Dive Brief:

• Wayfair on Thursday said that third quarter direct retail net revenue rose 43.3% year over year to $1.7 billion.

• The online furniture and home goods retailer, which runs Joss & Main, AllModern, Birch Lane and the upscale Perigold site in addition to its flagship Wayfair site, grew its number of active customers 35.2% year over year to 13.9 million, according to a company press release. Advertising expenses in the quarter grew to $203 million from $142 million in the year-ago quarter.

• Wayfair's Q3 net loss nearly doubled year over year to $151.7 million. Adjusted EBITDA in the quarter was negative $76.4 million and negative $26 million in the U.S.

Dive Insight:

Wayfair posted strong growth in its top-line sales and active customer base, but it’s not clear that it’s getting its money’s worth.

"The growth in customer numbers is hardly surprising given that Wayfair has spent well over half a billion dollars on advertising since the start of this fiscal year," Neil Saunders, GlobalData Retail managing director, said in comments emailed to Retail Dive. "This is an incredible amount that represents around 49.2% of gross profit."

Saunders's back-of-the-napkin number-crunching, taking the company's 3.6 million new customers at a time it spent $707 million on advertising, works out to an outlay of $196 each. "When customers only spend $443 a year, this seems like a rather excessive, and completely unprofitable, acquisition cost," he said. "Obviously, we appreciate that this is a simplified calculation as it does not account for the impact advertising has on existing customers, but it underlines the point that Wayfair is buying both market and shopper share with extremely high marketing spend."

The situation is all the worse in light of the fact that Wayfair's most mature market, the U.S., still requires a steep investment in marketing, with EBITDA margins back in negative territory in the quarter, Saunders warned. "This underlines the fact that even the U.S. operation is not entirely stable from a financial perspective, even during a time of elevated and heightened consumer demand," he said.

The online retailer aims to be the easiest place to shop for furniture online at various price points, executives told analysts on a conference call Thursday morning, defending their new fee-based MyWay loyalty membership as more effective than any based purely on discounts because it offers value, including perks like delivery and early access to promotions, that they said go further in bolstering time and money spent. While Wayfair's stock was hit earlier this week on the news that Amazon unveiled two more private label furniture and decor brands, Saunders said that Wayfair does offer a superior experience in the segment, even if it "still has a lot to prove."

"The company's customer centricity is part of the reason for its popularity and why it has outperformed the market," he said, noting the company's investments in both mobile and traditional online platforms.