On the surface, the furniture and home furnishings retail sector ended 2025 on a positive note, with sales up 2.3%. But that gain was lackluster compared to core retail’s 4% increase, excluding automotive, gasoline and food service. 

Set against the year’s 2.7% inflation rate, the picture looks even more dismal. Household furnishings and supplies were among the hardest hit by inflation—up 4% in the year—meaning the sector’s growth in 2025 was driven more by higher prices than by rising demand. The home retail sector ended the year at $135.8 billion, virtually level with 2023 after falling 2.1% in 2024. 

Going into 2026, sector headwinds persist, according to a new report from Consumer Edge. In CE’s look at U.S. credit and debit card transaction data, it found spending on home furnishing contracted by mid-single digits during the year, with a noticeable decline across all income households during the fourth quarter compared to a year ago. 

CE analysis suggests that macro-level pressure on the home furnishings market will continue to plague the sector throughout 2026, including elevated mortgage rates, the “lock-in effect” keeping people from moving and weakening consumer sentiment toward discretionary purchases. 

Retailers built around clear value propositions are better positioned to ride out the storm. Those that confront the affordability squeeze head‑on with compelling price‑value offerings are poised to win—retailers like Wayfair and IKEA.

But these market‑share leaders are now on a collision course. Wayfair, the online giant, is moving into physical stores just as IKEA doubles down on e‑commerce, pushing the two rivals directly into each other’s lanes.

Wayfair Bets Big On Physical Retail

Wayfair has effectively become the online category killer in home furnishings—if that term can be applied to a digital retailer. 

Even more remarkable, across the entire home goods retail space, it holds the market-share lead along with TJX’s brick-and-mortar-centric Home Goods, both at just over 15% in the fourth quarter, and more than double number three IKEA at 7%, according to Yipitdata.  

Wayfair enjoys an advantage over Home Goods, IKEA and most of the other 30 home retailers on Yipitdata’s list: it competes almost exclusively online—a channel that declined only 1% year-over-year in the fourth quarter, compared to an 11% drop in brick-and-mortar. 

There’s no arguing that Wayfair hit its stride in 2025. U.S. net revenue advanced 7.4% in the fourth quarter to $2.9 billion, and it ended the year up 5.8% to $11 billion. However, it has not been able to duplicate its stateside success across the pond. International sales were basically flat last year at $1.5 billion. While it remains active in Canada, the U.K., and Ireland, it ended operations in Germany last year.

Wayfair has succeeded against the odds in selling furniture and home furnishings online—repeat customers placed nearly 80% of total orders in the fourth quarter, with a 3.5% uptick in repeat customer orders, and about two-thirds of all orders were placed via mobile device. 

Store Expansion

Now it is going after brick-and-mortar retail in a major way, effectively stepping out of a sector it dominates and into the lion’s den of physical retail. The Wayfair store expansion follows that of sub brands Birch Lane (four stores opened in 2024), Joss & Main (two stores in 2022 and 2023), All Modern (three stores in 2022 and 2023) and two luxury-leaning Perigold stores in 2025. 

Wayfair made its first major move into physical retail with a giant 150,000-square-foot store in Wilmette, IL, in April 2024. It claims the store has been a big success, introducing about half of its customers to Wayfair for the first time. And the store has generated a halo in the local community, with a measurable uptick in consumer spending in Illinois and the Chicago DMA compared to other regional markets.

Following this test, new large-format stores are coming to Atlanta and Denver in 2026, and to Yonkers, NY, in 2027, plus a smaller 70,000-square-foot store in Columbus, OH, this year.

The company remains quite confident that the expansion of Wayfair’s physical presence will bring new customers in and contribute to its overall business. 

“Walking through a physical store gives every shopper a broad view of the breadth of our categories and the depth of our assortment, often inspiring purchases they didn’t know they could get through Wayfair,” said co-founder and CEO Niraj S. Shah during the most recent earnings call.

He added, “The store functions as a new form of consumer marketing.” Wayfair spent $1.4 billion on advertising in 2025. 

While the company downplays the capital investment required to open and operate the physical locations, Shah assured investors that the inventory carried in-store is largely owned by its suppliers. 

“The incremental cost here is simply the cost of the stores themselves. These stores are all located in relatively close proximity to one of our fulfillment centers, so when customers purchase large parcel items, those products can show up on their doorstep in a matter of days rather than weeks,” he explained.

