What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 129 added, 123 removed, 562 unchanged (31% of the section changed)

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You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

Risks Related to the COVID-19 Outbreak

The recent and ongoing global outbreak and spread of the COVID-19 outbreak, and any future outbreak or other public health emergency, could materially affect our business, liquidity, financial condition and operating results.

In March 2020, the World Health Organization declared the COVID-19 outbreak to be a global pandemic.

In response to this declaration and the rapid spread of COVID-19 globally, authorities across the U.S.

and the globe have and continue to implement varying degrees of restriction on social and commercial activity to promote social distancing in an effort to slow the spread of the illness, some of which have been subsequently rescinded or modified, such as travel bans, stay-at-home orders and shutdowns of certain businesses.

Risks Related to the COVID-19 Pandemic

The ongoing global pandemic, and any future outbreaks or other public health emergencies, could materially affect our business, liquidity, financial condition and operating results.

The ongoing COVID-19 pandemic and the various responses to it globally have created significant volatility, uncertainty and economic disruption.

Authorities across the U.S.

and the globe have implemented and continue to implement varying degrees of restriction on social and commercial activity in an effort to slow the spread of the virus, some of which have been subsequently rescinded or modified, such as travel bans, stay-at-home orders and shutdowns of certain businesses.

These measures have impacted and may continue to impact all or portions of our workforce, operations, suppliers and customers and demand for our products and services.

For example, the COVID-19 outbreak has disrupted the global supply chain, including many of our suppliers, as factory closures and reduced manufacturing output impacted inventory levels, potentially exacerbated by surging demand for products.

During the COVID-19 outbreak, however, we have seen increased sales and order activity and, at times, lower advertising costs in the market.

The virus also impacted our workforce, moving a large portion of our employees to working-from-home and adding administrative complexity to our everyday human resources and employee technology functions.

Disruption caused by business responses to the COVID-19 outbreak, including working-from-home arrangements, may create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships, disrupt operations, increase costs and/or decrease net revenues and expose us to claims from customers, suppliers, financial institutions, regulators, payment card associations, employees and others, any of which could have a material adverse effect on our business, financial condition and operating results.

The spread of COVID-19, and any future pandemic, epidemic or similar outbreak, may disrupt our third-party business partners’ ability to meet their obligations to us, which may negatively affect our operations.

In particular, while we have seen increased sales and order activity at times during the COVID-19 pandemic, the pandemic has significantly disrupted the global supply chain, including many of our suppliers.

Such disruptions, including staffing shortages, production slowdowns, stoppages and/or disruptions in delivery systems, could materially and adversely affect our suppliers’ ability to provide products in a timely manner, or at all, and could materially and adversely affect our logistics providers’ ability to distribute products to our customers in a timely manner, or at all.

We expect issues related to the global supply chain to continue into 2022.

In addition, the ongoing COVID-19 pandemic has disrupted, and may continue to disrupt, third-party business partners’ ability to meet their obligations to us.

These third parties include our suppliers and logistics providers, such as FedEx, UPS, DHL, the U.S.

Postal Service and other third-party delivery agents, as their workers may be prohibited or otherwise unable to report to work and transporting products within regions or countries may be limited due to extended holidays, factory closures, port closures and increased border controls and closures, among other things.

We may also incur higher shipping costs due to various surcharges by third-party delivery agents on retailers related to the increased shipping demand resulting from the COVID-19 outbreak.

These higher costs affected us in the fourth quarter of 2020 as a result of peak surcharges during the holiday season and may continue to affect us in future quarters.

Further, our efforts to mitigate the impact of COVID-19 through social distancing measures, enhanced cleaning measures, the increased use of personal protective equipment and COVID-19 testing at our warehouses and other facilities, as well as other steps taken to protect the health, safety and financial security of our employees, may result in other negative impacts on our operations, including increased costs, reduced efficiency levels or labor disputes resulting in a strike or other work stoppage or interruption.

The COVID-19 outbreak has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of and accessibility to capital.

We have also incurred, and may continue to incur, higher shipping costs due to various surcharges by third-party delivery agents on retailers related to the increased shipping demand resulting from the COVID-19 pandemic.

These higher costs affected us over the past year and may continue to affect us in the future.

The COVID-19 pandemic also impacted our workforce, causing us to move a large portion of our employees to work-from-home and adding administrative complexity to our everyday human resources and employee technology functions.

Furthermore, if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, the impact of vaccine mandates and the willingness of our employees to comply with such mandates, facility closures, remote working or other restrictions in connection with the COVID-19 pandemic, our operations will likely be adversely impacted.

Further, the steps we have taken to protect the health, safety and financial security of our employees, including instituting testing and vaccination requirements at our facilities, may result in other negative impacts on our operations, including increased costs, reduced efficiency levels or labor disputes resulting in a strike or other work stoppage or interruption.

The COVID-19 pandemic has also significantly increased economic uncertainty and has led to disruption and volatility in the global capital markets, which could increase the cost of and accessibility to capital.

If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all.

The COVID-19 outbreak has caused a significant economic slowdown, which could be of an unknown duration, could lead to increased unemployment, reduced discretionary consumer spending and a corresponding reduction in demand for our products and could result in a material adverse effect on our business, financial condition and operating results.

Governments around the world have implemented fiscal stimulus measures to counteract the effects of the COVID-19 outbreak, however, the magnitude and overall effectiveness of these actions remain uncertain.

