From the Corner Office – Patrick Byrne
The dot-com era was a doozy for bad business, and it is tough to single out the worst perpetrators because there were so many. So, it’s impressive to see a business that not only survived that era, but is doing well in today’s economy. Such is the case with Overstock.com, led by CEO Patrick Byrne.
Byrne understood that to succeed online, you have to harness the unique power of the Internet; that is, an Internet company’s business proposition must be different than that of an offline company.
Byrne realized the Web offered an online opportunity that could not be easily duplicated offline in the physical world. Specifically, people looking for bargains and closeouts had to drive to obscure outlet centers in far-off locations, but he calculated correctly that there was a huge market for a sort of online closeout warehouse. When presented with the opportunity to take over Overstock.com’s financially failing predecessor, he saw the potential in a Web site offering closeouts.
But what to name the new venture, here in the height of the dot-com era, circa 1999? Therein lay the second secret of his success—a great name. Byrne gathered his team and asked for suggestions. Many were thrown out, but once someone said “Overstock.com” it was fairly unanimous. “It was a great name that created a self-explanatory brand,” Byrne says.
With no outside funding, Overstock.com was launched, offering about 100 closeouts or otherwise discontinued products. He took the Utah-based company public in 2002—the same year BusinessWeek named Byrne one of the 25 most influential people in e-business. Today, Overstock offers almost 700,000 products. The company is valued at $60 billion, and annual sales approach $1 billion.
Byrne also has sought to make online retail opportunities available to the less fortunate. In 2001, he beganWorldstock.com as a marketplace for handcrafted products created by underprivileged artisans in the United States and in developing countries. Overstock’s margins are lower on these products to provide more profit—60 percent on average—to the supplier.
Byrne brings a unique résumé to the position. He formerly was the CEO of Centricut LLC, an industrial manufacturer, and then ran Fechheimer Brothers Inc., a Berkshire Hathaway company. He has undergraduate degrees in Asian studies and philosophy from Dartmouth College, a master’s from Cambridge University as a Marshall Scholar and a doctorate in philosophy from Stanford.
His interest in philosophy heightened after he was stricken with cancer after college and was in treatment for some three years, he says. To help raise awareness of the disease and money for the Dana-Farber Cancer Institute, he bicycled across the United States in 2000—his fourth cross-country cycling venture.
So how did Byrne guide Overstock.com to grow so big, so fast, especially at a time when so many of its competitors crashed and burned? One reason, Byrne says, is customers get real value at Overstock.com: “Because it’s a closeout business, we really have no bread-and-butter products. Instead, what we have to offer are the best prices online.”
While offering good value at great prices is a tried-and-true business model, especially online, another reason the company took off like it did is because it used some decidedly old media tools, namely, a very clever television ad.
“Have you discovered the secret of the Big O?” asks a beautiful woman. Of course, the Big O she was referring to was Overstock.com and its great prices. It was a memorable ad, and in fact, says Byrne, “it was a phenomenon. It put us on the map and made all the difference. We ran it for three years.”
But a great name and smart advertising are only a couple of pieces of the Overstock success puzzle. Byrne attributes the continued growth to several factors, all of which are good lessons for anyone in business.
Offer great customer service. This is especially true in this challenging economy and online. Today, people are looking for value and, as such, customers are far less loyal to brands and businesses than they were even a few years ago. Accordingly, one way to keep them around, or snag them in the first place, is to make “great customer service” more than just a throw-in phrase in a mission statement, but rather an integral part of your business culture.
This is even more important if you have an online business, Byrne says, as customers cannot physically experience your commitment as they can at, say, Nordstrom. Overstock.com, he says, “takes customer service very seriously. We train all of our people to be friendly and fair and to be great to all customers.” As customers deal with Overstock employees via online chats, e-mail and phone calls, exceptional customer service is taught in a variety of ways. “We like to build relationships,” Byrne says.
So, how great is Overstock.com’s customer service? Pretty great, apparently. In 2008, the National Retail Federation named it No. 2 in customer service nationwide (L.L. Bean was No. 1). This recognition applies to all national retail businesses, online and off.
Byrne credits his senior vice president, Stormy Simon, for much of the customer-service success. Says Byrne, “If you want to make your company customer-centric, just take the most stubborn, unbending, hardheaded, customer-loving employee you have, and put her over in customer service. The company gets customer-centric quicker than you ever thought possible.”
Offer great products. Overstock.com offers, as they say, namebrand products for less. Whether it’s an Xbox or a top-rated DVD, Overstock has it. They sell cars, handmade goods from around the world and clothes for toddlers. People love outlet malls, and that is the whole idea behind Byrne’s baby. It combines the value, branding and products of the outlet mall with the convenience of online shopping. As Byrne says, “Whether it’s a high-end or a low-end product, we have it, and we sell it at the best prices.”
Offer great value for the money. “People always want to save money, so our business model works in both good and bad economies,” he says. And aside from everyday low prices, Overstock built its brand by offering daily specials and $1 shipping to new customers. It all adds up to a great value.
Byrne also has some tips for other entrepreneurs in this challenging economy. “Of course,” he says, “you need to be conservative with your capital at this time, but one thing remains the same: Successful entrepreneurs find a need and fill it. It is almost an altruistic calling.”
Find a need and fill it. Great advice. And if it turns out that you have something left over after you fill that need, just call Patrick Byrne. He would be happy to list it on Overstock.com.
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