|Fri July 15 2011 18:02:55|
Overstock Abandons Third-Party Seller Marketplace
By: Ina Steiner
As most retailers and marketers are opening their doors to small third-party sellers, Overstock.com is closing its door to them. It told sellers on Friday it would close the O.co Marketplace on July 21, 2011 (see details in today's EcommerceBytes Newsflash).
Overstock.com rolled out its auction site in the fall of 2004 under the direction of Holly MacDonald-Korth. It cost $6 million to develop, and pitched its auction feedback system as one that used social networking to protect its community of buyers and sellers.
Shortly after Overstock.com launched auctions in 2004, Patrick Bryne told shareholders:
First there was "e-bay" and now there is "o-cean" - the internal code name for Overstock.com Auctions. I think this will work for three reasons: 1) certain dynamics within eBay's marketplace are causing eBay's Powersellers to itch for an alternative; 2) our auction tab scratches that itch; and 3) the social networking imbedded within our auction tab may turn out to be powerful.
Overstock.com moved aggressively to compete with eBay when it launched, a time when eBay was a virtual monopoly and sellers were eager for competition. Overstock.com shadowed eBay's seller conferences, launching extravagant off-site parties to lure attendees.
But Overstock.com ran into problems in 2005 - founder Patrick Byrne explained it had invested heavily in infrastructure - and the auctions business took a back seat.
In 2006, Byrne told sellers that the auctions business was viewed as a "money-losing distraction" by Wall Street, shareholders and others in the company who wanted to close it. That year, its auction platform processed an estimated $40 million in GMV (gross merchandise volume).
Today's closure of the Overstock.com Marketplace goes against the current trend by other retailers and marketplaces who are opening 3P marketplaces - Buy.com, Sears, Walmart, NewEgg, for example.
I spoke to Overstock.com spokesperson Roger Johnson this afternoon - he said they preferred not to comment for the record. Let us know what you think - why was Overstock unable to be a serious contender to eBay in 2004 - 2005? And, is the closure of Overstock Marketplace a significant event in 2011?