The COVID-19 pandemic has caused and could continue to cause periods of significant economic slowdown, which could lead to reduced discretionary consumer spending and a corresponding reduction in demand for our products and could result in a material adverse effect on our business, financial condition and operating results.

To counteract the effects of the COVID-19 pandemic, governments around the world have implemented fiscal stimulus measures and vaccination rollouts, however, the magnitude and overall effectiveness of these actions remain uncertain and certain

federal and state laws and regulations intended to reduce the spread of COVID-19 are in direct conflict, which means we may be unable to comply with all applicable laws and regulations in some of the jurisdictions in which we operate.

Further, the full extent of the impact of COVID-19, including the extent of its impact on our business and financial condition, will depend on numerous evolving factors that we may not be able to accurately predict, including, but not limited to:

the length of time that the outbreak continues;

the availability and distribution of an effective vaccine;

the length of time that the pandemic continues;

the availability, distribution and continued efficacy of available treatments and vaccines;

vaccination rates among the general public and our employees;

its effect on our suppliers, logistics providers and the demand for our products;

the effect of governmental regulations imposed in response to the outbreak;

the effect on our customers, their communities and customer demand and ability to pay for our products and services, which may be affected by prolonged high unemployment, increased consumer debt levels, changes in net worth due to market conditions and other factors that impact consumer confidence;

the effect of governmental regulations imposed in response to the pandemic;

the effect on our customers, their communities and customer demand and ability to pay for our products and services, which may be affected by increased consumer debt levels, changes in net worth due to market conditions and other factors that impact consumer confidence;

disruptions or restrictions on our employees’ ability to work and travel, as well as uncertainty regarding all of the foregoing.

We cannot at this time predict the full impact of the COVID-19 outbreak, but it could have a larger material adverse effect on our business, liquidity, financial condition and operating results beyond what is discussed within this report.

While the home industry has fared much better during the COVID-19 pandemic than other sectors of the economy, the recent surges in COVID-19 cases due to new variants and the resurgence of inflation brought on by labor and supply shortages have had and may continue to have an adverse impact upon our business.

Much is still unknown, including the duration and severity of the COVID-19 pandemic, the emergence of variants of COVID-19 that may continue to prolong the pandemic, the amount of time it will take for normal economic activity to resume, and future government actions that may be taken.

Accordingly the situation remains dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our suppliers, logistics providers and customers, which ultimately could result in material adverse effects on our business, financial condition and operating results.

We cannot at this time predict the full impact of the COVID-19 pandemic, but it could have a larger material adverse effect on our business, liquidity, financial condition and operating results beyond what is discussed within this report.

We will continue to actively monitor the COVID-19 situation and may take further actions that alter our business operations as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our customers, employees, suppliers, partners, stockholders and communities.

We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 outbreak and reactions thereto will continue, and we expect to face difficulty in accurately forecasting our financial condition and operational results.

As noted above, however, in the short term we have continued to see increased sales and order activity since the COVID-19 outbreak.

These results, as well as those of other metrics such as net revenues, gross margins and other financial and operating data, may not be indicative of results for future periods.

Some of the increased demand is likely due to customers being required or encouraged to stay at home, school closures and employers requiring employees to work remotely.

Some is also likely attributable to the timing of tax refunds and COVID-related stimulus payments.

Such increased demand may increase beyond manageable levels, may fluctuate significantly, or may not continue, including the possibility that demand may decrease from historical levels.

Much is unknown, including the duration and severity of the COVID-19 outbreak, the amount of time it will take for normal economic activity to resume, and future government actions that may be taken, and accordingly the situation remains dynamic and subject to rapid and possibly material change, including but not limited to changes that may materially affect the operations of our suppliers, logistics providers and customers, which ultimately could result in material adverse effects on our business, financial condition and operating results.

Additionally, to the extent the COVID-19 outbreak adversely affects our business, results of operations or financial condition, it may heighten other risks described in this “Risk Factors” section below.

We cannot predict with any certainty whether and to what degree the disruption caused by the COVID-19 pandemic and reactions thereto will continue, and we expect to face difficulty in accurately forecasting our financial condition and operational results.

Additionally, to the extent the COVID-19 pandemic adversely affects our business, results of operations or financial condition, it may heighten other risks described in this “Risk Factors” section below.

Risks Related to Our Business and Industry

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• continue to expand internationally;

• continue to execute our omni-channel strategy with the launch of physical retail stores across our family of brands;

• opportunistically pursue strategic acquisitions.

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To manage our growth effectively, we must continue to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and expand, train and manage our employee base.

We have rapidly increased employee headcount since our inception to support the growth in our business.

To support our continued growth, we have rapidly increased employee headcount since our inception.

To support continued growth, we must effectively integrate, develop and motivate a large number of new employees.

If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees and staff, or if we are not successful in retaining our existing employees and staff, our business may be harmed.

Moreover, in February 2020 we implemented reductions in force and may in the future implement other reductions in force.

Moreover, in 2020 we implemented reductions in force and may in the future implement other reductions in force.

Any reduction in force may yield unintended consequences and costs, such as attrition beyond the intended reduction in force, the distraction of employees, reduced employee morale and adverse effects to our reputation as an employer, which could make it more difficult for us to hire new employees in the future, and the risk that we may not achieve the anticipated benefits from the reduction in force.

Properly managing our growth will require us to establish consistent policies across regions and functions, and a failure to do so could likewise harm our business.

