shah admitted in a January 19th letter to staff announcing the cuts. “We got over our skis.”
Third quarter 2023 revenue tumbled nearly 28% year-over-year. The company estimated it was losing $100 million per month heading into 2024. With economists warning of a potential recession, Wayfair moved swiftly to cut costs.
1,650 Layoffs, Additional “Realignment” Expected
Wayfair aims to save up to $280 million annually from the workforce reduction beginning in the first quarter of 2024. The retailer has offered severance packages and career transition help to affected employees.
The eliminated roles span corporate, technology and customer service positions across the company. The cuts amounted to 13% of Wayfair’s global staff and 18% of corporate employees.
In his January 19th letter, Shah indicated further “realignment” of the business will follow as Wayfair aims to reach profitability by mid-2024. Additional areas up for evaluation include third-party agency and contractor roles, company real estate footprint, and overall org structure.
“We need to ruthlessly prioritize and ensure we are set up to drive profitable growth,” Shah wrote.
Industry-Wide Economic Impact Sparks Cuts
Wayfair isn’t alone in facing post-pandemic struggles. Multiple major retailers have reacted to declining 2023 revenues, high inflation and recessionary fears by eliminating jobs, including:
- Macy’s – Cut 2,000 corporate and back-office positions in January
- Amazon – Shed over 18,000 roles in various rounds of layoffs since November
- iRobot – Eliminated 10% of workforce amid 27% drop in 2022 revenue
Table source: Forbes.com
Though Wayfair’s cuts followed controversial circumstances, they reflect ongoing economic uncertainty facing both the company and wider retail world. With the path forward filled with obstacles, businesses must rethink their operating models to survive.
How Wayfair fares in reaching sustainable profitability after slashing 1650 jobs will be an important industry indicator in the months ahead.
To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.