Plagued By Debt

Yet Wayfair continues to operate in the red, ending the year with a net loss of $313 million, better than the nearly $500 million loss last year. GlobalData managing director Neil Saunders observed its loss is “still a painful reminder that Wayfair has a long way to go before the business model proves itself.” And Wayfair is holding $3.2 billion in long-term debt, up from $2.9 billion in 2024.

“The central challenge remains unchanged: with a weak balance sheet, Wayfair has little room for error,” he added. 

Saunders also warned that further tightening of consumer spending on home—a distinct possibility—and stiffer competitive dynamics—a certainty—could hinder progress, especially as value-oriented competitors expand, like TJX’s Home Goods, which added 15 stores through the third quarter of fiscal year 2026 to reach 958 U.S. stores, and IKEA.  

IKEA Is On The Move

Last year, IKEA opened fourteen stores in the U.S., including two smaller format plan-and-order locations in Arcadia, CA and San Marcos, TX. It ended fiscal year 2025 on August 31 with 52 traditional large-format stores, complete with food courts serving Swedish meatballs, and 18 plan-and-order points. 

Nonetheless, its $5.3 billion in 2025 U.S. sales dropped 4.3% from previous year and it also experienced a slight decline in store foot traffic. Yet it remains committed to store expansion with plans to open 10 new stores in 2026, including its first Los Angeles city-center store and first location in Oklahoma. 

Acknowledging that a challenging external environment hindered 2025 results, interim U.S. CEO Rob Olson said digital innovation and new store formats, like plan-and-order and its pilot program with ten Best Buy stores that offer kitchen, laundry and storage planning services to complement Best Buy appliance sales, were key to building the customer connection.  

While Wayfair is stepping into IKEA’s space with stores, IKEA is moving aggressively to challenge Wayfair online. From 2024 to 2025, it grew the number of online visitors from 440 million to 458 million, a 4% increase, and generated a 6% increase in remote sales over previous year. 

Remote sales are supported by its Remote Customer Meeting Point (RCMP) program, which serves customers directly through phone, chat, social media, and specialized customer service. 

Last year, RCMP serviced over three million customers remotely, including a 19% increase in Remote Furniture Planning appointments and 24% growth in Remote Kitchen Planning appointments. Remote appointments added over $100 million in incremental sales.

IKEA’s e-commerce and remote sales growth is energized by the company’s $2.2 billion investment in omnichannel retail, including maximizing its fulfillment network to make home deliveries and buy-online-pickup-in-store more convenient. It currently operates 42 pickup locations, including in two of the pilot Best Buy stores.

Wayfair And IKEA Will Keep Crossing Paths

Wayfair and IKEA are advancing toward each other from opposite directions and are poised to keep colliding—Wayfair moving from digital dominance into physical retail and IKEA pushing beyond its store network into e-commerce and remote services. 

Their strategies reflect the same reality: in a challenged home market, growth will come from market share shifts, not market expansion, and the winners will be those who deliver the best value, convenience and design options to the customer.   

Owning the customer relationship is critical and both retailers recently upped their customer loyalty rewards programs. But here, Wayfair seems to be behind the curve. 

Its pay-to-play rewards program, launched in late 2024, offers free shipping, members-only sales and 5% rewards for purchases for a $29 annual fee, a price set as the breakeven point for customers spending $600 or more per year. While the company boasts that members generated 15% of U.S. revenue in 2025, only about one million members have signed on, suggesting that fee-based loyalty often is more of a disincentive than a draw. 

The newly upgraded IKEA Family Rewards program, on the other hand, is free and structured to reward both purchases and engagement. As per usual, members earn points for spending—$1 spent earns one point with redemptions starting at 60 points. 

But they also earn points for simply engaging with IKEA. For example, ten points are earned by sharing a gift registry, 25 points for creating a wish list or saving a kitchen plan and 50 points for going to an event or completing a planning appointment. 

With 25 million members, up 17% year-over-year, IKEA Family accounted for 56% of U.S. sales last year.

Not only does IKEA win on the membership front, it also remains committed to environmental and social values that resonate with today’s consumers. For example, it generated nearly 1 billion kilowatt-hours of renewable energy in 2025 and donated $1.2 million to local community organizations. 

Plus, IKEA’s got those signature Swedish meatballs. Wayfair’s Porch restaurant with its all-day brunch menu can’t hold a candle to that.