Wayfair, the online home goods retailer, has announced a significant layoff, affecting 13% of its global workforce, totaling 1,650 employees. The decision comes as a result of the company’s struggle to recover from its initial success during the pandemic lockdowns.

CEO Niraj Shah, who gained attention for urging employees to work harder, acknowledged that the company had over-hired during the peak of online shopping in 2020, which led to a surge in demand and doubled sales to $18 billion. However, the company’s fortunes took a downturn in mid-2022, prompting multiple rounds of layoffs in 2022 and 2023.

Shah emphasized the need for the company to refocus on what committed small teams can achieve, stating that an excess of great people can be detrimental. The layoffs, with approximately 20% affecting the corporate team, are expected to save Wayfair an estimated $280 million annually.

All affected employees will receive email notifications about their future with the company, with severance packages being offered. The Boston-based company, which had around 14,000 employees in 2023, anticipates significant financial savings following the workforce reduction, as evidenced by a nearly 16% surge in Wayfair’s premarket trading shares.

Wayfair’s initial success during the pandemic, driven by high demand for home decor and furniture, has been overshadowed by the current economic landscape. Inflation has led to higher prices, causing middle-income consumers to prioritize essential expenses over discretionary purchases. Additionally, wealthier customers have shifted their spending from goods to travel and services, while elevated mortgage rates have dampened demand for new homes.

Shah’s straightforward communication with employees, urging them to integrate work and life, has been a point of discussion. His emphasis on hard work and the correlation between effort and success has resonated within the company, despite the recent challenges faced by Wayfair.