How I Built This with Guy Raz - Wayfair: Niraj Shah & Steve Conine

Episode Date: April 16, 2018

After selling their first small business and shuttering their second, former college roommates Niraj Shah and Steve Conine thought about getting "normal" jobs. But in the early 2000s, they stumbled across an unexpected trend: people were buying furniture online to get a wider selection. Within a few years, Niraj and Steve launched 250 different websites, selling everything from barstools to birdhouses. Eventually, they consolidated these sites into one giant brand: Wayfair. The company now carries more than 10 million items for home and last year brought in more than $4 billion in sales. Plus, for our postscript "How You Built That," how Carin Luna-Ostaseski fell in love with scotch and became the first American woman to create a Scotch whisky company. See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

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made it feel less like a visit and more like we were actually living there. Plus, taking a trip is the perfect time to host your space on Airbnb. Your place with all of its personal touches and its amazing location could make someone else's vacation even better. Your home might be worth more than you think. Find out how much at Airbnb.ca.com slash host. Hey, 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 October 16th 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 Gebia, Katrina Lake of Stitchfix, 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 slash summit to find out more and to get your tickets. So, all right, I'm going to read some of the websites that you guys launched. Hotplates.com. I'm assuming that sold hot plates. Yeah.

Yes. Okay. All barstools.com. And what do you think that sold? Yes. You're doing good. You're doing good. All right.

My dinnerplate.com? Nice. That's a classic. I love this one. Every grandfather clock. com. A very hot category online. Who knew people were searching for that?

We did. 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 $5 billion worth of home goods, each year. 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 American believed the world needed Lara Bars. Jenny 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 Coney nor Niroid Shaw 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, Indiana, you couldn't easily get the same type of 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 $5 billion worth of this stuff every year. Wayfair was actually the third company Steve and Neeridge 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 that the other one was going to Cornell? No, we hadn't really kept in touch, so I think it was a surprise. Yeah, pretty much. I was like, hey, what's up? How you've been this past year? So were you friends, like, right away?

Yeah, we were part of a, you know, I think when you're a freshman 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 and Neerj 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. Yeah. Did you guys, Neer, did you, did you and Steve used to talk about starting a business when you were in college? 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. Yeah, it was 95, and it was very early years of the Internet. The Nescape Browser had kind of come out that year. Yeah.

Our idea was actually to develop some Internet Directory services. And we would go downtown in Nitha, New York, and try to pitch companies on paying us five bucks to have a listing in our internet directory. And, of course, most 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, you know, build a website and, you know, maybe at least get a present on the internet? And, you know, what would that cost me? And so the business turned into kind of an internet consulting business that built sites for companies.

And you kind of knew how to do the basics because you were engineering students? 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 who could we hire, so on and so forth. We were one of the few shops that had actually done things. 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 are we fired? This is like a 22-year-old kid. Yeah, what am I doing here? You know, we did. We're both pretty good sales guys, so I don't remember that being,

snacking 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 here 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. So I guess by that summer, you've graduated from Cornell and then you decide to move to Boston to launch the company? Yeah, so we had, what happened very quickly is 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 or what have you. So we actually decided to move to Boston at the beginning of that summer. And how are you guys managing, I mean, if you were getting all these projects in coming in, presumably they wanted the two of you to do the work. How were you managing all that work? We were working pretty hard. 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 he won it. 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, I mean, 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. Was it exciting? Did it feel like you guys were building something really big? Yeah. Yeah, it was our first year out of college. I mean, so we're young, full of energy. It's very, very exciting. There's all this hype around the Internet, and everyone sort of got their eyes on it looking at how, you know, the potential of it.

It's an area when you first see a new technology, you can envision the potential of it very quickly. I think it was awesome to be in the middle of it. By the way, what did you guys call the company? Spinners, because you spin the web. Oh. Well, it was the World Wide Web at the time. We were like, oh, spinners. You know, if you're a spider, you spin the web.

Oh, I see you spin the web like a spider. Oh, that's clever. Yeah, yeah. Oh, my God. You guys were super nerds. So how long did spinners last? About four years. So we started it in the summer of 1995.