We also face significant competition for personnel, particularly in the Boston, Massachusetts and Berlin, Germany areas where our largest corporate offices are located.

We also face significant competition for personnel.

Failure to manage our hiring needs effectively or successfully integrate our new hires may have a material adverse effect on our business, financial condition and operating results.

Further, we have a substantial number of hourly employees.

In January 2021, we announced a minimum wage increase for all U.S.

employees to at least $15 per hour.

While we are at or above current local and federal minimum wage requirements across the U.S, any future local or federal minimum wage increases may increase our labor costs, which may have an adverse effect on our results of operations.

Additionally, the growth of our business places significant demands on our operations, as well as our management and other employees.

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The growth of our business may require significant additional resources to meet these daily requirements, which may not scale in a cost-effective manner or may negatively affect the quality of our sites and customer experience.

Further, we may face a number of challenges to our expansion into physical retail locations, including locating retail space with a cost and geographic profile that will allow us to operate in highly desirable shopping locations, hiring in-store talent and expanding our physical retail operations in a cost-effective manner.

We may also have to enter into long-term leases before we know whether our physical retail strategy or a particular geography will be successful.

We are also required to manage relationships with a growing number of suppliers, customers and other third parties.

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If we are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially adversely affected.

If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, we may not be able to sustain our recent profitability.

If we fail to acquire new customers or retain existing customers, or fail to do so in a cost-effective manner, our business, financial condition and operating results could be harmed.

Our success depends on our ability to acquire and retain customers in a cost-effective manner.

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Maintaining and enhancing our brands is critical to expanding our base of customers and suppliers.

Our ability to maintain and enhance our brand depends largely on our ability to maintain customer confidence in our product and service offerings, including by delivering products on time and without damage.

Our ability to maintain and enhance our brand depends largely on our ability to maintain customer confidence in our product and service offerings, including by maintaining product availability and delivering products on time and without damage.

If customers do not have a satisfactory shopping experience, they may seek out alternative offerings from our competitors and may not return to our sites as often in the future, or at all.

In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product quality, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation.

In addition, unfavorable publicity regarding, for example, our practices relating to privacy and data protection, product quality or availability, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm our reputation.

Such negative publicity also could have an adverse effect on the size, engagement and loyalty of our customer base and result in decreased net revenue, which could adversely affect our business and financial results.

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Customer complaints or negative publicity about our sites, products, delivery times, company practices, employees, customer data handling and security practices or customer support, especially on blogs, social media websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and result in harm to our brands.

Our efforts to expand our business into new brands, products, services, technologies and geographic regions will subject us to additional business, legal, financial and competitive risks and may not be successful.

Our efforts to expand our business into new brands, channels, products, services, technologies and geographic regions will subject us to additional business, legal, financial and competitive risks and may not be successful.

Our business success depends to some extent on our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographies.

For example, we recently launched the Kelly Clarkson Home Collection and Hykkon, a European Union flagship brand, and in 2016 we launched Wayfair.ca in Canada.

For example, we launched the Kelly Clarkson Home Collection in 2020, Hykkon, a European Union flagship brand in 2019, and in 2016 we launched Wayfair.ca in Canada.

Launching new brands and services or expanding internationally requires significant upfront investments, including investments in marketing, information technology and additional personnel.

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There can be no assurance that we will be able to operate our networks effectively.

We have also entered and may continue to enter new markets in which we have limited or no experience, which may not be successful or appealing to our customers.

We have also entered and may continue to enter new markets or channels in which we have limited or no experience, which may not be successful or appealing to our customers.

These activities may present new and difficult technological and logistical challenges, and resulting service disruptions, failures or other quality issues may cause customer dissatisfaction and harm our reputation and brand.

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As a result, fluctuations in foreign exchange rates could significantly impact our financial results.

Brexit may continue to have a significant impact on currency exchange rates and the global and European economy generally.

Further, Brexit has and may continue to have a significant impact on currency exchange rates and the global and European economy generally.

The outcome of the referendum caused volatility in global stock markets and foreign currency exchange rate fluctuations, including the strengthening of the U.S.

dollar against the British pound and the euro, which may continue or worsen as the withdrawal of the United Kingdom from the European Union is finalized.

Until fiscal 2020, we had a history of losses and we may be unable to sustain our recent profitability and positive cash flow in the future as we continue to expand our business.

Prior to fiscal 2020, we had a history of losses and negative cash flow and a resulting accumulated deficit of $1.9 billion as of December 31, 2020.

Although we achieved profitability and positive cash flow in fiscal 2020, we can provide no assurance that we will be profitable in future quarters or achieve our goal of sustained profitability.

Because the market for purchasing home goods online is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future operating

As a result, we may incur future losses that may be larger than anticipated, and we may not sustain our recent profitability.

Also, we expect our operating expenses to increase over the next several years as we expand internationally, continue to grow our proprietary logistics network, hire more employees and continue to develop new brands, features and services.

dollar against the British pound and the euro, and such volatility may continue.

We have had a history of losses and we may be unable to achieve or sustain profitability and positive cash flow in the future as we continue to expand our business.

We have had a history of losses and negative cash flow and a resulting accumulated deficit of $1.9 billion as of December 31, 2021.

Although we achieved profitability and positive cash flow in fiscal 2020, we incurred losses in fiscal year 2021 and we can provide no assurance that we will be profitable in future years or achieve our goal of sustained profitability.

