Overstock Sees Drop in Revenue, Hires New Marketing VP
By Ina Steiner
Overstock.com experienced a net loss of $19.4 million in 2011, the company said Friday when it released fourth-quarter and full-year earnings for 2011, which was a 240% decrease year-over-year. The CEO took the blame for some marketing problems experienced last year and said a very senior person from a large brand will join the company in 2 weeks to run its marketing department. It's also working on an initiative to bring its products to other marketplaces.
Overstock.com revenue decreased 3% last year to $1.054 billion, while gross profit fell 6% in 2011 to $179.1 million. That compares to a 15% increase in gross profit in 2010 to $189.6 million compared to 2009.
|Overstock.com Net Revenue 2009 - 2011|
|Direct||$163.6 million||$209.6 million||$150.9 million|
|Fulfillment partner||$890.7 million||$880.2 million||$725.8 million|
|Total net revenue||$1.054 billion||$1.089 billion||$876.7 million|
Overstock.com's total operating expenses rose 12.6% last year, with Sales & Marketing expenses holding steady from the previous year (up less than 1%), Technology expenses rising 15%, and General & Administrative expenses rising almost 22%.
The company said the 6% decrease in gross profit was primarily due to fixed costs increasing as a percentage of revenue due to declining direct revenue; higher inbound and outbound freight; higher product costs from returned goods due to a direct sales mix shift to the home and garden category; and competitive pricing initiatives in the fulfillment partner business. Gross profit fell 14% in the fourth quarter of 2011.
Among Overstock's challenges were legal expenses ($16 million in 2011) to fight Wall Street and patent trolls, and a problem with a Google penalty at the beginning of 2011.
"Revenues were also hurt by a shift of marketing resources into our Club O loyalty program and away from coupons and other site-wide promotions, which were less effective in generating revenues during the second and third quarter of 2011," according to the company's press release. "We also believe that our efforts to rebrand ourselves from Overstock.com to O.co hurt revenue growth in 2011 as it confused some prospective customers who had trouble finding our website."
CEO Patrick Byrne explained the confusion during a post-earnings conference call - about eight out of 13 people who were trying to visit O.co were actually typing O.com, he said.
Byrne said Stormy Simon had left the marketing department 2 years ago to head a new initiative and he took all of the blame for the company's marketing problems in 2011. He also revealed that Overstock.com has hired a Senior Vice President of Marketing with a retail background who will be starting in a couple of weeks. As yet unnamed, the executive is a very senior person from a large brand who has quantitative experience.
Overstock executives indicated the company had laid off some developers in January and said it had deployed a marketplace initiative and it was starting to bring its assortment live on other marketplaces.
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to firstname.lastname@example.org.
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