Wayfair, the online home goods retailer, announced its decision to exit the German market and cut approximately 730 jobs, or 3% of its global workforce, CNBC reports.
The move reflects the company’s strategic pivot toward new growth areas, including physical retail and investments in international markets with stronger potential.
The decision comes after an internal assessment determined that expanding in Germany would require significant time and resources, with limited potential returns. CEO Niraj Shah explained in a memo to employees that challenges such as weak macroeconomic conditions, low brand awareness, and limited scale made scaling the German market unviable.
“Achieving market-leading growth in Germany remained a long and costly endeavor…we made the difficult but necessary decision to reallocate efforts to areas with strong long-term potential,” Shah wrote.
Wayfair plans to reinvest savings from the restructuring into core initiatives, including physical retail and international markets like the UK and Canada. The company recently opened its first namesake store near Chicago and is planning further expansion in the US and abroad.
Around half of the affected employees will have the option to relocate to other Wayfair locations, such as London or Boston. The job cuts will affect corporate staff, customer service, and warehouse teams.
The restructuring is expected to cost between $102 million and $111 million, including $40 million to $44 million for employee-related expenses such as severance and relocation, and $62 million to $67 million in non-cash charges related to facility closures. These costs will be incurred across the fourth quarter of 2024 and the first quarter of 2025.
Wayfair’s exit from Germany underscores its effort to prioritize investments with better returns. Kate Gulliver, Wayfair’s CFO, stated that the decision is not about cost-cutting but reallocating resources to initiatives with stronger performance.
“We see better ROI initiatives that we are already further along on,” she said, highlighting the company’s physical retail expansion as a key area of focus.
The retailer has experienced a “halo effect” from its physical store near Chicago, with increased online sales in nearby areas. While Wayfair has not turned an annual net profit since 2020, the company views physical retail as a promising growth driver. Plans include opening additional stores in the US and eventually expanding to international markets.
The decision to exit Germany comes amid challenges for the broader home goods market, exacerbated by a sluggish housing sector. In the third quarter ending September 30, Wayfair’s sales declined by 2% to $2.9 billion. Germany, where Wayfair has operated for 15 years, contributes only a small percentage of its overall revenue and orders.
Despite the challenges, Wayfair’s stock rose approximately 5% in premarket trading following the announcement, reflecting investor optimism about the company’s strategic shift.