So I guess that's three years or 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. Wow. 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. What would you guys sell it for? We sold it for a combination of cash and equity. I think it was 500,000 cash. So we each got like 250 cash. Does that sound right? I think it might have been a little more than that. I think we might have each gotten like half a million.

cash. And then 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. Down to zero? That's where it ended. Yeah, yeah. Got to watch tens of millions a road. So you guys didn't really walk away with a whole lot of money from that venture? No. No. I remember I had this Merrill statement that says I was worth 27 million when I was probably like a 24-year-old. And I remember thinking I'm all set. And then I'm, you know, six months, later it was basically back down zero. So at one point, you were worth $27 million when you're in your mid-20s and then... Yeah. But it was really, it was just on paper. It was just on paper,

but boy, what a good lesson to learn as a young fellow. So this is like the early 2000, 2000, I guess, and the two of you, I guess, decide to start a new business together, right? 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 Let's pick something new and do it again, yeah. 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.

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'd effectively have, you know, thousands of phones, but they reached 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. What's a virtual carrier? Think of Virgin Mobile in the UK where they use a Virgin brand name and they actually operate on top of British Telecom's network.

It's a branding on top of an existing network. But to the consumer, it feels like they're buying Virgin Mobile. They don't think they're buying British Telecom. Got it. Okay. What was the company called? Simplify Mobile. Simplify mobile.

Yes. But you would just call up companies and say, hey, can I talk to the person who handles your mobile phones? Yeah. I'm Steve, Simplify Mobile. I've got a really great offering to help you save money in mobile phones. Would you be, you know, I'd love to talk to whoever manages that for you. And occasionally you get someone, right? Yeah.

We did have one key flagship customer that we had lined up who was very interested in doing it, which was Merrill Lynch. Big customer, yeah. Yeah, yeah, they had big phone spend. And so that was looking quite good. And then, unfortunately, what happened in 2001 was, you know, say September 11th was a huge impact for everybody. And particularly for financial services companies, in 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. 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 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. 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 we thought about the market potential and the odds and the, you know, what we'd learned in that 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 as entrepreneurs, I think we've been a big fan of saying like, well, look, if you can't, you 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. Was that rejection hard for you to handle?

Was it humiliating to just like eat away at you after a while? 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 calling 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. He's like, because that way, if you look at it, every rejection is a good thing because it gets you closer to your goal.

And so it keeps you motivated to working at it. You learn a lot more from when things are going bad and 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, I don't know, we just love being entrepreneurs. So when Simplified Mobile kind of like fizzled out, you guys both were starting to approach your 30s, right? So you're still pretty young. Yeah. Did you have a sense of what you were going to do next? Of course, you're going to get into furniture. What else are you going to do? Yeah, I mean, furniture on the Internet.

It's where it's all at. So what did you guys do? I mean, you wind this business down. You're still presumably thinking, let's continue to work together? We went right back to the drawing board. So we started looking at that point. We got very... Were you living in my basement at this point?

That's right. So I... In your downstairs bedroom. Yeah, so I was living there. Yeah, because we'd kind of brainstorm stuff. Right. And then my girlfriend at the time moved up from New York. And I'm like, honey, it's a great deal.

We can just live here. And the deal was he bought the groceries. 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 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 journalist said, you would have been left believing that e-commerce was dead. That was what all the articles talked about.

Because there were a bunch of companies that crashed. Oh, yeah, big time. But I think there was even at that time, there was a lot of skepticism that Amazon was going to succeed. There were a lot of people talking about Amazon's imminent demise, you know. And so we got fairly methodical. We said, well, okay, we should start looking at Internet ideas. We know Internet. We know Internet software.

We should look at Internet ideas. And then we should 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. When you say e-commerce, what were they selling? I remember there's one lady who was selling birdhouses. She was storing them in a garage every day. She was taking all the orders and collecting all the items out of the garage and packing them up and taking them to the post office. And selling them online. Yeah, all birdhouses.com or such 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. If you want to buy a birdhouse locally where you live today, where would you go if you want a decent selection?

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. Exactly. Right. And they're pretty basic styles, right? because they're only going to have three or four, right? And so all of a sudden, people started realize, well, I don't have to be stuck with that. I can go online. And find a hundred different options. Exactly. 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 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 racks and stands.com at the very end of August of that year. Which was? TV stands and speaker stands. So it was entertainment furniture. Did you have a particular passion for TV and speaker stands? I was a mechanical engineer out of Cornell.

I mean, these things are central. But you know what you find? There were in those days, on Yahoo's 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 100 categories. And so both of those terms were in the top 100 search product terms. Wow. So people were looking for TV and speakers.

Why wouldn't they just go to their local, like... You couldn't find anywhere that sells them. Same thing about just 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? Yeah. So wait, so you're thinking, all right, our first one is going to sell TV and speaker stands. Just had curiosity, where did you got?

