While focused on profitability, Overstock CEO Patrick Byrne says to expect single-digit growth rates as Overstock continues to face off with Wayfair.

Overstock.com Inc. CEO Patrick Byrne used the e-retailer’s first quarter earnings call with investors to dole out some gritty details on how Overstock battles its biggest direct competitor, Wayfair Inc.

“The point of these calls is to inform shareholders about the realities of the business,” Byrne said in his opening remarks.

And so he did for the next 30 minutes over 30-some slides of data that detailed how Overstock and Wayfair acquire customers, work with suppliers, their differing business models and why he concluded that Wayfair can’t “grow themselves out” of the situation it is in and is “self-immolating.”

Wayfair’s sales grew nearly 60% last year to $3.26 billion and it is No. 16 in the Internet Retailer 2017 Top 500. However, Wayfair is unprofitable, losing $194.4 million in 2016.

By contrast, Overstock (No. 30), grew revenue 8.5% last year to $1.8 billion and turned a profit of $11.2 million. (It swung to a loss of $5.9 million in Q1, the quarter that was the focus in the investor call.)


Wayfair declined to comment to Internet Retailer about Byrne’s comments about its business. Wayfair reports its Q1 financials Tuesday.

At the end of the day an incremental $100 actually delivers $11 or $12 to us of money we can spend to support the corporation. In [Wayfair’s] case it’s about $2.50.

Overstock generated 79% of its 2016 revenue in the “home and garden” category, putting it nose to nose with Wayfair’s e-retail holdings, which include Wayfair.com, Joss & Main, All Modern and Birch Lane.

Byrne focused on how Overstock and Wayfair spend differently to acquire customers. Last year Overstock spent $38 to acquire a customer, while Wayfair spent $68. To acquire traffic in Q4, Overstock spent 38 cents per visitor; Wayfair spent 88 cents per visitor.


Overstock spent $147.9 million on sales and marketing, up 18.8% from $124.5 million in 2015. Meanwhile, Wayfair spent $409.1 million on advertising last year, up 47.1% from $278.2 million in 2015, according to its annual report.

And when it comes to turning a one-time visitor or buyer into a repeat buyer, Byrne contends Overstock is doing that more efficiently. 71% of orders from Overstock’s home and garden categories are made by returning customers, whereas 58% of Wayfair orders are from returning customers.

“They are spending three times as much to get someone to visit their site than Overstock is spending,” Byrne said.


Byrne focused on the ultimate cost of acquiring sales, contending Wayfair’s spending is outpacing any growth it can capture. “At the end of the day an incremental $100 actually delivers $11 or $12 to us of money we can spend to support the corporation,” Byrne said. “In their case it’s about $2.50.”

“We run a much more efficient shop,” Byrne said, calling out further business metrics like revenue per employee ($1,000 for Overstock and $600 for Wayfair), contribution margin and pricing. Wayfair has a greater margin per product than Overstock, which Byrne says is because Wayfair charges more for the same or similar products. In an analysis Overstock commissioned, it found that if consumers bought the same products they bought on Overstock at Wayfair, they would pay 18%-24% more at Wayfair.

Byrne said fighting Wayfair’s encroachment on Overstock’s business has been hard, but Overstock has remained focused on profitable growth, not top-line revenue growth.

“We are parsimonious with capital, we are parsimonious with our expense dollars. We have a great business, it has stayed profitable, even in in the face of having a competitor come along, a [competitor] that is a kamikaze competitor next to us.”


Byrne said Overstock’s growth will likely remain in the single-digit millions “as long as we have this competitor in Wayfair doing what they’re doing.”

For the three months ended Mar. 31, Overstock reported:

  • $432.4 million in revenue, up 4.5% from $413.7 million.
  • Gross profit of $86.9 million, up 12.4% from $77.3 million.
  • Net loss of $6.3 million, down from a positive income of $13.1 million a year earlier.
  • An average order value of $195 on 2.6 million orders that occurred during the quarter.
  • A customer acquisition cost of $20.78, up from $16.61 in Q1 2016.
  • It had 1.8 million unique customers place orders during the quarter.