October 28, 2014
Overstock goes back to its roots with huge liquidation buy
The dot-com bust was good for Overstock.com’s business in the early days. Now, the company is looking to turn the misfortune of other e-tailers into a brighter future for itself.
Yesterday, the company announced it had purchased the entire inventory of high-end jewelry from Bidz.com as part of a foreclosure deal. The inventory, which was valued at more than $89 million at retail, was transported from California to Overstock’s distribution center in Utah. The pieces it acquired, according to Overstock, will be featured in its new Jewelry Liquidation Vault on the site.
The deal with Bidz was similar to how founder Patrick Byrne built his company when he starting out. Mr. Byrne would make cashier’s check offers to buy inventories of entire companies. A total of 18 failed dot-coms took him up on his offers. "It is how we acquired our initial momentum," Mr. Byrne said in a statement.
Clearly, Overstock’s management believes that a return to its roots will be good for business. The deal for Bidz’ inventory was the largest in the company’s history.
"We encourage all parties looking to monetize inventory quickly to reach out to us, as we pride ourselves on our agility and ability to react to these opportunities while paying top recovery dollar," said Seth Marks, senior vice president of merchandising and strategic sourcing, at Overstock. "Due to the flexibility of our deal structures, there is no deal too big for us to handle now."
Mr. Byrne told Internet Retailer, "To any other parties out there in possession of inventories on which they need to recover top dollar while liquidating quickly, I say, ‘call collect.’"
BrainTrust
Recent Discussions
Discussion Questions
Will Overstock.com’s return to its roots make the site more successful? Are liquidation purchases an untapped opportunity for other retailers? What skills are needed to succeed when it comes to buying and then selling liquidated inventory?
Poll
Sites like Overstock flourish based on a couple of key variables—inventory depth, breath and price. If the “return to the roots” helps them achieve those goals, it will be a success. If not, they may be the next candidate for liquidation.
In terms of buying and selling, the formula is classic—you have to know what items will be in high demand, since you don’t want to be stuck holding inventory, and then be able to acquire them at a price point that allows you to make your margin.
A “return to its roots” strategy is about reducing the cost of acquiring inventory for resale. It assumes that your marketing and online presence (in Overstock.com’s case) is sufficiently strong to attract shoppers that just couldn’t find those other sites.
Buying liquidated inventories is not a typical skill set for retailers (be these people, processes or systems). From the obvious structuring of purchase deals know-how, your store allocation (if brick-and-mortar) process will be tested beyond current limits, your distribution centers will have to adapt to holding product out of season and much more.
Advice: Don’t go there unless you know what you’re doing (low inventory cost now turns to higher costs elsewhere) and unless it is a good fit with your business strategy.
Consumers like the idea of a treasure hunt or a great deal. Publicizing the acquisition of fun inventory may renew excitement about going to Overstock.com’s website. Since Overstock already has a reputation in this space, they have momentum. If retailers are doing their jobs well there should not be enough excess inventory for many companies to thrive in this space. The skill required is acquiring the inventory at a price that allows for a profit, letting the right customers know about the inventory available and keeping those consumers coming back.
As someone with off-price buying experience, my view is it’s all about buying the right content at the right price.
Buying assorted lots is a tricky thing. For example, if you bought assorted lots from a “hot” denim label, but half the inventory was in an undesirable color, then you need to make sure you bought the goods at a price to profitably sell the “bad” color.
I saw an ad on TV last night for Overstock.com. First time I can recall seeing them. It was an impressive spot. If they keep buying right and luring us in with their baited ads then going back to their roots will be a success story.
“(M)isfortune of other e-tailers…” Misfortune? But I thought this time it was different.
The story is a little short on info—is this really a “return to its roots” or just a diversion? Is it abandoning its current business model or just tweaking it?—so it’s hard to say too much. I suspect the real value here was getting the O.co name out into the public eye (and ear), which doesn’t happen that much other than the annual A’s implosion at the O.co Coliseum (or maybe the bi-weekly Raiders one).
As for the tactic itself, obviously it’s an age-old one that many department stores rode to success in their youth long ago (and many off-price retailers still do ), but success depends on having a sharp eye, and acquiring from vendors that went under because of bad business models, not because they had merchandise nobody wanted.
I said “somewhat more” rather than going whole hog and saying “much more” (successful) will be the result of Overstock.com’s return to its roots. As the others noted: You’ve got to know the territory—how much to pay for the goods in order to sell them at the right price at the right time to the right people. That’s a real skill—nay, that’s the key to any retailer’s success and life.
The success of this site will depend on how Overstock markets this new showcase of high-end jewelry. There is an exclusive advantage to these pieces from Bidz.com, to be showcased online at Overstock’s new “Jewelry Liquidation Vault,” because, according to the site, “when the vault is empty, the special jewelry event will end.”
