GUY RAZ, HOST:
Just a quick thing before we start today's show - I have some very exciting news to share - our first ever HOW I BUILT THIS one-day summit sponsored by American Express. The summit will take place on Oct. 16 at San Francisco's Yerba Buena Center for the Arts. You'll have a chance to hear from and interact with some of the world's most inspiring entrepreneurs, like Airbnb's Joe Gebbia, Katrina Lake of Stitch Fix, John Zimmer of Lyft and many more. We'll have breakout sessions with experts and guides. But most importantly, the summit will be a chance to meet other innovators and builders, people like you. So go to npr.org/summit to find out more and to get your tickets.
(SOUNDBITE OF MUSIC)
RAZ: So all right, I'm going to read some of the websites that you guys launched - hotplates.com...
STEVE CONINE: (Laughter).
RAZ: I'm assuming that sold hotplates?
NIRAJ SHAH: Yes.
RAZ: OK. Allbarstools.com. Sold bar stools?
SHAH: And what do you think that sold?
SHAH: Yes. You're doing good. You're doing good. Alright.
CONINE: Nice. That's a classic.
RAZ: I love this one. Everygrandfatherclock.com.
CONINE: (Laughter) A very hot category online.
RAZ: Who knew people were searching for that?
CONINE: We did.
(SOUNDBITE OF MUSIC)
RAZ: From NPR, it's HOW I BUILT THIS, a show about innovators, entrepreneurs, idealists and the stories behind the movements they built. I'm Guy Raz. And on today's show, how an online search for birdhouses led two college roommates down an Internet rabbit hole that inspired what would become Wayfair, an e-commerce company that now sells almost five billion dollars' worth of home goods each year.
(SOUNDBITE OF MUSIC)
RAZ: So pretty much everyone we've had on the show had a passion for a product that they needed to put out into the world. Lara Merriken believed the world needed Larabars. Jeni Britton Bauer was convinced that her ice cream was going to change how people thought about ice cream. Even Jimmy Wales, founder of Wikipedia, thought everyone should have access to free knowledge. But I'm here to tell you that that is not always the case. In fact, sometimes, the product isn't what drives the founders. What really drives them is the challenge or, rather, solving the challenge. And that's basically the story behind Wayfair.
Neither Steve Conine nor Niraj Shah felt that strongly about home furnishings. But they did feel like people should have choices, no matter where they lived because there was a time when, if you lived in say Evansville, Ind., you couldn't easily get the same type of cool coffee table or sofa that someone in San Francisco or New York could get. Now, today, this concept isn't particularly radical or new. But back in the early 2000s, it was a revolution. And today Wayfair sells almost five billion dollars' worth of this stuff every year.
Wayfair was actually the third company Steve and Niraj started together. They met as teenagers at a summer camp for math and engineering nerds in the early 1990s. They quickly lost touch. But then, almost a year later - as if fate herself was watching over these guys - they both ended up as first years at Cornell, assigned to dorm rooms on the same corridor.
Did you know both of you - did you know the other one was going to Cornell?
SHAH: No. We hadn't really kept in touch. So I think it was a surprise.
CONINE: Yeah. Pretty much. I was like, hey, what's up? How you been this past year?
RAZ: So were you friends, like, right away?
CONINE: Yeah. We were part of a - you know, I think when you're - freshmen year, you sort of have a small group of friends that you sort of connect with and spend a lot of your time with. And we were in that group together. And then junior year, Niraj and I started - we got to be a lot closer and lived together that year - junior year. And senior year, we actually lived together, as well, with a few other people up at Cornell.
RAZ: Yeah. Did you guys - Niraj, did you and Steve used to talk about starting a business when you were in college?
SHAH: I don't know that we ever talked about it per se, but our last semester at Cornell, we took an entrepreneurship course as one of our elective courses. And in this entrepreneurship course, one of the things you had to do was create a business plan. And what really happened is through the process of doing the project, which was creating the business plan, we basically started our first business.
CONINE: Yeah. It was '95, and it was the very early years of the Internet. The Netscape browser had kind of come out that year.
CONINE: Our idea was actually to develop some Internet directory services. And we would go downtown in Ithaca, N.Y., and try to pitch companies on paying us five bucks to have a listing in our Internet directory. And, of course, most of them would look at us like we're nuts. A few would say, hey, kid, that's interesting but, you know, I don't even have a homepage - they called it at the time - could you help me build a website and, you know, maybe at least get a presence on the Internet? What would that cost me? And so the business turned into kind of an Internet consulting business that built sites for companies.
CONINE: And you kind of knew how to do the basics because you were engineering students?
SHAH: Exactly. So you'd go from project to project. And companies were trying to move very quickly. You know, different people would ask other people they knew, who could we hire? So on and so forth. We were one of the few shops that had actually done things.
RAZ: When you would meet - when you guys would go and meet with clients, did you ever get a feeling from any of them that they would look at you and think, wait - these guys are the ones who I've hired?
CONINE: (Laughter) It's like a 22-year-old kid...
RAZ: Yeah. Right.
CONINE: ...Like, what am I doing here? You know, we did - we were both - we are both pretty good sales guys, so I don't remember that being - smacking me too hard. I mean, I think that, you know, the prices we're charging versus, like, what they would be looking at for consultancies - I think a lot of these bigger shops looked at it as, like, play money, where they're kind of like, well, whatever. How bad can it go with a couple of college students who are doing this for us? If it works out, phenomenal. If it doesn't work out, you know, whatever. We haven't really lost a lot.
RAZ: So I guess by that summer, you've graduated from Cornell. And then you decide to move to Boston to launch the company?
