Wayfair Fights to Fix Waning Customer Trust

Wayfair's Struggle with Shifting Customer Behavior

Wayfair, a major player in the home goods industry, is facing a concerning shift in customer behavior. Despite recent improvements in profitability, the company is working to address declining customer engagement and loyalty. In its second-quarter earnings report for 2025, Wayfair reported a total net revenue of $3.3 billion, marking a 5% increase compared to the same period in 2024. The average order value also rose, from $313 in the second quarter of 2024 to $328 in the current quarter.

However, these positive numbers are overshadowed by troubling trends. The company experienced a 4.5% year-over-year decline in the number of active customers. Additionally, only 80.7% of repeat customers placed orders during the second quarter, down slightly from 81.7% in the same period last year. These figures highlight a growing challenge for the company as it seeks to retain its customer base.

CEO Warns of Weak Demand Environment

During an earnings call on August 4, Wayfair CEO Niraj Shah expressed concerns about the weak demand environment for home goods. While he noted that demand has improved slightly, it remains subdued. Shah attributed this to factors such as low housing turnover rates and stagnant existing home sales in the U.S. He explained that over the past three years, demand had declined significantly each year, and now it is "flat to down."

The impact of rising home prices has also played a role in this trend. In the second quarter of 2025, the average home sales price reached $512,800, which is 38% higher than the average in the second quarter of 2020. This increase has made housing less affordable, leading many consumers to avoid purchasing new homes. As a result, the home goods market has seen a slowdown in demand.

According to a weekly survey from the Mortgage Bankers Association, mortgage applications decreased by 3.9% from the previous week, while mortgage rates remained near 7%. These conditions further complicate the situation for companies like Wayfair.

Wayfair’s Strategy to Win Back Customers

To counteract these challenges, Wayfair is focusing on improving the customer experience. The company is investing in technology and new programs to make shopping more seamless for customers and easier for suppliers. A key initiative involves rolling out artificial intelligence-powered features that enhance the shopping process.

In addition, Wayfair is leveraging its paid loyalty program, Wayfair Rewards, which launched last year. The program has shown promising results, with member growth and customer lifetime value curves exceeding initial expectations. Shah highlighted that the initial excitement around the program continues to grow, indicating that it could play a significant role in boosting orders and website traffic.

Wayfair also plans to keep prices stable despite the growing threat of tariffs, which could lead to higher costs for imported goods. With over 20,000 suppliers on its platform, the company relies on competition among suppliers to maintain pricing stability. Shah emphasized that suppliers understand the risks of raising prices too much, as it could negatively impact sales.

Consumer Response to Tariffs

Consumers nationwide have been adjusting their spending habits in response to President Donald Trump’s tariffs on multiple countries. These tariffs are expected to lead to higher prices for everyday goods. According to a recent survey by market research company Numerator, 87% of consumers are worried about the financial impact of these tariffs.

Furthermore, 80% of consumers are altering their shopping behaviors, including delaying nonessential purchases, buying fewer imported goods, searching for sales and coupons, and switching to lower-priced retailers. These changes reflect a broader economic uncertainty that affects consumer confidence and spending patterns.

As Wayfair navigates these challenges, its ability to adapt and innovate will be critical in retaining customers and maintaining its position in the competitive home goods market.