Because the market for purchasing home goods online is rapidly evolving and has not yet reached widespread adoption, it is difficult for us to predict our future operating results.

As a result, we may incur future losses that may be larger than anticipated.

Also, we expect our operating expenses to increase over the next several years as we expand internationally, expand into physical retail locations, continue to grow our proprietary logistics network, hire more employees and continue to develop new brands, features and services.

Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring new customers, our financial condition and stock price could be materially adversely affected.

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The satisfactory performance, reliability and availability of our sites, transaction processing systems, logistics network and technology infrastructure are critical to our reputation and our ability to acquire and retain customers, as well as maintain adequate customer service levels.

For example, if one of our data centers fails or suffers an interruption or degradation of services, we could lose customer data and miss order fulfillment deadlines, which could harm our business.

For example, if one of our data centers or our cloud provider fails or suffers an interruption or degradation of services, we could lose customer data and miss order fulfillment deadlines, which could harm our business.

Our systems and operations, including our ability to fulfill customer orders through our logistics network, are also vulnerable to damage or interruption from inclement weather, fire, flood, power loss, telecommunications failure, terrorist attacks, labor disputes, cyber-attacks, data loss, acts of war, break-ins, other physical security threats, earthquake and similar events.

In the event of a data center failure, the failover to a back-up could take substantial time, during which time our sites could be completely shut down.

In the event of a system outage or degradation, the failover to another site or a back-up could take substantial time, during which time our sites could be completely shut down.

Further, our back-up services may not effectively process spikes in demand, may process transactions more slowly and may not support all of our sites' functionality.

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We may experience periodic system interruptions from time to time.

In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities, seasonal trends in our business or the COVID-19 outbreak, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions.

In addition, continued growth in our transaction volume, as well as surges in online traffic and orders associated with promotional activities, seasonal trends in our business or the COVID-19 pandemic, place additional demands on our technology platform and could cause or exacerbate slowdowns or interruptions.

If there is a substantial increase in the volume of traffic on our sites or the number of orders placed by customers, we may be required to further expand and upgrade our technology, logistics network, transaction processing systems and network infrastructure.

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Google Cloud provides a distributed computing infrastructure platform for business operations, or what is commonly referred to as a "cloud" computing service.

We have architected certain of our software and computer systems so as to also utilize data processing, storage capabilities and other services provided by Google Cloud.

Given this, along with our inability to rapidly switch our Google Cloud operations to another cloud provider, any disruption of or interference with our use of Google Cloud or any disruption in Google Cloud itself would impact our operations and our business would be adversely impacted.

We have architected our software and computer systems so as to also utilize data processing, storage capabilities and other services provided across multiple Google Cloud data centers.

Given this, along with our inability to rapidly switch our Google Cloud operations to another cloud provider, any disruption of or interference with our use of Google Cloud or any widespread disruption in Google Cloud itself would impact our operations and our business would be adversely impacted.

Our failure or the failure of third-party service providers to protect our sites, networks, systems, confidential information and assets against security breaches or loss could damage our reputation and brand and substantially harm our business and operating results.

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Despite all of our efforts to protect these assets, our security measures and those of our third-party service providers, may not be effective in preventing a failure of our systems, a loss of assets or a failure of our platforms to operate effectively and be available to us.

This may be as a result of deliberate attempts to infiltrate our systems by state-sponsored attackers or cybercriminals, denial-of-service attacks, viruses, malicious software, break-ins, phishing attacks, social engineering, security breaches or other attacks, or incidents due to employee error or malfeasance.

Failures may also be caused by various other factors, including, disruptions during the process of upgrading or replacing computer software or hardware, power outages, computer viruses, hardware and software errors by the vendors we rely upon, telecommunication or utility failures or natural disasters or other catastrophic events or other disruptions that may jeopardize the security of our assets or information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise maintain, process or transmit including payment card systems and human resources management platforms.

This may be as a result of deliberate attempts to infiltrate our systems by state-sponsored attackers or cybercriminals, denial-of-service attacks, viruses, malicious software, zero-day vulnerabilities, break-ins, phishing attacks, social engineering, security breaches or other attacks, or incidents due to employee error or malfeasance.

Failures may also be caused by various other factors, including, disruptions during the process of upgrading or replacing computer software or hardware, power outages, hardware and software errors by the vendors we rely upon, telecommunication or utility failures or natural disasters or other catastrophic events or other disruptions that may jeopardize the security of our assets or information stored in or transmitted by our sites, networks and systems or that we or our third-party service providers otherwise maintain, process or transmit including payment card systems and human resources management platforms.

We and our service providers may not anticipate or prevent all types of attacks until after they have already been launched, and techniques used to obtain unauthorized access to or sabotage systems change frequently and may not be known until launched against us or our third-party service providers.

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In addition, any party who is able to illicitly obtain a customer's password could access that customer's transaction data or personal information.

Any compromise or breach of our security measures, or those of our third-party service providers, could violate applicable privacy, data security and other laws and regulations, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and operating results.

Any compromise or breach of our security measures, or those of our third-party service

providers, could violate applicable privacy, data security and other laws and regulations, and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, which could have a material adverse effect on our business, financial condition and operating results.

Although we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all.

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We depend on our ability to provide our customers with a wide range of products from qualified suppliers in a timely and efficient manner.