SHAH: Yeah. So we had - what happened very quickly, as it sort of was clear, well, Ithaca is not really the right place to be. New York, in theory, would be very logical as a place to be. But we both had more of an affinity for Boston. And we thought from Boston, we could easily work with New York clients, what have you. So we actually decided to move to Boston at the beginning of that summer.
RAZ: And how are you guys managing - I mean, if you were getting all these projects in - coming in - presumably, they wanted one of the two of you to do the work. How were you managing all that work?
CONINE: We were working pretty hard.
SHAH: Yeah. We were working 100-hour weeks. I mean, we were basically - we set up the living room - we got an apartment, and we flipped coins on who got the bigger bedroom and then...
CONINE: I won it.
SHAH: Yeah. He won it. And the living room was basically the office, right? So it was just desks with a, you know, computer - and we worked - which was fine because you're working from like 7 a.m. to midnight. And then you're sleeping for a few hours and doing it again.
RAZ: Was it exciting? Did it feel like you guys were building something really big?
CONINE: Yeah. Yeah. It was...
SHAH: It was our first year out of college...
SHAH: ...And so we were young, full of energy. It's very exciting.
CONINE: There's all this hype around the Internet. And, you know, everyone has sort of got their eyes on it, looking at how - you know, the potential of it. You know, it's an area - when you first see a new technology, you can envision the potential of it very quickly. And I think it was awesome to be in the middle of it.
RAZ: By the way, what did you guys call the company?
CONINE: Spinners. Because you spin the web.
CONINE: (Laughter) Well, it was the World Wide Web at the time. And we're like, oh, spinners - you know, if you're a spider, you spin the web.
RAZ: Oh, I see. You spin the web like a spider. Oh, that's clever. OK.
CONINE: Yeah. Yeah. That's - right.
RAZ: Oh my God. You guys are super nerds.
RAZ: So how long did Spinners last?
SHAH: About four years. So we started it in the summer of 1995 - so I guess that's three years - the fall of 1998, so maybe a little over three years, when we sold it. So a little over three years. We were about 40 people when we sold it.
SHAH: And the Internet had heated up a lot. And so there were starting to be some much larger consultancies doing the type of work we were doing. And we didn't think we could scale as fast as these other ones, so we opted in the end to sell to one of them.
RAZ: What'd you guys sell it for?
SHAH: We sold it for...
CONINE: A combination of cash and equity. I think it was $500,000 cash. So we each got like $250,000 cash. Does that sound right?
SHAH: I think it might've been a little more than that. I think we might have gotten, like, half a million in cash. And then...
RAZ: And some stock.
SHAH: And we got equity that was worth a few million bucks that then kind of - with the dot-com boom, kind of went up tremendously and then came all the way - like, all the way - back.
RAZ: Down to zero?
SHAH: That's where it ended.
CONINE: Yeah. Yeah. Got to watch tens of millions erode.
RAZ: So you guys didn't really walk away with a whole lot of money from that venture?
CONINE: No. I remember I had this Merrill statement that says I was worth $27 million when I was probably, like, a 24-year-old.
CONINE: And I remember thinking I'm all set. And then, you know, six months later, it was basically back down to zero.
RAZ: So at one point, you are worth $27 million when you're in your mid-20s. And then...
RAZ: ...But it was - really, it was just on paper.
CONINE: It was just on paper. But, boy, what a good lesson to learn as a young fella.
RAZ: So this is, like, the early 2000s - 2000, I guess...
CONINE: 2000, yeah.
RAZ: ...And the two of you, I guess, decide to start a new business together, right?
CONINE: We did. Yeah. We'd had a lot of fun and success in the first one and thought, hey, this entrepreneurship thing is easy. Let's...
RAZ: Let's do it again.
CONINE: ...Let's pick something new and do it again. Yeah.
SHAH: Yeah. So that takes us - so now we're at the beginning of 2001. And we're, like, thinking of different ideas. And we're not sure what we want to do. Long story short, we came across this idea around mobile phones. So 2001 was still pretty early for mobile phones.
SHAH: But we found that a lot of companies were starting to have a lot of mobile phones, but they weren't really managing them well because they would effectively have, you know, thousands of phones. But they were each on different contracts, and they were on the wrong ones. They're paying too much for some, too little for others. So our idea was we would build a software platform that would allow these companies to better manage all their phones and their contracts. And we thought over time, we could build that in to basically being a virtual carrier focused on enterprises.
RAZ: What's a virtual carrier? Just...
CONINE: Think of Virgin Mobile in the U.K., where they use the Virgin brand name, and they actually operate on top of British Telecom's network.
RAZ: All right.
CONINE: So it's a branding on top of an existing network.
RAZ: Got it.
SHAH: But to the consumer, it feels like they're buying Virgin Mobile.
RAZ: Oh I see.
SHAH: They don't think they're buying British Telecom.
RAZ: Got it. OK. What was the company called?
CONINE: Simplify Mobile.
RAZ: Simplify Mobile.
RAZ: But you would just call up companies and say, hey, can I talk to the person who handles your mobile phones?
CONINE: Yeah. I'm Steve from Simplify Mobile. I'm - you know, I've got a really great offer and can help you save money on mobile phones. Would you be - you know, I'd love to talk to whoever manages that for you. And occasionally, you get someone, right?
SHAH: We did have one key flagship customer that we had lined up who was very interested in doing it, which was Merrill Lynch.
RAZ: Big customer. Yeah.
CONINE: Yeah. Yeah. They had a big phone spend.
