Shah said Wayfair is also able to offer a bigger selection in home goods than big-box retailers like Target.

"These retailers obviously have an advantage over us because they are much more well known, but there is certain aspects of what we do that we think we can use to differentiate ourselves and be successful even with them there," Shah said.

While Wayfair directly competes with retailers like Williams-Sonoma ( WSM), Pottery Barn, Crate and Barrel and Restoration Hardware, Shah said these companies only target one small slice of the market.

"These companies have a focus on the upper markets, just below designer and luxury, and they tend to be fairly narrow in the style range they cover," Shah said. In total, these four companies have sales of about $4 billion, he estimates, while the entire furniture market in the U.S. is $75 billion; with housewares it's more than $100 billion.

"Those companies do well with a specific demographic, but there is still a very large market they aren't tapping into where people are on more of a budget or want access to more selection," Shah said. "If Crate and Barrel-style happens to be their style, and if they aren't particularly sensitive to price, Crate and Barrel may be their go-to destination first, and it is unlikely they will switch. But the market is very large and these companies have such a small piece of it that we just decided to go after the mass offering instead of the lifestyle retail approach."

But it's not just about offering a wide selection, Shah said. Wayfair is also keenly focused on providing detailed product descriptions that make it easy for shoppers to find what they are looking for, and then having these items at competitive prices.

The Boston-based company is also looking to differentiate itself by creating an emotional experience. Wayfair hired Kristine Kennedy, formerly editorial director at Better Homes and Gardens, to bring editorial content to the site that can help inspire shoppers and guide them when making a purchase.

With the tagline "there are a zillion things home," Wayfair is positioning itself to be the online destination for home goods. The company is on track to do $500 million in sales this year, up from $380 million in 2010.

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