Dive Brief:

• Wayfair on Thursday said that fourth quarter direct retail net revenue through its five e-commerce sites rose 40% year over year to $959 million, with Q4 total net revenue increasing 33.1% year over year to $984.6 million.

• The e-commerce home furnishings retailer’s Q4 active customers rose to 8.25 million as of Dec. 31, up 53.9% from 5.36 million in the year-ago period, and the number of orders delivered rose 52.8% to 4.7 million from 3.1 million a year ago. But orders per customer, measured as orders over the last 12 months divided by active customers, slipped to 1.70 from 1.71 in Q4 2015, and average order value fell to $203 from $222 in the prior-year period; at the same time, Q4 merchandising, marketing and sales expenses rose to $47.9 million from $32 million in the year-ago period. 

• For the full fiscal year, Wayfair's direct retail net revenue increased $1.2 billion to $3.3 billion, up 59.7% year over year, and total net revenue increased $1.1 billion to $3.4 billion, up 50.2% year over year.

Dive Insight:

Wayfair has garnered some patience from Wall Street, considering how much it continues to invest at the expense of profits. That could be in part because the home furnishings retailer is tireless about maintaining its technological prowess, which has paid off in mobile: 43.3% of total Q4 orders delivered for its direct retail business were placed on a mobile device, compared to 36.4% in same period last year. 

More generally, Wayfair's efforts in marketing and sales have made it a “clear winner of market share” in the countries where it operates, GlobalData Retail Managing Director Neil Saunders said in a note emailed to Retail Dive Thursday. In his own statement Thursday, Wayfair CEO, co-founder and co-chairman Niraj Shah crowed about "reaping the gains from the large, long-term investments we have been making over the past few years.”

But Saunders pointed out the downside of those investments. “Since its inception Wayfair has struggled to attain profitability and these latest results do nothing to suggest that it is reversing that position,” he said. “Although the U.S. operation is now profitable at [an earnings before interest, tax, depreciation and amortization] level, that profitability has waned this year and remains painfully low. For every dollar in revenue it takes in the U.S., Wayfair is making just one cent in profit. This is not a sustainable position.”

Wayfair's growth trends are also cause for concern, Saunders said. “While there is no denying that Wayfair is accelerating at a rapid pace, growth is slowing down across most metrics," he said. "Others, like average ticket, have gone into reverse. As much as we accept that much of this is down to maturity, it does suggest that the business now needs to start shifting its focus away from customer acquisition and top-line performance, to making sure it is operationally and financially sound — especially in its core U.S. operation.”

If Wayfair can reverse those fortunes, it maintains a strong position, even against e-commerce stalwart Amazon, Saunders added.

“Wayfair has a solid offer and is well differentiated from other players, especially in the U.S.,” he said. “We also believe that its systems and technologies are superior and even, at least in the home category, better than Amazon’s… Its challenge in the upcoming fiscal will be to translate these strengths, and its strong sales base, into a profitable and sustainable business proposition.”