SHAH: And so that was looking quite good. And then unfortunately, what happened in 2001 was - needless to say, September 11 was a huge impact for everybody and particularly for financial services companies. And in the case of Merrill Lynch, they lost use of their headquarters in the World Financial Center. And their priorities obviously had to dramatically change. So with that we lost sort of the flagship customer that we had anchored around. And so the combination of everything caused us to become much less bullish on this idea, that the odds of it succeeding was just not high enough.
RAZ: See, it's interesting because many people that have been on the show have had similar experiences, but they've said, you know, and we just kept that at it. The first year sucked. And then the second year was less sucky, but we just kept at it. And eventually, it, you know, took off like a rocket. But you guys just kind of came to this conclusion that it was not going to work.
CONINE: Yeah. I mean, we were in a - it was a business where you look around, and we were the only one doing it. And that's always kind of a scary spot to be, as well. And I think - and we had thought about the market potential and the odds and the, you know, what we'd learned in the intervening year. I mean, we spent probably the last three months of that business literally just pounding the Yellow Pages, like, just coming in and just, like, taking rejection all day long and trying to see if we could - how - we tried just really hard to try to sell it. And I - as entrepreneurs, I think we've been a big fan of say, like, well, look, if you can't - you've got to start with a sale. And if you can't sell anything, you don't have an idea. And so, you know, after kind of validating that, I guess, we sort of said it's time to walk away from this one.
RAZ: Was that rejection hard for you to handle? Was it humiliating? Did it just, like, eat away at you after a while?
CONINE: Not too bad. I mean, it's not a lot of fun. I remember my dad gave me some advice. He was a stockbroker for years. And he said, look. When you're going in and combing through the Yellow Pages, he's, like, the thing you have to do is set yourself a goal. And he's, like, your goal needs to be when you get 30 rejections, you can leave. And he's, like, because that way if you look at it, every rejection's a good thing because it gets you closer to your goal.
And so it keeps you motivated, working at it. You learn a lot more from when things are going bad than when things are going well. So I think we sort of - we both, like, went out and started thinking about just getting a job. And, like, I remember interviewing a few places and sort of, you know, thinking hey, maybe I should go the more traditional career route. Did that for - I think we both did that to some extent for a little while. And then we just love being entrepreneurs.
RAZ: So when Simplify Mobile kind of like, fizzled out, you guys both started to approach your 30s, right? You're still pretty young.
RAZ: Did you have a sense of what you were going to do next?
SHAH: Well, of course, you're going to get into furniture. What else are you going to do?
CONINE: Yeah, well, I mean, furniture on the Internet. It's where it's all at.
RAZ: So what did you guys do? I mean, you wind this business down. You're still presumably thinking, let's continue to work together?
SHAH: We went right back to the drawing board. So we started looking. At that point, we got very...
CONINE: Were you living in my basement at this point?
SHAH: That's right. So I - in your downstairs bedroom. Yeah. So I was living there.
CONINE: Yeah, because we kind of brainstormed stuff.
SHAH: Right. And then my girlfriend at the time moved up from New York. And so I'm, like, honey, this is a great deal. We can just live here.
CONINE: And the deal was he bought the groceries (laughter).
SHAH: Yeah. And we bought the groceries. And that only lasted about two weeks, though, before she decided that we really should get our own place. So that was the end of the free rent. But what happened after Simplify Mobile, what we decided - we spent basically the first couple of months of 2002 - we ended up talking to a lot of different business owners. And there was this theme that emerged because if you read the New York Times, and if you believed what the journalists said, you would have been left believing that e-commerce was dead. That was what all the articles talked about, you know, like...
RAZ: Yeah. Because there were a bunch of companies that crashed.
CONINE: Oh, yeah, big time.
SHAH: But I think there was even - at that time, there was a lot of skepticism that Amazon was going to succeed. There was - you know, there were a lot of people talking about Amazon's imminent demise, you know?
SHAH: And so we got fairly methodical. We said, OK. We should start looking at Internet ideas. We know Internet. We know Internet software. We should look at Internet ideas. And then look at other ideas that we think are just good business ideas. We're good operators. And so we started making lists of ideas. We started looking at businesses that were for sale, thinking that maybe there's something small that we could buy and we could really grow. And through that, we ended up tripping over these e-commerce websites that were for sale. And we would talk to the owner-operator. And they would, you know, tell us how they're growing 20 or 30 percent year over year.
RAZ: When you say e-commerce, what were they selling?
SHAH: I remember there's one lady who was selling birdhouses. She was storing them in her garage. Every day, she was taking all the orders and collecting all the items out of the garage and packing them up and take them to the post office.
SHAH: And selling them online?
CONINE: Yeah, allbirdhouses.com or some such thing.
SHAH: Yeah, the theme we found was really simple. Consumers had realized they could go online and search for any product category they wanted. There were a lot of product categories, like birdhouses, that are just not really available locally with good selection.
SHAH: If you want to buy a birdhouse locally where you live today, where would you go if you want a decent selection?
RAZ: You'd go to, like a local store. And you'd find, like, two or three different birdhouses. And then you'd have to pick one of them.
SHAH: And, you know, they're pretty basic styles, right? Because they're only going to have three or four, right?
SHAH: And so all of a sudden, people start to realize, well, I don't have to be stuck with that. I can go online.
RAZ: And find 100 different options.
SHAH: Exactly. And I can order whatever I want. I save the time of the trip to the store. It'll show up in the mail. Super easy. And so the - about a month's worth of research kind of helped us figure that out. And so what we ended up doing is we ended up deciding that there was a big opportunity in buying these businesses. So the first website we ended up launching - we launched a site called racksandstands.com at the very end of August of that year.
RAZ: Which was?
