Q&A   //   July 7, 2021

‘We really honed our focus’: How Overstock responded to the home goods boom

After a turbulent few years, Overstock has benefitted from the increased interest in home goods during the pandemic.

In the first quarter of 2021, online-only home goods retailer Overstock’s revenue rose 94% year-over-year and active customers nearly doubled. In 2020, the retailers’ full-year revenue rose 75%, to$ 2.5 billion. The majority of Overstock’s inventory comes from other brands: these brands can either ship their product directly to consumers or use the company’s fulfillment services. Either way, Overstock handles the payment process and receives commissions from all sales.

Overstock CEO Jonathan Johnson said that the company’s two keys to success have been a more honed focus on operating goals combined with market shifts towards home furnishings during the ongoing pandemic. Johnson became the CEO of Overstock, replacing founder Patrick Byrne, in 2019. Under Byrne’s tenure, Overstock had started to invest in tech that strayed far from the company’s core business model, such as blockchain and cryptocurrency. Bryne later resigned after releasing a bizarre statement claiming he was involved in investigations into Russian election interference.

Now, Johnson’s goal is to focus on what Overstock has historically been known for: home goods. Going forward, Overstock will double down on its focus on the home category, make its website easier to navigate and update its expansion to Canada.

Johnson talked to Modern Retail about Overstock’s unique ability to navigate furniture supply chain issues and the longevity of the patio furniture boom. This interview has been edited for length and clarity.

What do you feel is driving Overstock’s recent performance?
I think you’re looking at a brand new Overstock. Just under two years ago, I became the CEO [and] we really honed our focus. Before that, we had 27 key initiatives we were working on, and that was like having no key initiatives. It was just too many. [Now] we put four together that we worked on in 2020 and four that we’re working on in 2021. I think the increased focus, in particular on home furnishings, has helped us. And then of course the pandemic helped us. People were at home and e-commerce was helped and online furniture was helped.

During the pandemic, many moved from cities to suburbs. How did that impact Overstock’s business?
There’s been this reshuffling of the American workforce from cities to suburbs — and even exurbs. Most of the time, when people make that move, they’re moving to someplace bigger that needs more furniture. I also think it’s important to know that people are changing what they decorate [in these new homes]. It used to be our living space was the four walls of our home. Now it’s the four corners of our property. We’ve seen a great surge in growth in outdoor patio furniture and outdoor recreation equipment as people try and expand their living space beyond just the walls of the home.

I’d like to hear more about these kind of sub-category dynamics driving purchases at Overstock. Furniture drove 93% of your first quarter sales, but which categories in particular were strong performers?
[In the] first quarter outdoor was big. It’s always big [but] it was bigger sooner this year. Outdoor includes patio [and] recreation equipment… Living room furniture has been great. We’re [also] a very big rug seller. So area rugs are always good for us. And I’m surprised how many mattresses we sell week after week after week.

Did the pandemic alter these category dynamics at all and do you expect those shifts in interest to change as the world re-opens?
It’s interesting. Early in the pandemic there was a surge in office chairs, desks and things you would [need] to set up your home office. But [interest] really leveled out and was across all categories, living room furniture, kitchen furniture…

I don’t think patio furniture is a flash in the pan for two reasons that I’ve already mentioned, one is that people expanded their living space and two is that people are moving to bigger [spaces]. And then the third reason — and I think this is part of the reopening story — is people are very eager to entertain at home. We are [eager] to see a movie or go to a restaurant, [but] we’re also eager to have family and friends over to entertain.

Many furniture retailers have reported delays in their supply chain during the pandemic and even today. How have these issues impacted Overstock and, in particular, your focus on easy and quick delivery?
I would say early in the pandemic, the bottleneck in the supply chain was manufacturers. Then it was UPS and Fedex. It was the carriers — they were just swamped. Then it was the ports. Today,  it’s really containers, containers are expensive. So our suppliers are working hard to find ways to bring product into the country as inexpensively as possible.

I think the way that Overstock has benefited here is that we have about 3,500 suppliers and if one sells out of a product, another supplier has a very similar product. We’ve seen a larger percentage of SKUs sell through the pandemic than we did [in the past], and I think that’s because customers are just eager to find stuff. If their number one item is not there, they find a replacement product that works well too.

You have tens of thousands of SKUs across most home goods categories. What are some of the benefits and some of the challenges of maintaining such a large product assortment.
Product findability on the site is one of the challenges. We’re always focused on making it easier for people to navigate the site, to find what they want quickly, to have good reviews, unfiltered reviews. When I say good, it’s nice to have five stars out of five, but it’s more important to have [honest] reviews. If someone says this blue is a little more sky blue than it is ocean blue, that’s helpful to some purchasers.

The benefit to [this strategy] is a large selection so that, if one product falls out of stock, there’s another product that can backfill in. And because of our model — where we don’t hold the inventory and [instead] our partners and suppliers hold the inventory — there’s no real downside from a profit and loss perspective. We’re not risking our capital on this expanded inventory. We’re just offering our customers more products to purchase from.

Can you explain a little bit more about your efforts to increase product findability?
This is always a push, but it’s a particular focus this year. It’s changing the internal taxonomy behind the scenes so that products become easier to find and only relevant results come up when you search. The last thing you want is when someone searched for a rug and a child sweater comes up that says “your child will look cute as a bug in a rug in this sweater.”  There’s work to do, but there’s still another six months left this year before we move on to another initiative.

One of your key 2021 goals was an expansion into Canada. Why Canada and how have efforts gone thus far?

We tried to go to Canada in the past and we did in a way that didn’t make much sense, and it may have been because it was a little early in the e-commerce experience. [In the past] we were shipping to Canada from the U.S. and between shipping charges and taxes and tariffs, and the savings were eaten up. Today, most of our partners and suppliers have [Canadian] warehouses or are already shipping from Canada to Canadian customers. So it made sense to grow there.

Our business is almost entirely [in the] domestic U.S. We know that international [sales] are a growth spot and the easiest place to test our muscles, if you will, is to do it in Canada, where our suppliers already are shipping and [where] most of the country is English speaking. It’s an easier play than doing Germany or China.