Dive Brief:

• Wayfair opened what CEO Niraj Shah described on Thursday's earnings call as a U.S.-sized warehouse in the U.K. in the third quarter, bringing the company's CastleGate logistics network to a global total of 15 million square feet — a sign of the company's continued bullish attitude toward building undeniable logistics might.  
• Also in the third quarter, Wayfair opened a warehouse in Lathrop, California. Shah said the Lathrop warehouse has been instrumental in increasing the retailer's one-day and two-day shipping potential while decreasing inbound shipping costs. "We know the presence of such delivery speeds lifts conversion meaningfully," Shah​ said. Another opening in Jacksonville, Florida, is coming early next year.​
• The company will largely focus on increasing utilization of existing warehouse capacity in 2020, Shah said. Wayfair warehouses moved to seven-day operations in the second quarter after which Shah warned there would be a period of underutilization. But the company will "once again pick up our pace of square footage expansion in the U.S." by 2021. 

Dive Insight:

Wayfair's aggressive growth of its CastleGate warehouse and last-mile delivery network was a point of fascination when the company was gaining market share, but with a lowered sales forecast for the fourth quarter and profitability seeming to drift away, the head-scratching has begun. 

On the call, co-founder Steve Conine touted the company's supply chain software Buyfair, which handles product flow and routing from manufacturers overseas to CastleGate warehouses. 

"This is a proprietary solution that we built over the last three years in the absence of compelling third-party options," Conine said, emphasizing the benefit to supplier operations since Buyfair takes into account manufacturer capacity and networks and integrates it with Wayfair's own network to create the lowest-cost routes. 

"Buyfair effectively ensures availability to the customer while minimizing time, distance traveled touchpoints and damage involved that is at the lowest possible cost to all parties," Conine said. Suppliers receive analytics data from integrating with the software, he added. 

It has been the company's creed that such a large and expensive logistics network would win market share through a wide product selection and fast delivery — and win on the balance sheet through efficient operations. 

But with net loss growing quarter by quarter (up nearly 80% year-over-year in Q3) investors are starting to get spooked. Wayfair's stock fell to its lowest level all year on Thursday after the earnings announcement. Still, Shah insists the Wayfair network is unmatched, and fast delivery means sales. 

"We keep an eye on everybody, but we're not seeing the competitive field really take any ground," Shah said. "It doesn't mean that we get all the share. But ... we're still taking pretty significant share of the dollars that are moving online."