SHAH: TV stands and speaker stands. So it was entertainment furniture.
RAZ: Did you have a particular passion for TV and speaker stands?
CONINE: I was a mechanical engineer out of Cornell. I mean, these things are essential.
SHAH: But, you know what you find? There were - in those days, Yahoo - on Yahoo search, you could type in terms and it would tell you how many searches a month there were for that item. And on some of the product comparison sites, they would tell you their top hundred categories. And so both of those terms were in the top hundred search product terms.
RAZ: Wow. So people were looking for TV and speakers. Why wouldn't they just go to their local, like...
CONINE: You couldn't find anywhere that sells them.
SHAH: Same thing about just a selection of only two or three. And you can't find a good selection. The furniture stores want to focus on living room, bedroom, dining furniture. So where would you go?
RAZ: Yeah. So wait. So you're thinking, all right. Our first one is going to - we're going to sell TV and speakers stands. Just out of curiosity, where did you guys - where did you even go to find TV and speaker stands?
SHAH: Well, in the beginning, what you do is you go online, and you'd look for companies that made them. And you'd also look at what the other online retailers were selling. What brands did they have?
CONINE: And you'd buy the audiophile magazines and flip through and see what brands they were advertising.
RAZ: And so did you just buy a bunch of TV and speaker stands and just have them shipped to your apartment in Boston?
CONINE: No. So at the time, there was a bunch of electronics distributors that actually would stock small amounts of speaker stands. And so we initially started off buying through them. So we'd buy out of their inventory. So we had no inventory risk. So it was all drop shipped out of distributors.
RAZ: And somebody would go to Yahoo or Google and type in speaker stands, and that was one of the things that would magically come up?
CONINE: Exactly. They'd click into it. And it's the Promised Land if you're looking for, you know, speaker stands.
RAZ: So when did you launch the website?
SHAH: August 29, 2002.
RAZ: 2002. And how long before you had your first orders?
CONINE: Yeah, hours.
RAZ: When we come back, how racksandstands.com, then allbarstools.com, then everygrandfatherclock.com and on and on eventually turned into Wayfair. I'm Guy Raz. And you're listening to HOW I BUILT THIS from NPR.
(SOUNDBITE OF MUSIC)
RAZ: Hey. Welcome back to HOW I BUILT THIS from NPR. I'm Guy Raz. So it's 2002. And Steve Conine and Niraj Shah are on their third business idea. They're selling TV stands on the Internet. It's a site called racksandstands.com. And this was a time when a lot of people thought e-commerce was dead. But Niraj and Steve - they thought it was very much alive. So they started to advertise.
SHAH: Google had just launched AdWords, which is, you know, keyword bidding, right?
RAZ: Where people - where you pay money for...
CONINE: Yeah, you bid...
SHAH: You'd advertise - right.
CONINE: Bid nickel a click or...
SHAH: And you write your text ad. And you basically pay per click. And we would track every time we get an order. Which advertising unit drove it? And so we'd either bid those up or bid them down if they were nonproductive.
RAZ: And what kind of advertisements were they? What'd they say?
SHAH: They'd be text ads that'd say, you know, the largest selection available TV stands.
CONINE: Great TV stands for less.
SHAH: Hundreds available.
RAZ: So if you were a consumer, you click on this. And if you were adventurous in 2002, you would put your credit card into the computer. And then it would go to you guys. And then, you guys would order it from one of these companies. And then have that company directly ship to that customer?
SHAH: Correct. We launched at the very end of August. So September, October, November, December - the fourth month in business - in December of 2002, we did about $250,000 in sales...
SHAH: ...In the category.
RAZ: Racks and stands.
SHAH: Racks and stands.
CONINE: Racks and stands.
SHAH: And we grew to be one of the largest or the largest online seller in the category. And what happened is our suppliers started telling us, hey, you know, you've become my biggest online retailer of TV stands or speaker stands, what have you.
SHAH: But, you know, my other online guys sell more of my beds. Or my other online guys some more of my desks. And so we started learning that, in fact, these other furniture categories that we hadn't focused on - that they were doing quite well online, as well.
RAZ: And I have to assume that just, like, getting this off the ground wasn't that expensive, right? It didn't require a whole lot of capital.
CONINE: No, it didn't. I mean, some computers. We'd pay - I don't know - $15 a month for hosting on a shared hosting platform. And we had a couple computers in our office. But it was very expensive. We didn't pay ourselves a dime for the first year and a half or two.
SHAH: That was the big - the biggest leverage was that we didn't need to pay ourselves and that we knew how to also build the software and do that work. We didn't hire anyone to do that work.
RAZ: And did you have, like, a number on the website, like, a customer service number that people could call and, you know - I don't know - complain or, you know...
CONINE: We did.
CONINE: There's 4 phone lines in my house that would ring. They were right near my bed.
RAZ: You were - like, one hand you were, like, programming the technology, and the other hand you were picking up the phone?
CONINE: Yeah. Well, this is the beauty of that setup. It was Niraj and I's little tiny table. And we had four phone lines we were kind of juggling. If the phones were ringing, we'd take customer calls. And a lot of times, we'd get off a call with a customer and we'd change what we're working on that day. In my case, I'd probably change what I was programming. Niraj would - you know, he was the data entry guy. So, like, he'd be, like - he'd go line up new products. And we'd be like, oh, a customer's asking for this. He'd go figure how to source it, and he'd add it to the site. And, you know, those two activities rapidly made the site a lot better. And it got to where we couldn't juggle four phone lines. And that led to us start to hire people.
RAZ: So once you start selling racks and stands and you do pretty well, what's the next category you go to?
CONINE: Mounts - TV mounts.
