Robi Maddison Tech 08.19.2022 22:Aug PM EDT

Wayfair Lays Off 5% of Its Global Workforce — But Why?

(Photo : Pexels / Photo by ATBO)

In recent years, the company flourished dramatically to keep up with the growth in online home furnishings purchases, which was accelerated by the pandemic.

However, things have not been so favorable for the company recently, as per the news story by CBS News.

According to the Boston-based company's regulatory filing with the Securities and Exchange Commission (SEC), the cuts will affect 10% of its corporate staff and approximately 5% of its 18,000 global employees. The online home goods seller also said that the cost of hiring third parties will also be substantially reduced.

Wayfair Retrench About 870 Workers

As Wayfair cut costs in response to sluggish sales and a shift in consumer spending brought on by inflation, Wayfair decided to lay off around 870 employees.

Two weeks ago, as noted by CBS News, the company revealed that its second-quarter net revenue decreased 14.9% from the same period last year to $3.3 billion. In comparison to a profit of $131 million a year earlier, Wayfair reported a loss of $378 million during the period.

In addition, the company's stock has plummeted after beginning 2022 at a price of about $200 per share. On Friday, the stock lost another approximately 17% of its value, closing at $59.34.

What Is the Reason Behind the Lays Off

Wayfair reported a decline in active customers, orders made per customer, order deliveries, and a modest decline in orders delivered through Wayfair's mobile app and other channels in its second-quarter results. Overall, compared to its earnings in 2021, Wayfair suffered an almost 15% decline in net revenue, according to the report by The Verge.

Wayfair CEO Niraj Shah stated that the company had a spike in revenues during the start of the pandemic as customers stayed at home and became interested in home renovations and online shopping.

Niraj said that Wayfair's expected growth "has not materialized as we had anticipated." Therefore, the company "needed to adjust."

About 5% of Wayfair's 18,000 global employees would be affected by the changes, as well as 10% of its corporate team. The company also stated that it intended to substantially cut the cost of hiring third parties.

Earlier this month, the company's CEO told analysts that customers were becoming more frugal with their discretionary spending as a result of rising petrol and food prices.

How Much Can Wayfair Save By These Layoffs

According to CBS News, Wayfair forecasts saving $30 to $40 million as a result of the employment reduction.

The majority of this will be dependent on severance pay, which the company will provide based on location, length of employment, and job title. According to Shah, this includes paying out first-quarter corporate incentives to individuals who are qualified. Workers in the US will receive at least 10 weeks' salary, and employee equity will continue to vest up to October.

In May, the company put a 90-day freeze on corporate employment, citing economic unpredictability.

Companies in several industries have reduced their workforces due to a shifting sales landscape during the pandemic's peak phase and the necessity to save money since costs have lately risen and economic fears persisted.