As many consumers tighten their spending due to concerns about the economy, some retailers are starting to see their profits decrease. Wayfair (W) , which is famous for selling home goods online, did see a spike in its revenue; however, it suffered a major loss from a concerning change in customer behavior.
In Wayfair’s first-quarter earnings report for 2025, it revealed that it generated $2.4 billion in U.S. net revenue during the quarter, which is 1.6% higher than what it earned during the same quarter last year.
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Despite this increase, the company saw the number of its active customers decrease by 5.4% year-over-year. The number of orders delivered during the quarter also dipped by 5.2%.
Related: Wayfair announces a harsh decision amid declining sales
Even its loyal customers, those who repeatedly shop on the website, declined by 5.2% year-over-year.
Wayfair recognizes that when market forces increase costs for suppliers, they must decide how much of that gets passed on to the consumer.
Image source: Gabby Jones/Bloomberg via Getty Images
Wayfair CEO addresses a pressing concern
During an earnings call on May 1, Wayfair CEO Niraj Shah addressed the looming threat of tariffs, which is a major concern among consumers across the country that is causing them to reconsider their spending habits.
Tariffs are taxes companies pay to import goods from overseas, and the extra cost is often passed down to consumers through price hikes.
On April 2, President Donald Trump announced a 10% “baseline” tariff on all countries importing goods to the U.S., with roughly 60 countries seeing higher tariff rates.
However, on April 9, Trump changed direction and enforced a 90-day pause on reciprocal tariffs on all countries (except China), dropping them to a universal rate of 10%. He also unexpectedly hiked tariffs on China to 145%.
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Shah emphasized that tariffs are “not a new phenomenon” in the home goods category, and that Wayfair’s business model will help deter significant price increases.
“Suppliers who offer a more competitive wholesale price often succeed on the storefront because that translates directly into more competitive retail prices for customers,” said Shah. “So when an incremental cost like a tariff enters the system, suppliers have to make a decision on how much they want to pass through versus bearing themselves. This is where the marketplace-like forces on our platform work most in our favor.”
He said that many of Wayfair’s suppliers have manufacturing facilities across multiple countries and can easily pivot production lines if tariffs cause costs to skyrocket. Shah also confirmed that suppliers are already exercising caution when considering price increases.
“We’re actually seeing suppliers are very wary to raise prices because they know they’re competing with one another,” said Shah. “So I haven’t heard of them being aggressive in raising prices anywhere yet. What I’ve generally heard is that they’re trying to be very thoughtful about how to optimize their business. They know that it’s a challenged demand environment in general, and they know that raising prices if their competitors don’t is going to hurt them substantially.”
Shoppers are shifting gears amid tariff threat
Consumers are already contemplating changing their spending habits as Trump’s tariffs threaten price increases. This poses a significant threat to retailers across the country.
According to a recent survey from market research company Numerator, 72% of consumers are worried that tariffs will raise prices for everyday goods.
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Also, 83% of Americans are changing their shopping habits to prepare for the higher prices Trump’s tariffs could bring. Some of these changes include scavenging for sales and coupons, delaying purchases, and buying fewer imported goods.
As Wayfair’s suppliers become more aware of the potential consequences of increasing prices, the company is offering them two crucial pillars of support.
First, Wayfair plans to offer suppliers data on the types of customer behavior it is seeing on its platform so that suppliers can better understand how to stay competitive.
Second, Wayfair is also planning to boost its advertising, which will help suppliers actively manage demand levels.
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