RAZ: TV mounts.
SHAH: And we were surprised. So what happened in that time frame also - the 2002 time frame - is two different things. TV mounts were not widely available. So if you had a gym and you wanted to hang some TV mounts, like, you didn't know where else to buy them, so on, so forth. But the other thing that happened is flat-screen TVs started really becoming popular.
RAZ: Oh, yeah, yeah.
SHAH: And so people wanted to hang those on the wall. And so our timing on that was quite good. So we saw those huge sales sort of start, you know, kind of momentum. So then we built a site just for that to have every type, you know.
RAZ: What was it called?
CONINE: Mounts and More.
RAZ: Like, but it didn't really matter what you called it - right? - because you would make sure that the search engine...
CONINE: Oh, these were brilliant branding and (laughter)...
SHAH: And the traffic was primarily driven by these search - by the advertising we would do, the paid search and then other forms of advertising that we would do. So the key to the name of the site wasn't so much that it was something someone would type in or that was memorable or that they'd pick it over other items, it was more that it made sense as a place you would go for this item.
RAZ: All right, so TV mounts - and then how did that do?
CONINE: That did phenomenally well. We were the mount kings of the internet.
RAZ: Oh, my God. And so then what came next?
CONINE: Then we - I think we started kind of a new beachhead in outdoor furniture. And so we started a site called Teak Wicker and More, which was basically outdoor furniture.
RAZ: I mean, it's so interesting because you didn't have to build a brick-and-mortar store. And you didn't have to stand outside in front with a sandwich board saying, come on, 10 percent off today; try our samples. Like, you would just - you just put this out on the Internet. You figured out the search - how search worked, and people came.
SHAH: Well, that was the sandwich board.
RAZ: That was the sandwich board.
CONINE: Oh, yeah, the sandwich board.
SHAH: We paid Google to run the sandwich board for us.
RAZ: And you didn't have to take in any outside investment in - at that time because the revenue from each expanding website was fueling the business.
CONINE: It was. I mean, this business is cool. It's - from that day - earlier years on, it runs a positive cash cycle. So, you know, customers would pay us right away, and we didn't have to pay suppliers for 30 to 45 days. And so you had this kind of natural cash cushion. And so, yes, it was, you know, it was - we were able to self-fund it very well.
RAZ: Do you remember how much revenue you were doing in - I don't know - by, like...
RAZ: Yeah, 2004.
CONINE: ...2004. Do you remember, Niraj?
SHAH: Yeah. So 2002 was our first year. We did about 700,000. 2003 was our second year. I think we did about 7 million. And then the following year, 2004, I think we did 27 million.
RAZ: Wow. I mean, you probably had to just hire tons of people - tons and tons of people - fast.
SHAH: Yeah. So we started hiring - as early as January, 2003 we hired a couple people then. We probably ended that year with, you know, 15 people or something like that. And then that became the model to grow is - you know, we would be reinvesting aggressively by hiring people so that we could keep expanding the selection and expanding the categories, which then gave us more things to advertise, which then would get us more customers, you know? And that was a virtuous cycle. And we would take the money that resulted, and we would invest that into growing the team to keep driving it.
RAZ: Just out of curiosity, when people you like, oh, Niraj, what are you up to? What are you doing these days? Would you say, oh, I'm selling TV stands? Like, how would you describe your business to people?
SHAH: Yeah, I remember one time, I was very uninterested in describing what we were doing. And a lot of Indians in the United States are doctors. They assumed I was a doctor. And I'm like, oh, no, no, I'm - oh, hi, Dr. Shah. No, no, I'm not a doctor.
SHAH: No, I just sell furniture because if you say you sell furniture, no one's interested. There's no follow-up questions.
RAZ: No - oh, it's almost, like, silences the conversation. Oh, I see.
SHAH: So that's a good way to wrap up the conversation.
RAZ: So obviously, when you were doing is, of course, what would eventually would become Wayfair. But at this point, you started calling it, I think, CSN Stores, right?
CONINE: Yeah, that was it. I think at the end of 2002, 2003, we adopted that.
RAZ: It's a great name, CSN stores - very catchy. It's very catchy.
CONINE: (Laughter) Well, thanks. It's our initials.
RAZ: Did you get a bunch of consultants to help you figure out that name?
CONINE: No. We could get it for 12 bucks a year, and there was no trademark issues with it.
RAZ: I see. OK.
CONINE: I think Niraj came up with it. It was our initials kind of conglomerated together.
RAZ: CSN - oh, Conine...
CONINE: Yeah. Conine, Steve; Shah, Niraj - the S's overlap.
RAZ: Right, I got you.
CONINE: It was a generic name we could use across any category, you know? We - and...
SHAH: Yeah. It helped with two key things, basically. One is, we needed a company name that, you know, sort of implied we had a lot of stores.
RAZ: Sounds like it, yeah - CSN stores.
SHAH: Right, so - because you don't want to just name it after one of the names, right? The second is a lot of the suppliers were very traditional companies. And so when we go to, like, the High Point furniture market and approach suppliers, you want to be able to get into a conversation with them. And during this time frame - 2002, 2003, 2004 - they're still not very keen on e-commerce. They're not dead set against it, but their experiences have been poor.
And so what happened is when your badge says CSN Stores, and where are you based? Oh, we're in Boston. Oh, where in Boston? Oh, we're right in Back Bay. We have an office on Newbury Street. Oh, great. Oh, what are you guys focus on? Oh, well, we're really focused on entertainment furniture. Oh, who do you carry? Oh, we carry brand - this brand, that brand, this other brand. Oh, great. You get into a conversation. And they say, well, what are you interested in? Well, we would really be interested in this selection. We think would do well for these reasons. Da-da-da (ph).