Where did you even go to find TV speaker stands? Well, in the beginning, what you do is you'd go online and look for companies that made them. You'd also look at what the other online retailers were selling. What brands did they have? And you'd buy the audiophile magazines and flip through and see what brands they're advertising. And so did you just buy a bunch of TV and speaker stands and just have them shipped to your apartment in Boston? No. So at the time, there was a bunch of electronics distributors that actually would stock small amounts of speaker stands.

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. 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? Exactly. They'd click into it.

And it's the promised land if you're looking for, you know, speaker stands. So when did you launch the website? August 29th, 2002. 2002. And how long before you had your first orders? Hours. Hours. Yeah, hours. When we come back, how racks and stands.com, then all barstools.com, then every grandfatherclock.com and on and on, eventually turned into Wayfair.

I'm Guy Raz, and you're listening to How I Built This from NPR. Hey, welcome back to How I Built This from NPR. I'm Guy Raz. So it's 2002, and Steve Kohnine and Niroid Shaw are on their third. third business idea. They're selling TV stands on the internet. It's a site called racks and stands.com. And this was a time when a lot of people thought e-commerce was dead. But Nerej and Steve, they thought it was very much alive. So they started to advertise. Google had just launched AdWords, which is, you know, keyword bidding. Right? People, where you pay money for... Yeah, you'd advertise, right? You'd write your text ad, and you'd

basically pay per click. And we would track every time we got an order which advertising unit drove it. And so we'd either bid those up or bid them down if they were nonproductive. And what kind of advertisements were they? What would they say? They'd be text as it's, you know, largest selection available TV stands. Great TV stands for less. Hundreds available. Racksandstands.com. So if you were a consumer, you'd 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 shipped to that customer?

Exactly. 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 in the category. Racks and stands. Racks and stands. And we grew to be one of the largest or the largest online seller in the category. And what happened is our supplier started telling us, hey, you know, you've become my biggest online retailer of TV stands or speaker stands or what having.

But, you know, my other online guys sell more of my beds or my other online guys sell more of my desks. And so we started learning that, in fact, these other furniture categories that we hadn't focused on, but that they were doing quite well online as well. 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. 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. That was 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 need to hire anyone to do that work. 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 complain.

We did. There's four phone lines in my house that it would ring. They were right near my bed. And you were, like, one hand, you were, like, programming the technology. In the other hand, you were picking up the phone? Yeah, well, this is the beauty of that setup. It was Nierz and I, it's a 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 get off a call with a customer, and we'd change what we were working on that day. In my case, I'd probably change what I was programming. Nridge 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 was asking for this. He'd go figure out to source it. 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 for phone lines. And that led to us start to hire people. So once you start selling racks and stands and you do pretty well, what's the next category you go to? Mounds. TV mounts. TV mounts. 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 and so forth. But the other thing that happened is flat screen TV started really becoming more popular.

Yeah. And so people wanted to hang those on the wall. And so our timing on that was quite good. So we saw this huge sales sort of start, you know, kind of momentum. So then we built the site just for that to have every type, you know. What was it called? Mounds and Moore. Mounce and More.com.

But it didn't really matter what you called it, right? Because you would make sure that the search engine. Oh, these were brilliant. branding and high. Well, the traffic was primarily driven by 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 and the site wasn't so much that it was something someone would type in or that would memorable or they'd pick it over other items. It was more that it made sense as a place you would go for this item. All right. So TV mounts and then how did that do? That did phenomenally well.

We were the Mount Kings of the Internet. Oh, my God. And so then what came next? Then we, I think we started kind of a new beachhead in outdoor furniture. And so we started this site called Teakwicker and Moore, which was basically outdoor furniture. 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% off today, try our samples. Like, you would just put this out on the internet. You figured out how search worked, and people came.

That was the sandwich board. That was the sandwich board. We paid Google to run the sandwich board. for us. And you didn't have to take in any outside investment at that time because the revenue from each expanding website was fueling the business? It was. I mean, this business is cool. From that day earlier it was 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.

Do you remember how much revenue you were doing in, you know, I don't know, by like 2003, yeah, 2004? Do you remember New York? 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.

Wow. I mean, you probably had to just hire tons of people, tons and tons of people fast. 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 grows. 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 the virtuous cycle. And we would take the money that resulted, and we would invest that into growing the team. to keep driving it. Just that curiosity, when people asked you, like, oh, Nairch, 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?

