Wayfair: Drayage Process & Economics

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You mentioned that Wayfair could manage to get the same kind of ocean freight rates as Amazon or Home Depot. Is that true? I mean, Amazon is much larger than Wayfair if you consider the entire company, same with Home Depot. How would they secure similar rates?

In ocean freight, Wayfair's size puts them at the equivalent of a top 20 importer. The volume they bring in means the rates they get are similar to those of Walmart, Amazon, Home Depot, or Target. These big four might get slightly cheaper rates, but it's not a significant step change, like 10% or 20% lower than what the next tier of shippers would get.

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Out of 100 suppliers who would ship containers using Wayfair's ocean freight program, how many of them would decide to detach from you when the container arrives at the port and find their own drayage company?

We mandated that they could not. We sold it as a package. They needed to do both ocean and drayage to be in the program. Part of the reason for that was the handoff became a huge space for errors and issues.

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What was the difference?

Since the CastleGate network is specific to goods sold on Wayfair, there was high assurance that all the product in that container is Wayfair product. From a pricing standpoint, there was a willingness to charge the freight either flat or even subsidize it a little to encourage goods into the Wayfair network. When shipping goods into the dropship network, we don't know how much will ultimately be sold on Wayfair. So, there was a strict policy not to subsidize freight going into the dropship network because we didn't want to subsidize competitor sales.

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