Political and economic instability, global or regional adverse conditions, such as pandemics or other disease outbreaks or natural disasters, the financial stability of suppliers, suppliers' ability to meet our standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, inflation and other factors relating to our suppliers are beyond our control.

As an example, the COVID-19 outbreak has and may continue to adversely impact supplier facilities and operations due to extended holidays, factory closures and risks of labor shortages, among other things, which may materially and adversely affect our business, financial condition and operating results.

Political and economic instability, global or regional adverse conditions, such as pandemics or other disease outbreaks or natural disasters, the financial stability of suppliers, suppliers' ability to meet our standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, labor inflation and other factors relating to our suppliers are beyond our control.

As an example, the COVID-19 pandemic has and may continue to adversely impact supplier facilities and operations due to factory closures, raw material and labor inflation and risks of labor shortages, among other things, which may materially and adversely affect our business, financial condition and operating results.

Our agreements with most of our suppliers do not provide for the long-term availability of merchandise or the continuation of particular pricing practices, nor do they usually restrict such suppliers from selling products to other buyers.

There can be no assurance that our current suppliers will continue to seek to sell us products on current terms or that we will be able to establish new or otherwise extend current supply relationships to ensure product acquisitions in a timely and efficient manner and on acceptable commercial terms.

Our ability to develop and maintain relationships with reputable suppliers and offer high quality merchandise to our customers is critical to our success.

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We depend on our suppliers to perform certain services regarding the products that we offer.

As part of offering our suppliers' products for sale on our sites, suppliers are often responsible for conducting a number of traditional retail operations with respect to their respective products, including maintaining inventory and preparing merchandise for shipment to our customers.

As part of offering our suppliers' products for sale on our sites, suppliers are often responsible for conducting a number of traditional retail operations with respect to their respective products, including maintaining inventory, preparing merchandise for shipment to our customers, and, in some cases, delivering products on our behalf.

In these instances, we may be unable to ensure that suppliers will perform these services to our or our customers' satisfaction in a manner that provides our customer with a unified brand experience or on commercially reasonable terms.

If our customers become dissatisfied with the services provided by our suppliers, our business, reputation and brands could suffer.

We depend on our relationships with third parties, and changes in our relationships with these parties could adversely impact our net revenue and profits.

We depend on our relationships with third parties, including our suppliers and logistics carriers, and changes in our relationships with these parties could adversely impact our net revenue and profits.

We rely on third parties to operate certain elements of our business.

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Postal Service deliver many of our small parcel products, and third party national, regional and local transportation companies deliver a portion of our large parcel products, including through our WDN.

As a result, we may be subject to shipping delays or disruptions caused by inclement weather, natural disasters, system interruptions and technology failures, labor activism, health epidemics (including the COVID-19 outbreak) or bioterrorism.

Our ability to efficiently ship products to customers may be negatively affected by factors beyond our and our carriers' control, including inclement weather, natural disasters, system interruptions and technology failures, labor activism, supply chain issues, including congestion and delays, labor inflation and increased costs, health pandemics and epidemics (including the COVID-19 pandemic) or bioterrorism.

We are also subject to risks of breakage or other damage during delivery by any of these third parties.

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In addition, any such changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy could prevent us from accurately reporting our financial results.

Further, we have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees continue to work remotely due to the COVID-19 outbreak, but we may experience a material impact in the future.

As the majority of our employees are expected to work from home, new processes, procedures and controls could be

required to respond to changes in our business environment, and should any key employees become ill from COVID-19 and unable to work, our ability to operate our internal controls may be adversely affected.

Further, we have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees continue to work remotely due to the COVID-19 pandemic, but we may experience a material impact in the future.

As the majority of our employees continue to work from home in some capacity, new processes, procedures and controls could be required to respond to changes in our business environment, and should any key employees become ill from COVID-19 and unable to work, our ability to operate our internal controls may be adversely affected.

We may be unable to accurately forecast our financial and operating results and appropriately plan our expenses in the future.

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Any such system, site or service interruptions could prevent us from efficiently receiving or fulfilling orders, which may reduce the volume or quality of goods or services we sell and may cause customer dissatisfaction and harm our reputation and brand.

During the fiscal year ended December 31, 2020, typical seasonality was disrupted by the COVID-19 outbreak, which resulted in increased sales volume during our second and third quarters of fiscal 2020.

However, beginning in mid-March 2020, the COVID-19 pandemic and the related responses disrupted our usual seasonal patterns, resulting in higher sales volumes during the second and third fiscal quarters of 2020.

During fiscal year 2021, as global economies began to reopen with rising vaccination rates during the first half of the year, spending patterns shifted as consumers moved back to experiential categories in a broad fashion.

The combination of these changes in consumer spending with continued global supply chain challenges, led to lower sales in the second half of the year as compared to the first.

Our ability to raise capital in the future may be limited, and our failure to raise capital when needed could prevent us from growing.

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Our results of operations may be affected by the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure to accommodate such alternative devices, operating systems and platforms.

offer access to our sites or limit the effectiveness of our marketing or other offerings, our customer growth could be harmed and our business, financial condition and operating results may be materially adversely affected.

Further, in the event that it is more difficult or less compelling for our customers to buy products from us on their mobile or other devices, or if our customers choose not to buy products from us on such devices or to use mobile or other products that do not offer access to our sites or limit the effectiveness of our marketing or other offerings, our customer growth could be harmed and our business, financial condition and operating results may be materially adversely affected.