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 so high doctor. No, no, I'm not a doctor. No, I just sell furniture. Because if you say you sell furniture, no one's interested. There's no problem.

It's like silences the conversation. Oh, I see you. Yeah. So that's a good way to wrap up the conversation. So obviously what you were doing is, of course, what eventually would become Wayfarer. But at this point, you started calling it, I think, CSN stores, right? Yeah, that was really. I think at the end of 2002, 2003, we adopted that.

It's a great name, CSN stores. Very catchy. It's our initials. Did you get a bunch of consultants to help you figure out that name? No. We could get it for $12. a year and there was no trademark issues with it. I think Nierge came up with it.

It was our initials kind of conglomering. CSN-O-Konine. Yeah, Conine, Steve, Shaw, Nierge. Yes, is overlap. I got you. It was a generic name we could use across any category, you know. 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.

Sounds like it. You don't want to just name it after one of the names, right? The second is a lot of the suppliers are very traditional companies. And so when we would go to like the high point furniture market and approach suppliers, you wanted 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 is CSN stores and where are you based, oh, we're in Boston, oh, we're in Boston, oh, we're right in Back Bay. Oh, oh, we have an office on Newberry Street.

Oh, great. Oh, what do you guys focus on? Oh, well, we're really focused on entertainment furniture. Oh, what do you carry? Oh, we carry this brand, that brand, this other brand. Oh, great. You get into a conversation and they say, well, what are you interested in? Well, what would really be interested in this selection?

We think it would do well for these reasons, da-da-da-da. And they say, oh, well, you know, how big is your store? 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 get kicked out of the show. They didn't want you. They didn't want to be involved with that. If you came in, like e-shop.com, they knew right away.

It's an internet guy. 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. So, all right, I'm going to read some of the websites that you guys launched because I just think they're amazing. Amazingly straightforward name. Hotplates.com.

I'm assuming that sold hot plates. Yeah. Yes. Okay. All barstools.com. What do you think that sold? Yes. You're doing good.

You're doing good. All right. My dinnerplate.com? I'm assuming you sold dinner plates. Yeah. I love this one. Every grandfather clock. com.

A very hot category online. Painful to ship. Who knew people were searching for that? We did. You could look on. I'm like, and see what people are looking at. I'm like, well, we definitely did. Yeah.

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. Yeah. We got up to where we had 250 of these. How are you managing 250 different websites? How did you even get your head around that? Yeah, 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. saying you knew how to answer the phone. Did you ever have a situation where somebody called the customer service number for, you know, racks and stands.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? Oh, yeah. When it was just near to I working, that happened all the time.

Did they ever say, hey, didn't I just talk to you at racks and stands.com? They usually didn't put it together. It was funny. It was the funniest thing. You weren't trying to hide it from them, but they just, they wouldn't. put it together. I've heard that by, I think, by 2010, you hit almost $400 million in sales. You had almost five million customers. And you would like this aggregation of 250 websites. Like nobody would have known what CSN stores necessarily was. No one knew who you guys were. I mean, people just

knew all barstools.com or my dinnerplate.com. Yeah, and they didn't know those that well. 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? 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 this 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. And how about your relationship with the two of you? I mean, it's 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's, it is crazy that you're still, after all these years from like high school, you're working together. No, gosh, it's interesting. You know, when we first started working together, I can remember having arguments where he was usually right.

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 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 that 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 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 it got into the point where 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. Yeah. Nears, what do you think? 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 hardworking and very committed to it. I think those are not to be taken for granted because I do think those traits may not be as common

as you would think. Yeah. In 2011, I guess, it was when you decided that you needed to scale this even bigger. And this is the first time you actually took in outside investment. Why did you allow venture capitalists to get involved in this company? We're definitely ones who would rather just funded ourselves or self-fund the business and have it fund itself. the challenge became, in 2011, we believe 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 sell fun. Because you did not have a brand. CSN was not enough of a brand. Right. You know, consumers didn't know that brand. It wasn't, you want to brand that one. 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 easy to do. And even if you figure out how to do it, it's not inexpensive by any stretch, right? So we wanted to be able to do that. The other just modern dynamic, I think, that happened is investors, they started to change their pitch to being, you know, purely from, we want to invest in buy part of your company to, hey, we'll invest in by 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 kids, I guess, near-tied 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 in that timing in our lives. So you had 250 websites under CSN stores. How did you come up with the idea for Wayfair? Well, we knew we knew we wanted a different name. The CSN name, CSN store's 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 a made-up word. The two words, Wayne Fair, we liked their positive kind of shop terms. The domain name was also available. And so you weren't going to have to go out and spend millions trying to buy domain names from people. You could just register it and kind of be off to the races. So it took about a year for all these sites to kind of consolidate under Wayfarer. And to the consumer, Wayfair seemed like a brand new thing, right?

