The Exchanges

Q What happens if the housing market starts to soften and with a softening housing market, You know, you could have a softening furniture market, potentially. Are you prepared for that possibility?

A Depending on what, uh, number you want to take the run rate of, you know, we're at 1314, fifteen billion dollars in annual revenue, but that compares to an end market that's eight hundred billion dollars, so we're still less than two percent of the end market. In 2007 to 2010, um, during the financial crisis, that was the worst, uh, time for the furniture industry since the Great Depression. In the Great Depression, it shrunk 35% from the top to the bottom. In the financial crisis, it actually shrunk, the furniture industry shrunk by 30%, three-zero, and so it was really devastating. What was interesting, though, is online, except for an immediate shock at the very beginning, online actually grew through it, and the reason is customers who maybe weren't as keen on buying online all of a sudden were more curious about value, more curious about availability. You know, we don't root for a bad economy, but I think we will Be able to do well, and we have great relations with our suppliers, and because we're sort of their ability to go to market and reach those customers. They basically lean in in periods of disruption even more than they will on a normal basis.

AI assessment note: “online actually grew through it, and the reason is customers who maybe weren't”

Q You can, Neeraj, I mean, there are many ways to do it. You can get convertible notes, you can pay people back. I mean, there's a bunch of ways to do. Normally, convertible notes just translate into stocks, but Neeraj, what do you think?

A Yeah. I think a convertible note is, is what I have heard of and seen as most common. What that is, is you're, instead of deciding at what value those investors are buying equity from you, they're giving you the investment. They hold a convertible note. And what that means is that when you raise your next round of capital, their money converts into equity, but at a discount to what that round ultimately gets priced at. So if you're able to take the money from them now, You're able to invest it very productively and grow the business nicely, and then ultimately raise around at a good price. These investors get the benefit. They're converting, you know, 20% less or 30% less than that. So they're, they're getting that value for being early, but you're also not necessarily having to price the company based on your current sales and where you are now, because that, that would be hard if you just do it off your current revenue. And if you start talking about the product pipeline and the vision you have, it becomes maybe a big debate as to what the price should be. So a convertible note I think is often an easy way to do it. And ultimately, those investors and the friends and family around, they are going to get equity at a good price, but it makes it an easy way to raise the money quicker.

AI assessment note: “I think a convertible note is, is what I have heard of and seen as most common.”

Q All right. Great questions. Um, Neeraj, I want to bring you in. What do you think? I mean, what, I mean, she wants to expand this thing, but she needs capital. She needs the money to do it.

A Yeah. In terms of selling the items, you mentioned you sell directly on your own website, you sell on Amazon. Have you discussed with any major retailers potentially carrying it? And what I was thinking there is, you know, potentially if you have someone who likes getting in early, they might be willing to give you a purchase order for, you know, the kind of quantity they want, even if it's a Modest test rollout in their sense. It could be quite a decent volume. And those purchase orders from the larger companies you can get financing against. That sometimes is a way, you know, kind of to get financing, but to your point, you're not selling equity. You're not selling equity for that.

AI assessment note: “those purchase orders from the larger companies you can get financing against”

Q Before we talk about what's happened, what were you able to do to keep warehouse employees safe? Cause you've got warehouses all over the country. Um, how do people stay safe in those environments?

A We did a few things. So we, we changed the scheduling of how shifts worked so that shifts didn't overlap, and we went to more shifts per week so that we were able to basically take care of the volume without having to have folks in a situation where they're overlapping other shifts. Then within the shift, we put in place temperature checks. We actually made a lot of the walking paths one-way aisles that we actually were able to support social distancing in the buildings. And then we also increased the cleaning protocols, We actually, uh, raised the rate of pay. We, um, we did a lot of things to support the families of the folks who are working. For example, we put in place a dinners to go program twice a week. Everyone who worked in one of our buildings was taking home a family meal for their whole family. And so, and that helped the local independent restaurants who are, uh, popular restaurants next to our locations continue to have volume. So we kind of did a variety of things, some things helping the community, some things helping our team, some things about health and safety.

AI assessment note: “we changed the scheduling of how shifts worked so that shifts didn't overlap”

Q You know, it's, it's interesting in March, A lot of businesses really saw steep decline in revenue. I assume that maybe happened to you too, but pretty soon after, sales just not only picked up, but dramatically picked up, right?

