Businessmodel of Overstock.com

Customer Segments

Overstock.com has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

• Suppliers: Firms in various categories (retail, manufacturing, distribution, etc.) supply the site with excess merchandise for sale to consumers. Overstock.com receives a commission from the firms.
• Consumers: Individuals visit the website and purchase available items. ### Value Proposition

Overstock.com offers four primary value propositions: accessibility, convenience, price, and brand/status.

The company increases accessibility by making it possible for suppliers who need to get rid of excess store inventory to do it through the online channel. This is particularly necessary for many small retailers who are not able to use third-party brick-and-mortar outlets for this purpose.

The company offers convenience for consumers by enabling them to shop for excess merchandise from their computers. Consequently, they do not have to travel to far-off outlets, spending time and gas money. It also makes shopping easier by offering a wide variety of items (over one million) in numerous categories in a centralized channel.

The company offers consumers a lower price than they would receive from physical outlets that sell excess inventory because it has lower operating expenses. It does not have to worry about many overhead costs, allowing it to pass savings onto customers. Overstock.com estimates it has saved users millions of dollars since its inception.

The company has established a strong brand due to its success. The National Retail Federation ranked it fourth in terms of customer service among online retailers. Other forms of recognition it has received include “Customer Service Department and Retail and Sales Department of the Year“ at the Stevie Awards and Top Ten “Best Place to Work in Corporate America“ by Glassdoor.

Channels

Overstock.com’s main channel is its website, through which it acquires new customers; it also sells products on its mobile app. The company promotes itself through TV, radio, print, and online advertising (the latter includes display ads, product listing ads, search engines, banners, e-mail, affiliate marketing programs, and social media campaigns). Further, it markets its offerings through event sponsorships.

Customer Relationships

Overstock.com’s customer relationship is primarily of a self-service, automated nature. Customers utilize the website while having limited interaction with employees.

The site offers a “Support” section with detailed answers to many potential questions. That said, there is also a personal assistance component as the company provides phone, e-mail, and online chat support.

Key Activities

Overstock.com’s business model entails maintaining a common platform between two parties:  suppliers and consumers. The company does not sign long-term contracts with suppliers.

Key Partners

Overstock.com maintains a Partner Program in which suppliers can utilize the company for management of their customer service and return processing. The firm also connects members with:

• Advertising Advisors - Individuals who can help enhance marketing efforts through SKU building, photo services, and customized branding experiences.
• Buying and Partner Care Teams – Groups that can help partners grow their businesses and manage their daily account issues. ### Key Resources

Overstock.com’s main resource is its platform, through which it connects suppliers and consumers. It maintains data centers that it uses for backups, development, and testing, among other purposes.

It also depends heavily on various human resources. The company hires technology employees such as computer programmers and software developers to maintain the platform. It also relies to a great extent on sales/marketing employees and on customer service staff (in-house and outsourced) to answer consumer questions through the phone, online chat, and e-mail channels.

Cost Structure

Overstock.com has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is sales/marketing expenses, a fixed cost. Other major drivers are in the areas of technology (web services, website search, customer support solutions, etc.) and administration, both fixed costs.

Revenue Streams

Overstock.com has three revenue streams:

• Merchandise Sales: The company generates revenue through the sale of items to consumers.
• Commission Fees: The company generates commissions from suppliers whose items are listed on its site.
• Advertising Revenues: The company generates income from advertising on its shopping page and other pages.