It did, yeah. Yeah, it just kind of came out of nowhere. People were kind of like, wow, this is a cool place to shop for home. And it's the fact that you guys got into home goods, it had to do 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? Yeah, 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 Amazon's and the targets and the Costco's, 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.

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. Your public company, you are listed on the stock exchange, right? Yep. Yep. New York Stock Exchange. And the company, I believe, is today valued more than $3 billion with a B billion dollars. But you guys, I've read that you're still not incredible. profitable. Does that actually matter for the time being? Well, obviously a company needs to be able to generate cash. If you run out of cash, you go out of business, right?

Yeah. 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. In our case, the United States has been profitable. You know, if you read our financials and we break out the adjusted eBed does. The U.S. U.S. and international. Yeah. So U.S. is 90% 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 is losing money. Well, international is much smaller. We're certainly investing a lot of money to build that up, 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. I mean, could you imagine, obviously, I mean, both of you guys are still pretty young. You're in the mid-40s. And, I mean, there are other things you could do conceivably do with your lives. You 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? You need to be prudent, right? So we know all those folks. You, 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% from the year prior. Well, so if you take a number like $4.7 billion in sales and you grow it at some decent-sized growth rate, some high growth rate, you know, the company is getting bigger at a fast 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. How much of the success of your partnership and the businesses you built is because of your intelligence and your skills and how much because of just lack and serendipity? It's all near just skill. I just show up to it.

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 continue 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 would tell you to go try and do other things. Niers? You know, serendipity and luck always play a little bit of a role, right?

So I think that definitely is a piece. You think about it, we happened to be in college. The last semester of college happened to be 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 have been different? Possibly, would it have been as well suited to us? I don't 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. With all this stuff in home furnishings that you've done, are either of you any good at interior design? Nierge likes to think he has a design eye.

He likes to comment on design, let's say that. And what about you, Steve? I have a very clean, modern aesthetic in my homes. And Nierge is, he has a much more traditional. Look, your wife would probably kill me when she hears me say that. Yeah, exactly. I'm going to find this clip and send it to him. Mirage Shop 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's the weirdest domain name you guys ever registered? What's the rooster decor one? All roosterdecor.com. And that's probably the best one. People want rooster decor? Rooster vases, pitchers, planners, 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. I just cannot imagine having a bunch of rooster decor in my house, but that's just me. It's a thing. Maybe I'm weird. Someday you'll visit someone who's got a lot. And please do stick around because in just a moment we're going to hear from you about the things you're building. Hey, thanks for sticking around because it's time now for how you built that.

And this story starts in 2009 when Corinne Luna Osteseski was working in marketing in New York City. 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. But the friend took her to one of those places that specializes in scotch. 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. And so almost instantly, Karin became a scotch drinker.

She started reading about it and then collecting it and then eventually evangelizing about it. 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. So Corinne began to think, hey, I already have all this amazing scotch. in my personal collection, maybe I could just blend my own.

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. So starting out in her kitchen... 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.

I came up with some really bad, not-so-great-tasting blends. Like, even just on the nose, I just dumped it before you've been tasting it. But eventually, after about six months of experimenting, Corinne 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. But time and time again, I just got so many nose.

In fact, there were 80 nose. 80 nose! 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. But finally? 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 whiskey importing business. And it was just this amazing moment that I realized that this could actually come together. Karin 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 1,000 stores around the U.S.

and is on track to bring in $600,000 this year. Oh, and the name's Sia, it comes from Scottish Gaelic. So the name Sia means the number six, and there are six. whiskey's in the blend, and a friend recently pointed out to me that it could stand for scotch is awesome. If you want to find out more about Corinne 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 how I built this.npr.org. Please also subscribe to our show at Apple Podcasts, or however, you get your podcasts. You can also write us. That's Hibt at npr.org. You can tweet us at How I Built This. Our show is produced this week by Rachel Faulkner, Rampin-Arablui composed the music. Thanks also to Niba Grant, Sanaz-Meshkampur Thomas Liu and Jeff Rogers. Our intern is Nur Kutzi. I'm Guy Raz, and you've been listening to How I Built This from NPR.