And they'd say, oh, well, you know, how big is your store? And they say - at that point, you'd say - you know, you'd be honest. You'd say, well, we actually - we sell online. And if you had to discuss online too early in the conversation, you'd get kicked out of the showroom.
RAZ: They didn't want you - they didn't want to be involved with that.
CONINE: Yeah, if you came in calling yourself, like, eshop.com (ph), they knew right away, it's an Internet guy.
SHAH: And - but now they've gotten into a 20-minute conversation with you, and you sound very rational, and you're carrying a bunch of good brands. So now they're like, well, you know, I don't really do much e-commerce business, but maybe this does make sense; let's have a little more of a conversation. So the generic name helped you get deep enough into a conversation for them to really consider and understand you, which was really important in those days.
RAZ: So all right, I'm going to read some of the websites that you guys launched because I just think they're amazingly straightforward names (laughter). Hotplates.com. - I'm assuming that sold hot plates.
RAZ: Yeah, OK. Allbarstools.com sold bar stools?
SHAH: And what do you think that sold? Yes. Yes. You're doing good. You're doing good. All right.
RAZ: Mydinnerplate.com - I'm assuming you sold dinner plates.
CONINE: Nice. That's a classic. Yeah.
RAZ: Yeah. I love this one - everygrandfatherclock.com.
CONINE: (Laughter) A very hot category online - painful to ship.
RAZ: Who knew people were searching for that?
CONINE: We did. You could look online (laughter) and see what people were looking for.
SHAH: Yeah, exactly. I'm like, well, we definitely did.
RAZ: That was - I mean, you would find categories, and then you would basically get these domain names. And you started to build a huge business that way.
CONINE: Yeah, we got up to where we had 250 of these.
RAZ: How were you managing 250 different websites? How'd you even get your head around that?
CONINE: Yeah, we - I had this very good - we had a very good tech platform that was built around the idea of building - we had a centralized product catalog. And then when calls came in, our call system would tell you exactly where the call was coming into, so you knew how to answer the phone.
RAZ: Did you ever have a situation where somebody called the customer service number for, you know, racksandstands.com and then said, oh, thanks, you know, I'm still looking around, and then called the customer service number for, you know, mounts.com and then got the same customer service rep on the phone?
CONINE: Oh, yeah. When it was just Niraj and I working, that happened all the time.
RAZ: Did they ever say, hey, didn't I just talk to you at racksandstands.com?
CONINE: They usually didn't put it together. It was funny (laughter) - it was the funniest thing. And you wouldn't to hide it from them, but they just - they wouldn't put it together.
RAZ: I've heard that by - I think by 2010, you hit almost $400 million in sales. You had almost 5 million customers. And you were, like, this aggregation of 250 websites. Like, nobody would've known what CSN Stores necessarily was. No one knew who you guys were. I mean, people just knew allbarstools.com or mydinnerplate.com.
CONINE: Yeah, and they didn't know those that well.
RAZ: Yeah. I mean, was that crazy to you guys, that that much revenue was coming in? Or were you just too busy to even stop and think about it?
CONINE: I mean, it's like watching your kid grow up a little bit. Like, it's just happening so incrementally, and you're just following this playbook that you've got that's working well that, you know, didn't - I don't - I mean, when you step back from it and think like, oh, wow, this has actually gotten huge, you know, you try not to do that too much because it gets scary.
RAZ: And how about your relationship - with the two of you? I mean, is it just you guys are wired in such a way where you just - you're kind of chilled out, and you get along and you don't have any tension? I mean, it's just - it is crazy that you're still - after all these years from, like, high school, you're working together.
CONINE: No, we - gosh, it's interesting. You know, when we would - when we first started working together, I can remember having arguments where he was usually right, and he was telling me something I needed to hear, but I really didn't want to hear it. And of course, my emotion would flare up, and I remember having to walk out of the room and just be like, I've got to go walk around the block and, you know, just be cursing under my breath at him for half an hour. When we got into this business, you know, we were a lot more mature as individuals and had been through a lot of that, had both gained and lost a lot of money together. And so I think, you know, greed is one of the things that can create a lot of tension.
RAZ: Yeah, yeah.
CONINE: ...In partnerships. I think we'd gotten past a lot of that. And we'd also gotten to where we valued each other's advice and had gotten - and gotten to the point where we were like, look, I trust what he's telling me because he cares and he actually is trying to make me better, make us better as a company.
RAZ: Yeah. Niraj, what do you think?
SHAH: I think the two key things that I think have always helped us - one is that we gravitate to different areas of the business, and the second is, we definitely have always found each other to be very hard-working and very committed to it. I think those are not to be taken for granted because I do think they - those traits may not be as common as you would think.
RAZ: Yeah. In 2011, I guess, was when you decided that you needed to scale this even bigger. And this was the first time you actually took in outside investment. Why did you allow venture capitalists to get involved in this company?
SHAH: We're definitely ones who would rather just fund it ourselves or self-fund the business and have it fund itself. The challenge became - in 2011, we believed the big opportunity - to continue the trajectory and to really capture the big opportunity, we needed to build a brand. And the amount of capital we thought to go through that migration and to build a brand that it would take was not an amount we could self-fund.
RAZ: Because you did not have a brand. CSN was not enough of a brand.
SHAH: Right. You know, consumers didn't know that brand. It wasn't - you want a brand that when, you know, you think, hey, I need to shop; I want to redo my living room - you want someone to think, oh, I go to Wayfair. You want it to be a top-of-mind brand for a category, right? And that is not - that's not easy to do. And even if you figure out how to do it, it's not inexpensive by any stretch, right? So there - we wanted to be able to do that.
