Why Overstock’s pivot to households will pay off in the long run

Overstock.com has just finished repositioning itself as an exclusive online retailer of homewares and furniture after putting aside its online liquidator image.

When the decision was made a year and a half ago, it seemed like a good idea. But with third-quarter revenue down 33% year over year, the executive team and investors may be suspicious of it.

Overstock and the entire household goods category are benefiting from the pandemic hit, and everyone expects it to slow. But not so much.

Retail sales at furniture and homeware stores fell 2% through August, while inflation for that category hovered around 10%, with a bigger shortfall. Even arch-rival Wayfair fell just 15% year over year in its most recent quarter.

But Overstock believes that despite the current short-term challenges, it has made the right long-term decisions. It noted that its residential-only sales were up 53% compared to 2019.

“It’s like the economy fell into the Grand Canyon and now we have to climb back,” CEO Jonathan Johnson shared with me. “It’s going to consume fuel, and we’ve got it — profit. We’ve learned how to make money in good times or bad.”

“Our business is growing. We’re taking market share, and we’re doing it profitably,” he asserted, boasting that Overstock had just posted its tenth straight quarter of profits. That’s not something Wayfair can’t claim, even though it’s four times bigger, with $11.3 billion in sales last year compared to Overstock’s $2.8 billion.

Johnson attributes the company’s asset-light business model to its profit advantage. The company has minimal inventory, and its 3,500 suppliers supply most product orders.

“Because we are profitable, our partners are more inclined to sell to us. Compared to many competitors, they know we will pay on time,” he explained. “If these suppliers don’t know if or when they’re going to get paid, they limit the amount of inventory they have tied up with someone.”

This model also yields supply chain advantages. “We have a lot of products to sell,” he said, adding that it has brought in new partners to increase the depth and breadth of home offerings.

The company didn’t guide revenue growth — “the water is still too choppy,” Johnson said — but he’s optimistic that it has turned around and the fourth quarter will be a good one.

“Small kitchen appliances will shine this year, and we’re going head-to-head with big names like Cuisinart, KitchenAid, Oster and Calphalon,” he said.

To raise awareness for its exclusive home repositioning, Overstock has just launched a major national advertising campaign. Invite shoppers to “get comfortable” with the ’80s Partridge Family hit “C’mon Get Happy.”

Under the headline “Making Dream Homes Come True,” it’s playing on radio and cable, streaming TV, YouTube and social channels, including Instagram, TikTok, Pinterest, Facebook and Twitter.

It also features a diverse team of six brand ambassadors – Tarak El Moussa, Vanessa Deleon, Farah Merhi, Taniya Nayak, Lizzy Mathis and Luke Caldwell – with authentic designs from HGTV. Together, they bring in a strong social media audience of 20 million followers.

Ambassadors will showcase products selected from Overstock’s inventory in fully furnished rooms to inspire the next generation of home consumers, especially HENRY (high income earners – not yet wealthy), who earn more than 70% of U.S. households, despite They earn less than the top 10% of the super-rich.

“People earning over $100,000 are our fastest-growing demographic,” Johnson said, describing them as a “smart value-seeker” segment, consumers looking for quality and style at a lower price.

“These aren’t shoppers ‘cutting prices’, they’re trading for more value. If they have $1,000 to spend on a sofa, they want the best sofa $1,000 can buy. They’re savvy shoppers .”

They’re also passionate about saving time and living busy multitasking lives, and Overstock’s mobile app — Overstock’s fastest-growing sales channel — is a great addition to the next generation of high-income, tech-savvy consumers Ways to save time. Its mobile app accounts for 50% of total merchandise sales.

When asked if the burgeoning second-hand furniture market could affect Overstock sales, especially because it appeals to the next generation of sustainability-conscious consumers, Johnson replied: “There’s always been resale, but people want today’s The style, today’s color, today’s fabric and our prices are all right.”

Johnson and his Overstock team believe they have a massive void in the $419 billion furniture and homewares market, according to Insider Intelligence/eMarketer estimates.

It is located in the fast-growing e-commerce segment, with a market penetration rate of over 30% in 2021, up from 24% in 2019.

It targets next-generation, value-driven customers who have higher incomes to spend. These shoppers are at the peak of their home investment.

Overall, Overstock sees it as the fourth-largest online home furnishing brand after Amazon
Amazon
Wayfair and Walmart
WMT
based on online income.

What differentiates Overstock from pure-home Wayfair is its favorable profit position, with suppliers lining up to approach its nearly 6 million active customer base.

“Suppliers are in a pinch right now. They’re seeing a lot of retailers struggling financially. They can’t fill their distribution centers because suppliers are pulling back. We’re offering better options. We’ll pay our bills here. , even though some competition may not,” Johnson concluded.

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