A What happened in mid-March, so from basically March 15th through the end of March, we actually saw sales rise, but they rose in very specific categories. So things like refrigerators and freezers, kitchen cooking utensils and pots and pans. Home office desks and children's playroom and children's furniture, and then outdoor recreation, you know, uh, trampoline, swing sets. So very specific categories that you could easily attribute to the immediate sort of a stay at home type situation that had transpired. So even though they rose, we didn't know what was going to happen after that. But to your point, what happened next is more, Hey, folks are at home. They're not traveling. They're not going out for entertainment. And every customer has a list of The things they want to do to improve their home. And we work across all those different categories. And so there were, there was basically all of a sudden people started tackling those items off their list.

AI assessment note: “we actually saw sales rise, but they rose in very specific categories”

Q What's the secret? I mean, why, you know, there's so many, we, we've done a bunch of co-founders, we've done co-founder splits, and, you know, what do you think it is that makes it work?

A Well, I think what we found is that we both always been drawn a little bit to different areas of the business. So Steve's always been very involved with the technology side of our business, and we've always been very technology oriented as a company. And then I've always been drawn a little more to the business side, but then we both really respect each other's business judgment. And so it's been a very easy partnership is that, you know, as we got into it, ultimately, you know, you need to find somebody who's just a great partner, meaning you have to be interested in doing complimentary things. But then you really need to trust each other's judgment and be a team that way. And I don't know that there's always an entire science in figuring that out. It's an art and science thing both.

AI assessment note: “we both always been drawn a little bit to different areas of the business.”

Q Yeah, Neeraj, I'm curious when, I mean, there's really no universal answer for when to jump ship. I mean, there's some things I think people should pay attention to, but, like, if people say, how do you know? How do you know when to leave your day job? Do you ever know?

A You know, what occurs to me is there's sort of like two questions in there, you know, so one is, have you been able to progress her house to a point where you feel like it's, it's worth the risk and the effort of making it your full-time vocation where you feel like, you know, you have a vision of what you want to do and the odds of it working is high enough that you have that conviction that it would be a good use of your time and that it would progress things in the way you want. And the second is that pragmatic financial question. You know, are you in a position financially where you can afford to take that risk And if you can't, and you still want to, then, you know, through a friends and family round or through some method, can you financially bridge it somehow where you could sell some equity and, and get enough? And maybe it's not the same amount of money as you're making now, but it's enough that you feel like it's worth doing. So I would try to break those two apart in how you think about it and, you know, focus on the first where you're not thinking about the money side. You're just saying like, Hey, how much conviction do I have that this, you know, If I put myself at this full time, I'm going to be able to get this where I want. And if you say you're very convicted, then I would kind of try to think through the money piece and figure out if there's a path that makes…

AI assessment note: “there's sort of like two questions in there, you know, so one is”

Q upset their customers. But that's changing. I mean, you look at PayPal, for example, they de-platformed, you know, hate groups from their, they don't allow conspiracy theorists to use PayPal, etc. There are other companies that are really taking a stand, and, um, when it comes to taking a stand on certain issues that you believe in, is there an argument to be made that you should be doing that?

A I think it's important to take a stand on issues you believe in, and there's certain things, like, on the topic of racism and actually being proactively, you know, fighting against racism and making sure that we're rooting out unconscious It's biased. That's something we've been very proactive on and we believe in very significantly. There are other opinions that I have personally that I don't know that the company should take a stand on because frankly, there's two sides to a lot of topics that in our mind, there is not just one side that reflects everyone's reasonable views. And so one of the things that's interesting is you mentioned our customers have a broad range of views. Well, our employees do too. And so what we did with this group is we actually amassed a group that actually is broad based across our workforce. And so what's interesting is then it becomes really clear on the broad things everyone does agree on, and these are things that we feel like we should go actively push, and the example of voting is one example of that, and there's many others. And then there's other things that the group would not all agree on, but they would then through that course realize that it's reasonable that people could have other opinions, and on those things we don't necessarily feel like the company should go and take one perspective. And so there's a balance, I think, between thes…

AI assessment note: “I think it's important to take a stand on issues you believe in”

Q I mean, have there been any supply chain issues at all in terms of keeping up with customer demand?

A Significant. Significant. I mean, as you can imagine, when demand grows that fast, You know, everything from the carrier capacity to do the deliveries to on our team, our customer service team did an amazing job of rallying to handle the volume. Because frankly, you know, we had the same number of customer service folks the day before, it's the day after, but the volume's grown dramatically. And as you can imagine, the delays in the carrier networks just create even more calls. So there's a lot of challenges. And then I mentioned in the beginning part, trampoline swing sets were examples and freezers of categories that took off early. Well, within a few weeks, they're sold out nationwide. And so now you have months where you have short supply. So there's a lot of supply chain challenges. And so we started working on that right away so that as you go through the weeks go by, all of a sudden you do see out of stock rates recovering. You do see transportation getting better, but it doesn't happen overnight. So you have a team that has to rally through a really tough period.