CONINE: The other just minor dynamic I think that happened is investors - they'd started to change their pitch to being, you know, purely from, we want to invest and buy part of your company to, hey, we'll invest and buy part of your company, invest in it, but we'll let you guys take some cash off the table, as well. And, you know, at that point in our lives, we'd both gotten married. I had some - I had kids. I guess Niraj had kids, as well. Being able to take, you know, a bit of money off the table as part of an equity was also appealing. And so there's - you know, those things kind of tied together at that timing in our lives.
RAZ: So you had 250 websites under CSN Stores. How did you come up with the idea for Wayfair?
CONINE: Well, we knew we wanted a different name. The CSN name - CSN Stores name - was difficult for people to remember, recall. We've always been reluctant to use consultants, but we hired a branding agency, and they came up with the name Wayfair. And it's - you know, it's a made-up word. The two words - way and fair - we liked are positive, kind of shop, you know, terms. The domain name was also available. And so you weren't going to have to go out and spend, you know, millions, trying to buy domain names from people. You could just register it and kind of be off to the races.
RAZ: So it took about a year for all these sites to kind of consolidate under Wayfair. And to the consumer, Wayfair seemed like a brand-new thing, right?
CONINE: It did, yeah. Yeah, it just kind of came out of nowhere, and people were kind of like, wow, this is a cool place to shop for home.
RAZ: And it's - the fact that you guys got into home goods, it had to do with - you know, with the fact that people were searching for these products. In other words, I mean, you could have ended up being a company that sold, like, personal grooming products, right?
SHAH: Yeah. And the one thing I would say - you know, home - the beauty of home - most categories, people want to all buy the same thing as each other, right? So you know, AA batteries - you buy Duracell or Energizer or the private label. There's only a couple categories where a huge selection is really a key piece, where visual and aesthetic considerations are very paramount, where people want unique items. And the two are really fashion and home. And we basically - by focusing on home, where the logistics are quite complicated and different, where there are no brands, where the visual merchandising is critical, where people have a very unique style, there's a lot of value you can add as a retailer.
If you're in any of these other categories, certainly, there's a big business there, but that's effectively the business that the Walmarts and the Amazons and the Targets and the Costcos - they're all in that business, selling the same exact items to everybody. And you can fight that out and try to find an advantage, but typically, the advantage is either in price or speed. There's really no other way to do it. And so the beauty in home is that it's more multifaceted, and it doesn't - if someone's a winner in these other categories, it doesn't automatically make you a winner in home.
RAZ: You're a public company. You are listed on the stock exchange, right?
CONINE: Yep, New York Stock Exchange.
RAZ: And the company, I believe, is - today is valued at more than $3 billion - with a B - billion dollars. But you guys - I've read that you're still not incredibly profitable. Does that actually matter for the time being?
SHAH: Well, obviously, a company needs to be able to generate cash. If you run out of cash, you go out of business, right?
SHAH: So that's really important. I think what folks confuse is a company that's willing to reinvest in smart ways with one who fundamentally has a business model problem and is not going to be able to be successful.
SHAH: In our case, the United States has been profitable. You know, if you read our financials, and we break out the adjusted EBIT doc...
RAZ: The U.S. sales, you're saying.
SHAH: ...Between the U.S. and international - yeah. So U.S. is 90 percent of our business, and that's been profitable for the last five quarters. And if you look at that, you'll then see, well, international's losing money. Well, international's much smaller. We're certainly investing a lot of money to build that up...
SHAH: ...And we think it'll be very big and successful. But we're in a very fortunate position. You know, if you have - we have $600 million in the bank. We have the ability to invest in these very ambitious things that help customers. I think, in that case, you're actually better off being an aggressive investor into the experience and making the experience better and better because you'll earn more loyalty and more customers.
RAZ: I mean, could you imagine - obviously, I mean, both you guys are still pretty young. You're in your mid-40s. And, I mean, could - you know, there are other things you could do - conceivably do - with your lives. You could start - you guys could start another company. Could you imagine - I don't know - like, an Amazon or Walmart, you know, coming to you and saying, hey, guys, we want to buy your company. We're going to give you X billion dollars. Could you ever imagine accepting that or agreeing to that?
SHAH: You need to be prudent, right? So we know all those folks. We, of course, would have conversations with anyone who wants to have a conversation. Last year, when we did $4.7 billion in sales, we grew 40 percent from the year prior. Well, so if you take a number like $4.7 billion in sales, and you grow it, it's some decent-sized growth rates - some high growth rate. You know, the company is getting bigger at a faster rate. And if you believe you can do a lot for the customer that is more than anyone else can do, well, why wouldn't that continue to grow at a fast rate? So it's really super early days if, in fact, we can be the best. So it would be very premature to think about selling it if we think we can win.
RAZ: How much of the success of your partnership and the businesses you've built is because of your intelligence and your skills and how much because of just luck and serendipity?
CONINE: (Laughter) It's all Niraj's skill. I just show up to the - (laughter) show up to the office daily. You know, it's obviously a bit of both. I don't know that there are dramatic intellectual skill differences in humans in general, so I think it tends to be, you know, your ability to focus and keep doubling down on your own - believing in yourself and your work ethic and continuing to focus on a narrow enough set of things that you can win in. And we've been good at kind of staying focused on that and not listening to other people who tell you to go try and do other things.
