Overstock.com - Business Model

Business Model

Part of Overstock.com's merchandise is purchased by or manufactured specifically for Overstock.com. Among their products are handmade goods produced for Overstock by workers in developing nations. The company also manages the inventory supply for other retailers.

In addition to its direct retail sales, Overstock.com began offering online auctions on its website on September 24, 2004, known as Overstock.com Marketplace and later O.co Marketplace. This service was retired in July, 2011.

After initially relying solely on word-of-mouth marketing from customers, the company turned to distinctive television advertisements starring German actress Sabine Ehrenfeld. Later, Briana Walker became the new spokesperson. In January 2011, Caitlin Keats became their spokesperson.

Since 1999, when Byrne took control and relaunched the company as Overstock the company took its time to become profitable. Byrne projected in May 2008 that Overstock would be profitable in the fourth quarter of 2008, and would achieve a $10 million profit. The company indeed was profitable in Q4/2008, but resumed making losses in Q1 and Q2/2009. Overstock.com finally has its first annual profit in April 2010. On the announcement shares of the company rose more than 30 percent.

In 2011, revenues dropped 5 percent over a two month penalty period imposed by Google. According to the Associated Press, Overstock set up fake websites linking back to its own site. Overstock said it was penalized, in part, for a practice of encouraging college and university websites to post links to Overstock pages so that students and faculty could receive discounts. As a result of the Google penalty, search results for certain products dropped in Google rankings.