Significant merchandise returns could harm our business.

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For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower profitability.

We also offer private label and/or co-branded credit card programs, which could adversely

affect our operating results if terminated.

We also offer private label and/or co-branded credit card programs, which could adversely affect our operating results if terminated.

We are also subject to payment card association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply.

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Our future success also depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled employees, particularly mid-level managers, engineers and merchandising and technology personnel.

The market for such positions in the Boston area and other cities in which we operate is competitive.

The market for such positions in the Boston area and other cities in which we operate is competitive and has intensified and may continue to intensify if overall demand in the labor market continues to increase or we incur attrition at levels higher than we have historically.

Qualified individuals are in high demand, and we may incur significant costs to attract them.

Our inability to recruit and develop mid-level managers could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements.

Our inability to recruit and develop mid-level managers, including through virtual-only outreach due to the ongoing COVID-19 pandemic, could materially adversely affect our ability to execute our business plan, and we may not be able to find adequate replacements, particularly in light of high attrition rates in some regions where we have operations.

All of our officers and other U.S.

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Alternatively, we may be required to develop non-infringing technology or intellectual property, which could require significant effort and expense and may ultimately not be successful.

We have received in the past, and we may receive in the future, communications alleging that certain items posted on or sold through our sites violate third-party copyrights, designs, marks and trade names or other intellectual property rights or other

proprietary rights.

Brand and content owners and other proprietary rights owners have actively asserted their purported rights against online companies, including Wayfair.

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Stock repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves.

In August 2020, the Board authorized a stock repurchase program of up to $700 million of our Class A common stock (the “2020 Repurchase Program”), which does not have an expiration date and replaced our previous $200 million stock repurchase authorization approved by the Board in 2018, which was terminated simultaneously.

Although the Board has authorized the 2020 Repurchase Program, the program does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

We cannot guarantee that the 2020 Repurchase Program will be fully consummated or that it will enhance long-term stockholder value.

The program could affect the trading price of our Class A common stock and increase volatility, and any announcement of a termination of this program may result in a decrease in the trading price of our Class A common stock.

In addition, this program could diminish our cash reserves.

In August 2020, the Board authorized a stock repurchase program of up to $700 million of our Class A common stock in the open market, through privately negotiated transactions, or otherwise, including pursuant to a Rule 10b5-1 plan (the “2020 Repurchase Program”).

On August 10, 2021, the Board authorized a new $1.0 billion stock repurchase program on the same terms (the “2021 Repurchase Program” together with the 2020 Repurchase Program, the “Repurchase Programs”).

Wayfair will begin repurchasing shares under the 2021 Repurchase Program upon the completion of the 2020 Repurchase Program.

Although the Board has authorized the Repurchase Programs, the programs do not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares.

Even if our Repurchase Programs are fully implemented, we cannot guarantee that the Repurchase Programs will be fully consummated or that the programs will enhance long-term stockholder value.

The programs could affect the trading price of our Class A common stock and increase volatility, and any announcement of a termination of either program may result in a decrease in the trading price of our Class A common stock.

In addition, the amount, timing, and execution of our Repurchase Programs may fluctuate based on our priorities for the use of cash for other purposes and because of changes in cash flows, tax laws, and the market price of our Class A common stock, and the Repurchase Programs could diminish our cash reserves.

Risks Related to Laws and Regulations

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In addition, it is possible that governments of one or more countries may seek to censor content available on our sites or may even attempt to completely block access to our sites.

legal or regulatory developments could substantially harm our business.

Adverse legal or regulatory developments could substantially harm our business.

In particular, in the event that we are restricted, in whole or in part, from operating in one or more countries, our ability to retain or increase our customer base may be adversely affected, and we may not be able to maintain or grow our net revenue and expand our business as anticipated.

Further, as we enter new market segments or geographical areas and expand the products and services we offer, we may be subject to additional laws and regulatory requirements or prohibited from conducting our business, or certain aspects of it, in certain jurisdictions.

Further, as we enter new market segments or channels or geographical areas and expand the products and services we offer, we may be subject to

additional laws and regulatory requirements or prohibited from conducting our business, or certain aspects of it, in certain jurisdictions.

We will incur additional costs complying with these additional obligations and any failure or perceived failure to comply would adversely affect our business and reputation.

Failure to comply with federal, state and international laws and regulations relating to privacy, data protection and consumer protection, or the expansion of current, or the enactment of new, laws or regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition.

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing, export and security of personal information.

Laws and regulations relating to privacy, data protection and consumer protection are complex and rapidly evolving and subject to potentially differing interpretations.

These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices.

As a result, our practices may not comply, or may not comply in the future, with all such laws, regulations, requirements and obligations.

Any failure, or perceived failure, by us to comply with our posted privacy policies or with any federal, state or international privacy or consumer protection-related laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease using certain data sets.

Any such claim, proceeding or action could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties and otherwise adversely affect our financial condition and operating results.

We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.

Foreign data protection, privacy and other laws and regulations have historically been more restrictive than those in the U.S.

The European Union (the "EU"), for example, traditionally has imposed stricter obligations under its laws and regulations relating to privacy, data protection and consumer protection than the U.S.

In May 2018, the General Data Protection Regulation (the "GDPR") governing data practices and privacy in the EU became effective and replaced the data protection laws of the individual member states.

