Why Overstock’s Pivot To Home Will Pay Off In The Long Run

Retail Why Overstock’s Pivot To Home Will Pay Off In The Long Run Pamela N. Danziger Senior Contributor Opinions expressed by Forbes Contributors are their own. I study the world’s most powerful consumers — The American Affluent Following New! Follow this author to stay notified about their latest stories.

Got it! Oct 30, 2022, 12:29pm EDT | Share to Facebook Share to Twitter Share to Linkedin Young brunette woman relaxing on the couch after a long day. Cozy home concept getty After casting aside its online liquidator image, Overstock. com has just finished repositioning itself as an exclusive home furnishings and furniture online retailer.

It seemed like a good idea a year and a half ago when the decision was. But with third-quarter revenues down 33% year-over-year, the executive team and investors may be second-guessing it. Overstock and the entire home furnishings category benefited from a pandemic bump and everyone expected it to slow down.

But not that much. Retail sales in furniture and home furnishings stores are off 2% through August and with inflation in the category hovering around 10%, the shortfall is higher. Even arch-rival Wayfair dropped only 15% year-over-year in its most recent quarter.

But Overstock believes it made the right long-term decision despite current short-term challenges. It points to its home-only sales up 53% compared with 2019. “It’s like the economy dropped into the Grand Canyon and now we’ve got to climb back out,” CEO Johnathan Johnson shared with me.

“That will take fuel and we’ve got it – profts. We’ve learned how to make money come good times or bad. ” “Our business is growing.

We’re taking market share, and we’re doing so profitably,” he asserted and boasted Overstock just racked up its tenth consecutive quarter of profits. That’s not something Wayfair can’t claim, though it’s some four-times larger, with $11. 3 billion in sales last year compared with Overstock’s $2.

8 billion. Johnson credits the company’s asset-light business model for its profit advantage. The company holds minimal inventory, with its 3,500 suppliers dropshipping most product orders.

“Because we’re profitable, our partners are more inclined to sell to us. They know we’ll pay them on time, compared to many competitors,” he explained. “These suppliers limit how much inventory they will tie up with someone if they don’t know if or when they’ll get paid.

” MORE FOR YOU The Inside Story Of Papa John’s Toxic Culture San Francisco 49ers Need Brandon Aiyuk To Deliver In Deebo Samuel’s Absence What Is The Crypto Freedom PAC Planning For The Midterm Elections? This model also yields a supply chain advantage. “We have plenty of product to sell,” he said, adding that it’s brought on new partners to increase the depth and breadth of home products on offer. The company is not guiding on revenue growth – “The waters are still too choppy,” Johnson said – but he is optimistic that it’s turned the corner and fourth quarter will be a good one.

“Small kitchen appliances will be big this year and we’re flush with name brands like Cuisinart, KitchenAid, Oster and Calphalon,” he said. And to raise awareness of its exclusively home repositioning, Overstock just launched a major national ad campaign. Set to the tune from the 80s Partridge Family hit “C’mon Get Happy,” it invites shoppers to “get comfy.

” Under the rubric of “Making Dream Homes Come True,” it is showing on broadcast and cable TV, streaming TV, YouTube and social channels, including Instagram, TikTok, Pinterest, Facebook and Twitter. It also features a diverse group of six brand ambassadors – Tarak El Moussa, Vanessa Deleon, Farah Merhi, Taniya Nayak, Lizzy Mathis and Luke Caldwell – with design bona fides from HGTV appearances. Together, they bring a robust social media audience of 20 million followers.

The ambassadors will present products selected from Overstock inventory in fully decorated rooms to inspire next-generation home consumers, particularly the HENRYs (high-earners-not-rich-yet), those doing better income-wise than 70% of U. S. households though under the top 10% ultra-affluents.

“The $100,000-plus earners has been our fastest growing demographic,” Johnson related and described them as a “Smart Value Seeker” segment, consumers in search of quality and style for less. “These aren’t shoppers ‘trading down,’ but trading for more value. If they have $1,000 to spend on a sofa, they want the best sofa that $1,000 can buy.

They’re savvy shoppers. ” They also are keen on saving time, having busy, multi-tasking lives and Overstock’s mobile app – Overstock’s fastest growing sales channel – is a great time saver for higher-income, tech-savvy next-generation consumers. Its mobile app accounted for 50% of gross merchandise sales.

Asked if the newly emerging second-hand furniture market would take some of the wind out of Overstock’s sales, especially as it appeals to sustainability-conscious next-gen consumers, Johnson replied, “There’s always been resale, but people want today’s styles, today’s colors, today’s fabrics and our prices are right. ” Johnson and his Overstock team believe they have plenty of whitespace in the $419 billion furniture and home furnishings market, as estimated by Insider Intelligence/eMarketer. It sits in the rapidly growing e-commerce segment, which reached market penetration over 30% in 2021, up from of 24% in 2019.

It is targeting next-generation, value-driven customers with money to spend based on their higher income. And these shoppers are at a time in their lives when home investments peak. Overall, Overstock figures it is the fourth largest online home furnishings brand, after Amazon AMZN , Wayfair and Walmart WMT , based on online revenues.

And what separates Overstock from home pure-play Wayfair is its favorable profit position that has suppliers lining up to gain access to its nearly 6 million active customer base. “Suppliers are in a pinch right now. They see many retailers are on tough financial ground.

They can’t fill their distribution centers because suppliers are holding back. We offer a better alternative. We’ll be here to pay our bills, even if some of the competition might not,” Johnson concluded.

Follow me on Twitter or LinkedIn . Check out my website or some of my other work here . Pamela N.

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