Wayfair Inc Q2 2023 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Steven Paul Forbes - Guggenheim Securities, LLC, Research Division - Analyst : I wanted to maybe start with -- wanted to start with CastleGate penetration. So curious if you can give us any color on where you expect to end the year in terms of penetration of small and large parcel? And what the current thoughts are around capacity for CastleGate as we look out to '24 and '25? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 03, 2023 / 12:00PM, W.N - Q2 2023 Wayfair Inc Earnings Call Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO Yes. Thanks for the question. What I would say is that CastleGate penetration, as we go through time, we're quite excited about where we think it will go, based on what we're hearing from suppliers' interest to flow goods in as they increasingly flow new goods out of Asia. So we've been at a period of time where suppliers are kind of working their way through excess stock. But they're now getting to a point where they're bringing in their best sellers, and I mentioned the Las Vegas Market recently. I'd say a substantial number of the suppliers are now bringing in large new product introductions for the first time in 3 years. So it's sort of like a moving forward thing going on in the business, which is particularly exciting, I think, plays to our strengths, but also from the standpoint of flowing fresh goods out of Asia, that will speak to increasing CastleGate penetration. From a capacity standpoint, what I would say is we've built that network out over the last few years to have a very good footprint, but with a lot of unutilized space because the idea we had is we wanted to have the footprint. And then as we get more volume through it, it will then get utilized, which will then be a situation where we'll only need to add new locations down the road when we have capacity constraints, which is not the case right now.

Question: Steven Paul Forbes - Guggenheim Securities, LLC, Research Division - Analyst : I appreciate that. Maybe just a quick follow-up. Maybe we'll get this next week. But I keep thinking back to the total logistics cost, right? I think you've referenced, Niraj, in the past around $0.20 of every dollar. So curious if you could sort of talk to where that -- where the total logistic costs are today and where you sort of see them going as various aspects of the supply chain normalize here? Niraj S. Shah - Wayfair Inc. - Co-Founder, Co-Chairman, President & CEO Yes. So I don't have a -- I don't have like a crisp number [to say] the $0.20 is that last rate or anything like that. But I guess the way to think about it is that logistics cost, we've been focusing on optimizing it. The biggest factors that would optimize it -- or basically, when you think about CastleGate penetration, if goods come in directly from wherever they're manufactured and get forward position from the get-go, that's the single biggest driver of taking out logistics cost because all the excess miles that would need to happen in the destination country really get minimized. That's the most expensive leg is the final mile leg. The second most expensive thing is also -- is around, on that final mile, how can you optimize it past just the miles. And so this is where we get into what we do in some of our buildings around sortation. And where you could take out things like hub touches, you can also, for the large parcel items that we deliver ourselves, how do we optimize that. So then again, whether you do 17 deliveries in a day instead of 16 or something like that, that could be a very big driver of cost. So if you think about the activities we have around the fulfillment center footprint, around the consolidation and then the things we're doing abroad that facilitates the ocean freight to be very efficient at loading to begin with, and then what we're doing on our last mile delivery network, these things kind of add up to tackling those costs. And then one of the things I mentioned is where we have capacity past what we use today, so as volumes increase, there's a tremendous opportunity to drive down costing. And that will happen as the volumes grow and the volume in that network on a proprietary basis grows. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 03, 2023 / 12:00PM, W.N - Q2 2023 Wayfair Inc Earnings Call