The GDPR imposes several requirements on companies that process personal data, including requirements relating to the processing of health and other sensitive data, the consent of the individuals to whom the personal data relates, the information provided to the individuals regarding data processing activities, the notification of data processing obligations to the competent national data protection authorities and certain measures to be taken when engaging third-party processors.

The GDPR also imposes strict rules on the transfer of personal data out of the European Economic Area (the “EEA”), including to the U.S.

Failure to comply with the requirements of the GDPR, and the related national data protection laws of the EU member states, may result in fines and other administrative penalties, including potential fines of up to 20 million euros or 4% of annual global revenues, whichever is greater.

The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.

The GDPR regulations may impose additional responsibility and liability in relation to personal data that we process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules, including as implemented by individual countries.

This may be onerous and adversely affect our business, financial condition, results of operations and prospects.

In addition, further to the United Kingdom's (the “UK”) exit from the EU on January 31, 2020, the GDPR ceased to apply in the UK at the end of the transition period on December 31, 2020.

However, as of January 1, 2021, the UK’s European Union (Withdrawal) Act 2018 incorporated the GDPR (as it existed on December 31, 2020 but subject to certain UK specific amendments) into UK law (the “UK GDPR”).

The UK GDPR and the UK Data Protection Act 2018 set out the UK’s data protection regime, which is independent from but aligned to the EU’s data protection regime.

Non-compliance with the UK GDPR may result in monetary penalties of up to £17.5 million or 4% of worldwide revenue, whichever is higher.

The UK, however, is now regarded as a third country under the GDPR which means that transfers of personal data from the EEA to the UK will be restricted unless an appropriate safeguard, as recognized by the GDPR, has been put in place.

Although, under the EU-UK Trade Cooperation Agreement it is lawful to transfer personal data between the UK and the EEA for a 6 month period following the end of the transition period, with a view to achieving an adequacy decision from the European Commission during that period.

Like the GDPR, the UK GDPR restricts personal data transfers outside the UK to countries not regarded by the UK as providing adequate protection (this means that personal data transfers from the UK to the EEA remain free

Compliance with the GDPR and the UK GDPR is a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with any future EU or UK activities.

Brexit has created uncertainty in data protection issues involving the UK, and could also lead to further legislative and regulatory changes.

It remains unclear how the UK data protection laws or regulations will develop in the longer term and how data transfer to and from the UK will be regulated notwithstanding Brexit.

The full effects of Brexit are uncertain and will remain so until the UK and EU reach a definitive resolution with regards to outstanding trade and legal matters.

Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations, and financial condition could be adversely affected by Brexit is uncertain.

Outside the EU, there are many countries with data protection laws, and new countries are adopting data protection legislation with increasing frequency.

Many of these laws may require consent from consumers for the use of data for various purposes, including marketing, which may reduce our ability to market our products.

We are subject to a variety of federal, state and international laws and regulations which govern the collection, use, retention, sharing, processing, export and security of personal information.

These laws and regulations are complex and rapidly evolving and subject to potentially differing interpretations.

There is no harmonized approach to these laws and regulations.

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We may need to change and limit the way we use personal information in operating our business and may have difficulty maintaining a single operating model that is compliant.

Further, many of these laws may require consent from consumers for the use of data for various purposes, including marketing, which may reduce our ability to market our products.

Compliance with such laws and regulations will result in additional costs and may necessitate changes to our business practices and divergent operating models, which may adversely affect our business and financial condition.

In addition, various U.S.

and foreign federal, state, and local legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations or issue revised rules or guidance regarding privacy, data protection and consumer protection.

Any such changes may force us to incur substantial costs or require us to change our business practices.

This could compromise our ability to pursue our growth strategy effectively and may adversely affect our ability to acquire customers or otherwise harm our business, financial condition and operating results.

For example, California enacted the California Consumer Privacy Act (“CCPA”), which became effective on January 1, 2020, and the and the California electorate recently approved the California Privacy Rights Act of 2020 (“CPRA”), which expands upon the CCPA and is scheduled to take effect on January 1, 2023 (with a lookback to January 1, 2022).

The potential effects of the CCPA and the CPRA are far-reaching and may require us to further modify our data processing practices and policies and incur additional costs and expenses in an effort to comply.

Among others, we are subject to the General Data Protection Regulation (“EU GDPR”) in the European Union (“EU”).

Following the United Kingdom’s (“U.K.”) withdrawal from the EU, the EU GDPR has been incorporated into U.K.

GDPR”), together with the EU GDPR referred to as “GDPR”).

The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, where required providing notification of data breaches, and taking certain measures when engaging third-party processors.

The GDPR also restricts transfers of data outside of the European Economic Area and the United Kingdom.

Data protection authorities hold a number of enforcement powers, including issuing fines of up to 4% of global annual turnover or €20 million (£17.5 million) (whichever is higher) for the most serious infringements.

The GDPR includes restrictions on cross-border data transfers.

Adequate safeguards must be implemented to enable the transfer of personal data outside of the EEA or the U.K., in particular to the U.S., in compliance with GDPR.

On June 4, 2021, the European Commission (“EC”) issued new forms of standard contractual clauses for data transfers from controllers or processors in the EEA (or otherwise subject to the EU GDPR) to controllers or processors established outside the EEA.

is not subject to the EC’s new standard contractual clauses but has published its own version of standard clauses and, unless objections are raised, will enter into force on March 21, 2022 to enable transfers originating from the U.K to third countries.

