Overstock CEO: We’re Winning Share From Wayfair and Bed Bath & Beyond
“2022 is a year I’m glad to have in the rear-view mirror. It’s not one we’ll forget, nor do we want to repeat it,” Overstock CEO Jonathan Johnson told PYMNTS.
In reflecting on the various challenges of the past 12 months, as well as those to come in the next 12, Johnson said his optimism — and to a lesser degree relief — are based on a number of factors.
“This is the first year in our 20-plus year history of being a public company that we’re a 100% home products retailer,” he told PYMNTS from his office last week outside Salt Lake City just hours after the retailer reported a 34% drop in Q4 sales and nearly as much of a revenue decline on a full-year basis.
While Johnson’s tenure, which began on an interim basis in August of 2019, has been largely framed by COVID, supply chain woes, and inflation and economic challenges, he said the retailer has doubled its product count in the past two years and plans to add more items, but is mostly focused on restoring top-line growth by nurturing the momentum it’s seeing in search and mobile.
“The mobile app customer shops more frequently, has a bigger order size, is younger and we're able to market to her a little differently, more directly,” he said, adding that his message to investors — who have cut the stock in half over the past year — is simple.
Message to Investors
“Our message to investors is, we know where we can do better. We know our internal search can improve and we can make the site experience better,” Johnson said, while pointing to efforts to boost loyalty like Overstock’s new credit card with Citigroup.
In addition, Johnson points to the fact that, despite its recent revenue and user declines, Overstock has still been able to hang onto its pre-tax profitability (EBITDA) for 11 consecutive quarters.
“That’s rare in this industry,” he said, “and we have a strong balance sheet too.”
As to the latter part, Johnson was blunt in the competitive advantage it is with another constituency — vendors.
“We’ve been able to sign up new vendors because they don’t have a risk of payment issue when they sell product to Overstock,” he said. “Our balance sheet is strong. You look at what happened with Bed Bath & Beyond, vendors stopped selling to them because they had payment concerns.”
As a result, Johnson says Overstock was also able to take market share from the 50-year-old chain that once had over 1,000 locations, as well as from more leveraged online rival Wayfair.
“I think our most direct competitor online is Wayfair,” he said. “When we look at them, they lose money, they’ve got a balance sheet that has a lot of debt on it so that they’re in a net negative position as opposed to our net positive position.”
While Overstock also competes with Amazon, Walmart and Target, he said the company’s “home goods expertise” made it a little different than the traditional general merchandise brands.
As Overstock Chief Product Officer Carlisha Robinson recently explained to PYMNTS, much has also been done behind the scenes to streamline and optimize the purchasing process itself.
“What we see is the easier that process is for them to check out using whatever platform or method of payment they would like to use, the more likely we will see a repeat customer, a customer that will buy more from us more frequently,” Robinson said.
A Reason to Buy
To be sure, Overstock, like the broader retail sector, has faced a string of challenges over the past few years, most recently the mix of economic headwinds that are crimping consumer spending and habits, though Johnson said he thinks consumers still have money and buying power.
“She [the customer] needs a reason to act. A call to action. Promotional periods,” he said, noting that Overstock’s revenues have tended to be in surges lately as customers continue “guard their pocketbook” a little more carefully than they did during the pandemic before noting that Overstock has historically done well in tough economic times.
“We went public during the dot-com bubble burst. We were one of the few to do that because people were looking for value,” he said, before pointing to the fact that Overstock turned its first profit during the great recession in 2009.
“We think that in today’s economy, if people spend, they spend carefully and that’s where our smart value looks good,” he said.
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