Dive Brief:
- Wayfair has canceled plans to open a fulfillment center in Houston, the company confirmed to Supply Chain Dive.
- The online furniture retailer made the decision "due to changes in our business," Marrah Morles, global head of operations communications, said in an email. Wayfair has been struggling amid falling sales and customer declines, and it announced another round of layoffs in January.
- Wayfair planned to invest $63.2 million for the 1.2 million-square-foot fulfillment center's development, with landowner Prologis chipping in another $70 million, according to a Houston City Council agenda item in December.
Dive Insight:
Wayfair nixing its plans for a Houston fulfillment center adds further evidence that the company's industrial real estate growth will be limited in 2023. CFO and Chief Administrative Officer Kate Gulliver said on a November earnings call that Wayfair is taking a moderated and thoughtful approach to investing in new fulfillment centers.
"We're very focused on building that when we need it, not in advance of when we need it," Gulliver said.
As far as Wayfair's existing fulfillment center operations, the company hasn't indicated that it's planning to scale back. CEO and Co-Chairman Niraj Shah said on the same earnings call that Wayfair's U.S. fulfillment footprint is "fairly heavily utilized right now." He added that Wayfair's facilities provide the benefit of reduced final-mile delivery expenses, since inventory is located closer to end customers.
"The customer sees a faster speed, but frankly, our shipping cost goes down dramatically because that inbound leg is not very expensive relative to the outbound leg," Shah said. "...Without a building in that place to put the goods in, you can't do what I just said."
Wayfair already has a presence in Texas, with positions listed for warehouses in Austin, Lancaster and Flower Mound on its careers site. Launching a new fulfillment center in Houston would have created 400 jobs by 2026, according to a July presentation from the city council's Economic Development Committee.
"We were looking forward to joining the Houston community and thank the city for the incredible partnership and support in this process," Morles said. "We’re working toward subleasing the space so that it can be used by another employer and contribute to the success of the region. We are no longer pursuing any incentives from the city."
The facility would have been located in Prologis Presidents Park on a 70-acre site owned by Prologis. The logistics real estate firm says the park provides quick access to highways and Houston's George Bush Intercontinental Airport.
Wayfair is one of Prologis' larger customers. Prologis owns and manages nearly 5 million square feet of space for Wayfair, according to the firm's Q4 earnings presentation.
The Houston Chronicle first reported the news of Wayfair canceling its Houston fulfillment center plans on Wednesday.