I’d like to see Overstock play up exclusivity here and also provide enticing descriptions of the high end jewelry pieces. If jewelry was previously owned, share a short story on its history. Otherwise, this will amount to just another online flash sale.
I do agree with “notcom” that this press release was a tactic to get the Overstock name in the news. Now, let’s see what they do with the goods.
Many a struggling company has turned itself around with the right combination of “return to roots” combined with leveraging of new visions and technologies. Seems like The Gap has actually done this several times.
As many have said before, more money is made on the “buy side” of inventory than on the “sell side.” So long at Overstock is able to buy at low cost and sell at price that delivers their desired profit, it will be a success.
I wish them well in their return to relevance!
There is not enough room for Overstock to move into mainstream retail and/or e-commerce. A look at recent sales results and store closings in the market will show support for this right away. A move to what got them where they were and belong is a good thing if there is enough money for the large amount of advertising they will need soon. This is maybe too late, a little time will tell a lot.
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Sites like Overstock flourish based on a couple of key variables—inventory depth, breath and price. If the “return to the roots” helps them achieve those goals, it will be a success. If not, they may be the next candidate for liquidation.
In terms of buying and selling, the formula is classic—you have to know what items will be in high demand, since you don’t want to be stuck holding inventory, and then be able to acquire them at a price point that allows you to make your margin.
A “return to its roots” strategy is about reducing the cost of acquiring inventory for resale. It assumes that your marketing and online presence (in Overstock.com’s case) is sufficiently strong to attract shoppers that just couldn’t find those other sites.
Buying liquidated inventories is not a typical skill set for retailers (be these people, processes or systems). From the obvious structuring of purchase deals know-how, your store allocation (if brick-and-mortar) process will be tested beyond current limits, your distribution centers will have to adapt to holding product out of season and much more.
Advice: Don’t go there unless you know what you’re doing (low inventory cost now turns to higher costs elsewhere) and unless it is a good fit with your business strategy.
Consumers like the idea of a treasure hunt or a great deal. Publicizing the acquisition of fun inventory may renew excitement about going to Overstock.com’s website. Since Overstock already has a reputation in this space, they have momentum. If retailers are doing their jobs well there should not be enough excess inventory for many companies to thrive in this space. The skill required is acquiring the inventory at a price that allows for a profit, letting the right customers know about the inventory available and keeping those consumers coming back.
As someone with off-price buying experience, my view is it’s all about buying the right content at the right price.
Buying assorted lots is a tricky thing. For example, if you bought assorted lots from a “hot” denim label, but half the inventory was in an undesirable color, then you need to make sure you bought the goods at a price to profitably sell the “bad” color.
I saw an ad on TV last night for Overstock.com. First time I can recall seeing them. It was an impressive spot. If they keep buying right and luring us in with their baited ads then going back to their roots will be a success story.
“(M)isfortune of other e-tailers…” Misfortune? But I thought this time it was different.
The story is a little short on info—is this really a “return to its roots” or just a diversion? Is it abandoning its current business model or just tweaking it?—so it’s hard to say too much. I suspect the real value here was getting the O.co name out into the public eye (and ear), which doesn’t happen that much other than the annual A’s implosion at the O.co Coliseum (or maybe the bi-weekly Raiders one).
As for the tactic itself, obviously it’s an age-old one that many department stores rode to success in their youth long ago (and many off-price retailers still do ), but success depends on having a sharp eye, and acquiring from vendors that went under because of bad business models, not because they had merchandise nobody wanted.
I said “somewhat more” rather than going whole hog and saying “much more” (successful) will be the result of Overstock.com’s return to its roots. As the others noted: You’ve got to know the territory—how much to pay for the goods in order to sell them at the right price at the right time to the right people. That’s a real skill—nay, that’s the key to any retailer’s success and life.
The success of this site will depend on how Overstock markets this new showcase of high-end jewelry. There is an exclusive advantage to these pieces from Bidz.com, to be showcased online at Overstock’s new “Jewelry Liquidation Vault,” because, according to the site, “when the vault is empty, the special jewelry event will end.”
I’d like to see Overstock play up exclusivity here and also provide enticing descriptions of the high end jewelry pieces. If jewelry was previously owned, share a short story on its history. Otherwise, this will amount to just another online flash sale.
I do agree with “notcom” that this press release was a tactic to get the Overstock name in the news. Now, let’s see what they do with the goods.
Many a struggling company has turned itself around with the right combination of “return to roots” combined with leveraging of new visions and technologies. Seems like The Gap has actually done this several times.
As many have said before, more money is made on the “buy side” of inventory than on the “sell side.” So long at Overstock is able to buy at low cost and sell at price that delivers their desired profit, it will be a success.
I wish them well in their return to relevance!
There is not enough room for Overstock to move into mainstream retail and/or e-commerce. A look at recent sales results and store closings in the market will show support for this right away. A move to what got them where they were and belong is a good thing if there is enough money for the large amount of advertising they will need soon. This is maybe too late, a little time will tell a lot.