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Overstock says its asset-light model is the way to go

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May 15, 2023
Illustration of a welcome mat that is a one-hundred dollar bill.

Illustration: Maura Losch/Axios

Overstock CEO Jonathan Johnson says the home decor and furnishing retailer is committed to a pure-play e-commerce strategy.

Why it matters: Rising interest rates, mortgage rates and inflation have put a damper on the sector, forcing companies like Bed Bath & Beyond, Tuesday Morning and United Furniture to file for bankruptcy.

What they’re saying: Overstock's asset-light model means the company "can go down on price by asking for better concessions from suppliers who are over-inventoried without hurting our gross margin,” Johnson tells Axios.

  • Overstock doesn’t hold any inventory, relying instead on third parties to drop ship products to consumers.

Of note: Overstock absorbed some of the supply from Bed Bath & Beyond after the big-box retailer was going through its own turmoil.

  • “We used some of our balance sheet to buy… 30 days worth of inventory,” which it was able to sell through, Johnson says.

Yes, but: Revenue continues to lag, coming off its pandemic highs.

  • Overstock says its adjusted earnings before interest and taxes has been positive for the past 12 consecutive quarters.
  • The company has $34.5 million in long-term debt and $371.3 million in cash and cash equivalents, according to its 10-K.

The intrigue: Overstock could explore omnichannel sales via a partnership with a brick-and-mortar retailer where it can help drive traffic through returns like "what Amazon and Kohl’s did several years ago,” he says.

What’s next: The company is improving its term search function internally.

  • “If people find us, but they don't find what they're looking for and we had it, that's our mistake that we need to fix,” he says.
  • Overstock has also dabbled with generative AI, he adds.
  • AI can be used to make product descriptions better and to improve customer calls so that questions can be answered and customers can get the information they want.
  • Overstock wants to increase its product count to expand the breadth and depth of its products, he says.
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