Overstock.com rebrands, plans to expand to counter losses
SALT LAKE CITY — Overstock.com, best known for selling discounted housewares and jewelry online, is shifting focus. The Salt Lake City-based company is hoping first run items like Ralph Lauren men's suits, Graco strollers and even auto insurance can lure customers beyond those seraching for liquidation items.
It's a move the internet discounter is making as it copes with declining profits and stagnant revenue growth. Overtock reported a second-quarter loss of $7.8 million, compared to a $1.34 million loss the previous year. Revenue was $235 million in the quarter, up 2 percent from the same period a year earlier. Those results are causing investors to leave. The company's value has dropped by almost a third in the past year.
"For most of our history, we grew so much faster than the industry, and I consider it substandard when we are growing like this," CEO Patrick Byrne, said during a conference call with investors.
The company plans to stabilize losses with major changes, including more first-run products, a retail store, insurance offerings and a new brand. That includes dropping the Overstock name in lieu of a shortened O.co.
"'Overstock' doesn't adequately describe what we're doing," said Jonathan Johnson, Overstock's president, in an interview at the company's Salt Lake City headquarters. "Only about 25 percent of what we sell is liquidation. We've turned into more of a savings engine."
Rebranding an entrenched name may prove difficult for the struggling company.
"Changing a name or logo is probably the hardest thing to do," said Peggy Lander, partner and executive vice president of advertising at Richter7, a Salt Lake City-based marketing firm. "That is a very difficult process because customers have become accustomed to how they do business with that company. It's a hand-holding, nurturing process to guide customers into new brands."
Turning around the company may be challenging. In the past year, shares of Overstock have dropped 34 percent while the Standard & Poor's 500 Index rose 6.3 percent. Head count has also dropped from 1,500 full-time employees at the end of 2010 to about 1,300.
The rebranding is a crucial change for the company as investors fear Overstock is losing its competitive edge online, said Dan Kurnos, an analyst at Benchmark Company, in a telephone interview from his office in Delray Beach, Florida.
The shift could dispel notions that the company only sells low quality "overstocked" items rather than first-run products, Kurnos said.
"They have quality products throughout the website, and if they can drive people to take a look at the website they will be able to pull out a sustainable niche in the e-commerce universe," Kurnos said.
Retail Store Entry
As the company rebrands, it's also launching its first retail store. The Sandy, Utah-location opened Aug. 27. It offers items that are returned from Overstock's online sales, priced at a discount. Until now, the company had sold its surplus of returned items in its warehouse, which led to the retail venture.
"I think the warehouse has proven the concept," Byrne said during an interview. "But our warehouse is not easy to find. We will have a permanent store in retail space where everyone would understand where it was and we would continuous feed it with the returns from warehouse."
After the Sandy location, the company doesn't have plans for any additional stores, spokesman Roger Johnson said.
With the online rebranding, Jonathan Johnson says the shorter, O.co, address can better show the company sells more than liquidated objects. Early on the company realized that some brand names were wary of entering a website called Overstock.com, he said.
"Brands are much more comfortable selling on O.co now," he said.
Johnson says the shift is working. Brands like Broyhill, Steve Madden, and Graco, which were once closeouts, have all joined the site as first-run products.
Last year, home and garden represented 55 percent of sales, while jewlery and clothing accounted for 23 percent and electronics made up 11 percent. The company has recently seen success in the auto market and began selling auto and home insurance from Answer Financial on July 18.
The insurance expansion "underscores O.co's dedication to saving our customers money and becoming the online savings engine," Byrne said. "Expanding our services to a new industry, and especially to insurance, which has always held a special place in my heart, is a natural extension."
By being an online-focused company, Overstock can match supply with demand according to consumer response, like the insurance entry, Johnson said.
"It's a safer way to get into things," said Johnson. "You know if there is demand and you create a supply it will sell."
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