We will be required to implement these new safeguards when conducting restricted data transfers under the GDPR and doing so may require significant effort and cost.

The EC has currently concluded that the U.K.

ensures an equivalent level of data protection to the GDPR, which provides some relief regarding the legality of continued personal data flows from the EEA to the U.K, and the U.K.

Government has confirmed that transfers from the U.K.

to the EEA may currently continue to flow freely.

Changes with respect to any of these matters may lead to additional costs and increase our overall risk exposure.

Further, we are subject to various state privacy laws, such as the California Consumer Privacy Act of 2018 (CCPA), which came into effect in January of 2020;

the California Privacy Rights Act (CPRA), which will go into effect in 2023;

the Virginia Consumer Data Protection Act (Virginia CDPA), which will go into effect in 2023;

and the Colorado Privacy Act (ColoPA), which will go into effect in 2023;

all of which give new data privacy rights to their respective residents (including, in California, a private right of action in the event of a data breach resulting from our failure to implement and maintain reasonable security procedures and practices) and impose significant obligations on controllers and processors of consumer data.

The potential effects of these laws, and any other regulations under consideration around the globe, are far-reaching, uncertain, and evolving, and may require us to modify our data processing practices and policies and incur substantial costs and expenses in an effort to comply.

These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices.

As a result, our practices may not comply, or may not comply in the future, with all such laws, regulations, requirements and obligations.

result in claims, proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease using certain data sets.

Any such claim, proceeding or action, including a complaint by an activist to a regulatory authority or other public statement criticizing our practices, could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers and may result in the imposition of monetary penalties and otherwise adversely affect our financial condition and operating results.

If the use of “cookie” tracking technologies is further restricted, regulated, or blocked, or if changes in technology cause cookies to become less reliable or acceptable as a means of tracking consumer behavior, the amount or accuracy of Internet user information we collect would decrease, which could harm our business and operating results.

Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of proprietary or third-party "cookies" and other methods of online tracking for behavioral advertising and other purposes.

analytics and other purposes.

and foreign governments have enacted, have considered or are considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other electronic tracking tools or the use of data gathered with such tools.

Additionally, some providers of consumer devices and web browsers have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies, to block other tracking technologies or to require new permissions from users for certain activities, which could if widely adopted significantly reduce the effectiveness of such practices and technologies.

We may have to develop alternative systems to determine our customers’ behavior, customize their online experience, or efficiently market to them if customers block cookies or regulations introduce additional barriers to collecting cookie data.

We may have to develop alternative systems, which may be less effective, to analyze our customers’ behavior and preferences, customize their online experience, or efficiently market to them if customers block cookies or regulations introduce additional barriers to collecting cookie data.

The regulation of the use of cookies and other current online tracking and advertising practices or a loss in our ability to make effective use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on cost-effective terms and consequently, materially adversely affect our business, financial condition and operating results.

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Supreme Court rendered a 5-4 majority decision in South Dakota v.

Wayfair Inc., 17-494 where the Court held, among other things, that a state may require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller

ships to consumers in the state, overturning existing court precedent.

Other new or revised taxes and, in particular, digital taxes, sales taxes, VAT and similar taxes could increase the cost of doing business online and decrease the attractiveness of selling products over the Internet.

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We have the ability to borrow up to $600 million under our senior secured revolving credit facility (the "Revolver") to finance working capital and provide funds for permitted acquisitions, repurchases of equity interests and other general corporate purposes.

The Revolver replaced our previous $200 million senior secured revolving credit facility which was set to mature on February 21, 2022.

If we draw down on this facility, our interest expense and principal repayment requirements will increase, which could have an adverse effect on our financial results and our ability to make payments on the Notes.

Further, the agreements governing the Revolver contain numerous requirements, including affirmative, negative and financial covenants.

As a result of these covenants, our ability to respond to changes in business and economic conditions and engage in beneficial transactions, including to obtain additional financing as needed, may be restricted.

Our failure to comply with any of these covenants or to meet any payment obligations under the Revolver could result in an event of default which, if not cured or waived, would result in any amounts outstanding, including any accrued interest and unpaid fees, becoming immediately due and payable.

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If the holders of the 2025 Accreting Notes convert their 2025 Accreting Notes, we would be required to settle all of our conversion obligation by delivering shares of our Class A common stock.

During 2020, CBEP Investments, LLC ("Charlesbank") converted $253.1 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of our Class A common stock.

In January 2021, GHEP VII Aggregator, L.P ("Great Hill") converted $253.1 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of our Class A common stock.

To the extent we satisfy our conversion obligation of the Non-Accreting Notes by delivering shares of our Class A common stock or if the holders of the 2025 Accreting Notes convert their 2025 Accreting Notes, we would be required to deliver a significant number of shares, which would cause dilution to our existing stockholders.

During 2020, CBEP Investments, LLC converted $253 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of our Class A common stock.

During 2021, GHEP VII Aggregator, L.P ("Great Hill") converted $253 million of accreted principal of the 2025 Accreting Notes and received 3,490,175 shares of our Class A common stock.

To the extent we satisfy our conversion obligation of the Non-Accreting Notes by delivering shares of our Class A common stock or if the remaining holders of the 2025 Accreting Notes convert their 2025 Accreting Notes, we would be required to deliver a significant number of shares, which would cause dilution to our existing stockholders.

In addition, even if holders do not elect to convert their Notes in such circumstances, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the applicable series of Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors