Wayfair, the U.S.-based online home goods retailer, has announced its decision to exit the German market after 15 years, citing the high costs and challenges of scaling its operations in the region. The move will result in 730 job cuts, representing about 3% of its global workforce.
CEO Niraj Shah explained in a memo to employees that Germany's weak economic conditions, limited scale, and low brand awareness made achieving significant growth a lengthy and expensive process. "We made the difficult but necessary decision to reallocate efforts to areas with strong long-term potential where our current efforts are showing great progress," Shah wrote.
The restructuring will cost between $102 million and $111 million, including severance packages, facility closure costs, and other wind-down expenses. Despite these costs, Wayfair intends to reinvest savings into other core markets and initiatives, such as its physical retail expansion in the U.S., UK, and Canada.
Germany accounted for a "low single-digit percentage" of Wayfair's revenue and customer base. Around half of the affected employees will have the option to transfer to other Wayfair locations in London, Boston, or elsewhere.
Wayfair's foray into physical retail has been a key part of its growth strategy. Its first namesake store opened near Chicago in May 2024 and has shown promising results, including a "halo effect" of increased online sales in nearby areas. The company plans to open additional stores in the U.S. and eventually expand to international markets, including Canada and the UK.
The move comes as Wayfair grapples with a sluggish housing market, which has dampened demand for home goods. The company reported a 2% drop in sales in Q3 2024, totaling $2.9 billion. Despite not turning an annual net profit since 2020, Wayfair believes focusing on high-return initiatives will better position the company for sustainable growth.
