Why he's got what you need

Wayfair is transforming the online marketplace. Its co-founder's philosophy took root in Pittsfield.

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PITTSFIELD — He had a paper route, ran his own lawn mowing business, and was a member of Pittsfield High School's computer programming and academic decathlon teams.

Niraj Shah's upbringing in Pittsfield was similar to many of his classmates in the Pittsfield High School Class of 1991. But his career path since then has been anything but typical. Last year, he officially became a billionaire. This year, he was named to the Federal Reserve Bank of Boston's board of directors.

Shah is the co-founder of Wayfair, the fast-growing Boston-based online seller of home furnishings whose sales are predicted to hit $6.6 billion this year. The company stock rose 48 percent during the first six months of this year. It is one of the state's largest publicly traded companies.

Wayfair had 11.8 billion active customers during the first quarter, up 33 percent from the same period last year, and is growing so rapidly that it has added 2,000 new employees in 2018, according to The Boston Globe. Its total workforce is approaching 10,000.

Shah and Wayfair's co-founder, Steve Conine, who attended college together at Cornell University, were officially declared billionaires by Bloomberg News last year.

Shah, 44, who lives in the Boston area, said much of Wayfair's success is due to its relationships with its customers.

"We're very customer-oriented," Shah said in a recent telephone interview from his office in Boston. "We've always built our own technology, so we've been able to do creative things that help customers get what they want. Today, we're probably the most innovative in using augmented reality and seeing how people will shop."

Although Wayfair's sales are skyrocketing, the company is losing money. Wayfair reported a net loss of nearly $245 million last year, according to The Globe, and hasn't made a profit since going public in October 2014.

Since going public, Shah said, Wayfair has been "very aggressive" in building its brand in the United States and internationally. The expansion of Wayfair's international operations, which Shah termed "pretty ambitious," has had the biggest effect on the company's bottom line. Wayfair's domestic operations, which make up the majority of its sales, are profitable, he said.

"The total business doesn't make money," Shah said.

John Mulliken, Wayfair's chief technology officer, said the company is "100 percent focused" on its long-term goals and committed to its current business plan, which he believes will pay off in the long run.

"We really see a clear path to continue to grow the kind of success we've had up until now, and to accelerate based on the things that we're doing for the consumer," said Mulliken, who is a member of the board of directors of New England Newspapers Inc., The Eagle's parent company.

He credits much of the company's success to Shah.

"He really has a high bar for talent and encourages everyone to hire the best people we possibly can," Mulliken said. "He's incredibly ambitious — he pushes each of the teams here to be world class — and incredibly focused. ... He wants that ambition to be infectious."

It started in the Berkshires

The roots of this attitude began in Pittsfield.

Shah's family is from India. His father came to the United States to obtain a master's degree in engineering, and settled in Pittsfield when he took a job at General Electric. Shah, who was born in Pittsfield, grew up in the southeast section of the city and attended Williams Elementary School in addition to PHS. GE began downsizing its Pittsfield operations in the mid-1980s, and Shah's father finished his career with the corporate giant in Boston. Shah's family no longer lives in the Berkshires; all his family members reside in the Boston area.

During his senior year in high school, Shah was a member of the Pittsfield High School computer team that finished first in a computer programming contest that was held at the former North Adams State College. According to the high school yearbook, the academic decathlon team that Shah was a part of won the Western Massachusetts title, a competition that included six 30-minute tests in science, math, social studies, English, fine arts and economics.

The Pittsfield team won seven of the nine available medals in the math competition, with Shah receiving a $200 prize for his 680 score on the math quiz.

Retired Pittsfield High School math teacher Tom Dillon didn't have Shah in class, but remembers him as a fine student who belonged to the math club and whose grades frequently landed him on the National Honor Society.

"He was relatively quiet, a friendly, sort of a smiley-type kid," Dillon said. "He was an excellent student. I didn't picture him working in commerce as much as I pictured him in medicine or something like that."

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After graduating from high school, Shah decided to follow in his father's footsteps and become an engineer, attending Cornell because it had a good engineering school. He first met Conine during a six-week summer program that he attended at Cornell before officially enrolling there.

"We briefly met then," Shah said. "Then randomly, our freshman year, we were located a few doors down on the same floor."

The two men found that they had mutual interests.

"I think we both had an entrepreneurial streak in us," Shah said. "Steve's grandfather owned ran a farm. His mom started a retail business when he was in middle school, and my grandfather was an entrepreneur. I had the paper route. It was something we were drawn to.

"We ended up stumbling over the internet," he said. "We knew that it had potential."

Shah and Conine formed their first internet business in 1994, while they were at Cornell. They were able to build several early internet systems through that endeavor, Shah said, an experience that gave them exposure to different internet styles.

The two men formed Wayfair in 2002 in a spare bedroom of Conine's house right after the dot-com bubble burst, which caused several technology-oriented businesses to fail.

But Shah said they were confident that their idea would succeed.

While researching ideas during their other ventures, Shah said, they noticed that economic data involving e-commerce had continued to grow every year.

"It was doing really well," Shah said. "The truth was, consumers love e-commerce. It made us think that it was being underserved."

Shah and Conine originally sold television stand and entertainment centers online on their first website, which was known as rackandstands.com, before branching out into offering the types of items that Wayfair sells today.

Shah recently told The Globe that the key to Wayfair's success was finding niches that weren't served by traditional retailers.

In addition to home furnishings, Wayfair last week was offering such eclectic knickknacks as a cotton candy-maker, a football novelty cake pan, a decorative gas pump with a clock, and "reflexology rotating massage head" sandals on its website.

"You've got to find a spot that's not covered well by everybody else," Shah told The Eagle. "You kind of watch what's happening in the market. The internet is really transparent in knowing what customers are out there.

"Facebook succeeded, but MySpace and Beebo are long gone," he said. "It's the place that does the best job for the customer that they're going to go back to instead of anywhere else."

During Wayfair's first decade of existence Shah and Conine essentially bet on themselves, turning down outside offers for private capital.

"As an entrepreneur, you want your company to succeed, but you're really putting your heart and soul in it," he said. "Something like raising capital eventually can change what you're doing. It might be worth it, but otherwise you invest in yourself. You're not giving away a lot of equity so you can determine who will make every dollar go further.

"They only reason we did raise capital (in 2011) was because building a brand was an incredible opportunity, and the return would be worth it."

Selling goods over the internet isn't without its pitfalls. Wayfair was involved in the recent Supreme Court decision that allows states to charge taxes on purchases made by out-of-state sellers, even if they don't have a physical presence in that state. There has been a lot of fallout since the ruling was rendered. Associated Industries of Massachusetts held a webinar on the topic Wednesday to discuss how the situation will affect state businesses.

Shah believes the ruling will help online sites like Wayfair, more than hinder them, because it establishes that same rules for everybody.

"I think it's actually going to work out quite well," he said. "We were already collecting [taxes] in 80 percent of the U.S. before. To get that extra 20 percent, we needed the Supreme Court to do that. This cleaned it up."

Contact Business Editor Tony Dobrowolski at tdobrowolski@berkshireeagle.com or 413-496-6224.


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