AI assessment note: “Significant. Significant. I mean, as you can imagine, when demand grows that fast”

Q Stephanie Moran. What are your plans to make your company more environmentally friendly? Um, a lot of questions about the so-called fast furniture business and its impact on the environment. Not only, um, the, On producing furniture in mass quantities, but shipping it across the world. So can you talk about that? I mean, there's no question that the industry you're in does have a significant impact on the environment.

A Absolutely. A lot of what we're doing is around streamlining the supply chain. So actually, if you look at how it works today, it's highly inefficient where effectively goods are shipped through multiple destination points. Customers are then driving to a store and they're then navigating the store. Then they're Or buying something and that item is then put out for delivery later and often has to transit a long way because a lot of these goods end up becoming special order type items that have to go travel again from a different destination. We move the items in bulk very efficiently, very close to the end customer. We then deliver it directly to them. We are able to take out a lot of the transportation legs, which have the benefit both from an environmental standpoint, from a cost standpoint and improve the speed of delivery. And so we're actually trying to do a lot to do that. And then That's separate from all the things we're trying to do around waste materials and how we can use more recycled materials.

AI assessment note: “We are able to take out a lot of the transportation legs”

Q a conspiracy about Wayfair products hiding children in them, trafficking children in them. I think they were these large industrial-sized cabinets. It's something that is so disturbing and distressing that it's, it's not even funny. How did you respond to it? I mean, I'm sure your initial response is like, oh, this is nonsense, but But it actually, you had to really respond to it. What, what did you do?

A Well, needless to say, you never want to be the target of a baseless conspiracy theory that is effectively engineered and spread by folks who are very adept at social media. Um, and that, that is in fact what happened. I think the real damage ends up being caused to the actual real victims. So the victims of child trafficking, who basically, you know, the hotlines where they can get help or overrun with calls from folks who are basically tying up that bandwidth. Just with non-content. What we did is, you know, frankly, just be honest and forthright, and, and basically, um, you know, point to the fact that it was baseless, and with a very basic amount of investigation, you can prove that it's baseless. And what we saw, it took a couple days, but then you see credible news sources, whether it's the Associated Press, or Reuters, or the New York Times, who have come out and basically debunk it, point out That there's no content there and basically also kind of highlight the forces that are at work that are causing some of these things to happen and spread. But I think it's a challenge because I don't think the average person is necessarily as keenly aware of what happens on social media and what perhaps is rooted in fact and what isn't and how to discern one from the other. So I think it is a challenge we have in our times.

AI assessment note: “What we did is, you know, frankly, just be honest and forthright”

Q I mean, you know, there are other things you could do, conceivably do with your lives. You could start, you guys could start another company. Could you imagine, I don't know, like an Amazon or, or Walmart, you know, coming to you and saying, hey, guys, we want to buy your company. We're going to give you X billion dollars. Could you ever imagine accepting that or agreeing to that?

A You need to be prudent, right? So we, we know all those folks. You, of course, would have conversations with anyone who wants to have a conversation. Last year, when we did 4.7 billion in sales, we grew 40% from the year prior. Well, so, if you take a number, like, 4.7 billion dollars in sales, and you grow it at some decent sized growth rate, some high growth rate, you know, the company's getting bigger at a fast rate, and if you believe you can do a lot for the customer, um, that is more than anyone else can do, well, why wouldn't that continue to grow at a fast rate? So, it's really super early days, if in fact we can be the best. So, it would be very premature to think about selling it, if we think we can win.

AI assessment note: “it would be very premature to think about selling it, if we think we can win.”

Q But can she do that? Cause I, I agree with you, but I would say she should really try to do that while keeping her job as tough as that's gonna be.

A Well, I think you got to start there. And then if you're like, Hey, I just need X amount more time. I think one of the other questions I have, which I was going to get into is, you know, is there an in between? So often in something like software sales, where it's a, you know, commission driven and it's outcome based, you know, if you're doing a great job for the company, if you say, Hey, You know, is there a halftime role or some such thing? You know, if it's like that kind of variable comp type thing, they, they might say, Hey, we don't want to lose you. So we might be willing to do that or something like that. But yeah, I, I wouldn't give up the job too quickly for sure. And then I, what I would guide to your point, like given the flexibility you have, it's remote, you're not traveling for it. You know, can you do both? And then degree you can't do both. Is there, is there something different than an all or nothing?

AI assessment note: “I wouldn't give up the job too quickly for sure.”