SHAH: You know, serendipity and luck always play a little bit of a role, right? So I think that definitely is a piece. So you think about it - we happened to be in college. The last semester of college happened to be at the beginning of the commercial Internet. The commercial Internet has created a huge amount of opportunity. Well, if it was a different point in time, would there have been no opportunity? No. But there would be opportunity. Would it be as big? Maybe, maybe not. Would it have been different? Possibly. Would it have been as well-suited to us? I don't know, you know? So I think there's a mix in there, and I think just - I do think a lot of it is how hard you go after something and how pragmatic you are about it.
RAZ: With all this stuff in home furnishings that you've done, are either of you any good at interior design?
CONINE: Niraj likes to think he has a design eye.
CONINE: He likes to comment on design. Let's say that.
RAZ: And what about you, Steve?
CONINE: I have a very clean, modern aesthetic in my home. And Niraj - he has a much more traditional look. Your wife would probably kill me when she hears me say that.
SHAH: Yeah, exactly.
SHAH: I'm going to find this clip and send it to her.
(SOUNDBITE OF MUSIC)
RAZ: Niraj Shah and Steve Conine, founders of Wayfair. The website now offers over 10 million different items for sale, stuff they used to sell on more than 250 different websites.
By the way, what was the weirdest domain name you guys ever registered?
SHAH: What's the rooster decor one?
SHAH: That's probably the best one, yeah.
RAZ: People want rooster decor?
CONINE: Rooster vases, pitchers...
RAZ: Oh, my God.
CONINE: ...Planters, pots, you name it. If it's got a rooster, we're going to try to find it and source it and sell it to you.
RAZ: I just cannot imagine having a bunch of rooster decor in my house, but that's just me. Maybe I'm weird.
CONINE: (Laughter) It's a thing.
RAZ: Maybe I'm weird.
CONINE: Someday, you'll visit someone who's got a lot.
(SOUNDBITE OF MUSIC)
RAZ: And please do stick around because in just a moment, we're going to hear from you about the things you're building.
(SOUNDBITE OF MUSIC)
RAZ: Hey, thanks for sticking around because it's time now for How You Built That. And this story starts in 2009, when Carin Luna-Ostaseski was working in marketing in New York City.
CARIN LUNA-OSTASESKI: After work one day, a friend asked me if I wanted to grab a glass of scotch. And I said, no, I don't drink scotch. That's my grandfather's drink.
RAZ: But the friend took her to one of those places that specializes in scotch.
LUNA-OSTASESKI: And that night, I tried four different brands, and I instantly fell in love with a brand called Oban 14. And I loved the beauty and the nuances and the complexities of the spirit.
RAZ: And so almost instantly, Carin became a scotch drinker. She started reading about it and then collecting it and then eventually evangelizing about it.
LUNA-OSTASESKI: I became that friend, you know, that was always trying to convince everyone else - oh, you should try scotch. And everyone always said the same things - you know, it burns my nostrils. It tastes like gasoline. It's too expensive.
RAZ: So Carin began to think, hey, I already have all this amazing scotch in my personal collection. Maybe I could just blend my own.
LUNA-OSTASESKI: One that's designed specifically to change the way that you think about scotch. Very smooth, approachable, that has a lot of vanilla and caramel and citrus and just a little bit of smoke.
RAZ: So starting out in her kitchen...
LUNA-OSTASESKI: I would take two brands that I thought would go well together, and I'd take a measuring cup and three glasses, and I would put one that was measured 50/50, another 25/75 and the other 75/25, and then I had three new blends. And I did this quite a lot. And I came up with some really bad, not-so-great-tasting blends - like, even just on the nose, I would just dump it before even tasting it.
RAZ: But eventually, after about six months of experimenting, Carin came up with the blend she really liked. At this point, she was living in San Francisco, and she started to call and email dozens of master blenders in the only country that makes scotch, which is Scotland.
LUNA-OSTASESKI: But time and time again, I just got so many noes. In fact, there were 80 noes.
RAZ: Eighty noes?
LUNA-OSTASESKI: I would say it's an old boys' club more than anything - right? - especially being, of all things, an American woman living in California. I think from a third party, I heard, oh, yes, that's that crazy American woman that's trying to create a scotch brand (laughter).
RAZ: But finally...
LUNA-OSTASESKI: The 81st person was the one that said, yes, we can help you. It was actually two sisters - that they worked for their father's Scotch whisky importing business. And it was just this amazing moment that I realized that this could actually come together.
RAZ: Carin then launched a Kickstarter campaign. She raised $48,000 and used the money to blend her first bottles of scotch. And it's doing pretty well. It won a few prestigious challenges. It beat out brands that have been there for centuries. SIA Scotch is now on sale in a thousand stores around the U.S. and is on track to bring in $600,000 this year. Oh, and the name SIA - it comes from Scottish Gaelic.
LUNA-OSTASESKI: So the name SIA means the number six, and there are six whiskies in the blend, and a friend recently pointed out to me that it could stand for Scotch Is Awesome.
RAZ: If you want to find out more about Carin and her scotch, you can visit our Facebook page. And, of course, if you want to tell us your story, go to build.npr.org. And thanks so much for listening to our show this week. If you want to find out more or hear previous episodes, you can go to howibuiltthis.npr.org. Please also subscribe to our show at Apple Podcasts or however you get your podcasts. You can also write us. That's email@example.com. You can tweet us - @HowIBuiltThis.
Our show was produced this week by Rachel Faulkner. Ramtin Arablouei composed the music. Thanks also to Neva Grant, Sanaz Meshkinpour, Thomas Lu and Jeff Rogers. Our intern is Nour Coudsi.
I'm Guy Raz, and you've been listening to HOW I BUILT THIS from NPR.
(SOUNDBITE OF MUSIC)
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.