Overstock.com Inc.’s Club O rewards program is becoming a more integral part of the retailer’s future.
Paid memberships to the retailer’s Club O rewards program are up 30% year over year, and sales from members of its Club O loyalty program now account for 25% of the company’s overall sales, founder and CEO Patrick Byrne told analysts on the retailer’s Q2 2017 earnings call Wednesday.
Club O is Overstock’s rewards program, for which a shopper pays $19.95 a year to receive such perks as free shipping with no minimum threshold and 5% cash back on purchases. Overstock previously had Silver and Gold levels of Club O, but it cut the Silver plan in the fourth quarter of 2016.
Overstock, No. 30 in the Internet Retailer 2017 Top 500, plans to add a tier to Club O next year that will offer more benefits and cost more than $19.95 annually.
“The reason this is so powerful is it’s a lot like what I hear about (Amazon.com Inc.’s) Prime, which is the lifetime value of customers that join this program significantly increases, so the more we can get that to grow the more it’s going to pay off long term,” president Saum Noursalehi said, according to a transcript from Seeking Alpha. Noursalehi declined to specify the cost of the new Club O tier or what perks it will include.
Chief financial officer Rob Hughes said shoppers tend to sign up when they need to refurnish a home.
“People who just moved or had a baby or had their in-laws move in, they have to wipe out their furnishings and start over,” Hughes said. “Club O catches them at the start of that cycle, and once they’re in, they keep boomeranging back to spend their rewards. As they do, they accrue more rewards, and so we end up capturing the entire wallet cycle on these customers and it’s just immensely valuable.”
For the third quarter ended Sept. 30, Overstock reported:
- Net revenue of $424.0 million, down 4.0% from $441.6 million during the same time last year.
- Direct revenue, defined as orders Overstock fulfills from its own warehouses, of $19.6 million, down 20.3% from $24.6 million.
- Partner revenue, defined as revenue from sales of Overstock’s partner products where Overstock is the merchant of record but goods are directly shipped by the manufacturer, of $404.4 million, down 3.0% from $416.9 million.
- A net loss of $1.1 million, compared with a net loss of $3.4 million.
For the first nine months of 2017, Overstock reported:
- Net revenue of $1.288 billion, up 1.1% from $1.274 billion during the same time last year.
- Direct revenue of $64.6 million, down 14.9% from $75.9 million.
- Partner revenue of $1.224 million, up 2.2% from $1.198 million.
- A net loss of $15.1 million, compared with an $8.5 million profit.