Overstock.com:
Business Strategy Analysis
Case Overview
⚫Comprehensive case that we will use
throughout the course
Overview of Business
⚫Close-out Internet retailer
–http://www.overstock.com
⚫Revenues grown from $2 million in 1999 to
$200 million in 2003
⚫Offers 12,000 non-BMV products and 500,000
Summary of Business Strategy
⚫Key Success Factors
⚫Utilization of Internet to aggregate supply and demand and
create a more efficient market for liquidation merchandise
⚫Single point distribution
⚫Resolution of channel conflict (different sales channel
prevents cannibalization of regular sales)
Summary of Business Strategy
⚫Key Risks
⚫Competition from established competitors (Amazon.com,
SmartBargains.com) and new entrants
⚫Inventory obsolescence risk (direct business)
⚫Risk associated with sales returns (direct and fulfillment business)
Overall Evaluation of Overstock’s
Business Strategy
⚫Currently characterized by rapid growth, but no profits
⚫Competition is high, so it will be difficult to establish a
sustainable competitive advantage
Key Takeaways
⚫Do not assume that rapid sales growth reflects
a viable business strategy. It is easy to grow
when you are selling something for less than it
costs.
⚫Good ideas are easily imitated in a competitive
Overstock.com:
Accounting Analysis
Critical Accounting Policies
⚫Revenue Recognition
⚫Major switch from commission basis to gross basis for fulfillment
partner revenue on July 1, 2003
Goodwill
Income Statement – Annual
Overstock.com Inc. As Reported Gross
OSTK 69037010 NASDAQ Natl Market
GAAP Basis vs. Gross Basis Sales
(see Gross to GAAP reconciliation at the top of page 32 of Form 10-K)