Overstock.com Inc. has a cheerful holiday season outlook, as the online retailer prepares for what CEO Jonathan Johnson predicts will be sales-generating reunions of family and friends.

Jonathan Johnson, CEO, Overstock.com

“We couldn’t get together last year and there is pent-up gathering demand,” says Johnson during an interview with Digital Commerce 360. “I know when I’m hosting a gathering, I make sure the home is a little nicer with a few more things to sit on or eat with, those kinds of things.”

Comparing Q3 periods ending Sept. 30, Overstock.com recently reported that its Q3 2021 total net revenue declined 4% to $689.4 million compared with $717.7 million in Q3 2020, but this was a 102% increase compared with the non-pandemic period of Q3 2019.

As pandemic-related behavior shifts to spending more time outside the home, average order value increased 24% year over year to $214, driven by the web retailer’s continued sales mix into home good categories. Orders delivered was 14.5 million for the trailing 12-month period, an increase of 8% compared to the prior year, or 1.1 million orders, and an increase of 51% or 4.9 million orders compared to 2019, said chief financial officer Adrianna Lee during Overstock.com’s Q3 earnings call on Oct. 28, according to a SeekingAlpha transcript.

Active customers, measured as a consumer making one purchase in the trailing 12-months, increased 5% year over year to 8.7 million—a possible indication that pandemic-period customers continue to shop at the web-only retailer, Overstock says.

“That represents an increase of 5% compared to the third quarter of 2020 and increase of 60% or 3.2 million customers versus 2019,” said Lee.

Overstock’s Johnson talks inventory, shipping and delivery

As a high-low pricing retailer, meaning a retailer that introduces a product at a higher price point and then gradually discounts and marks down the price as demand decreases, “promotions are crucial to what we do,” Johnson says. “It’s part of the hunt that our customer likes. She wants to know she’s winning and that she’s won at the right time.”

Overstock.com did not promote as much during the pandemic in 2020 as there was less competition from closed brick-and-mortar stores. Plus, Overstock, like many other retailers, had inventory supply issues in 2020, which also resulted in fewer promotions. Retailers didn’t have more than enough inventory to sell, Johnson says.

However, retailers are trying to grow year over year, “and not give back the gains they’ve made during the pandemic,” Johnson says.

Without inventory, there is nothing to offer customers. Johnson says Overstock.com’s suppliers are doing better than most with available inventory in stock and ready to ship. He credits Overstock.com’s expansive network of more than 3,000 suppliers mostly drop-shipping its products from more than 5,000 fulfillment centers.

“Because of our distributed supply chain, if we don’t have the exact mid-century modern black leather sofa you’re looking for, we’ve got one close to it,” Johnson says. “Our in-stock percentage is higher this year than last year. While not at pre-pandemic levels, it’s getting there.”

During very high demand and low supply periods like now in 2021, most suppliers do not want to put inventory in any one distribution channel, “whether it’s Amazon or even ours,” says Johnson. At about 90%, the majority of Overstock.com’s online orders are drop-shipped to consumers from its suppliers, and less than 10% of Overstock.com’s products ship from its three fulfillment centers.

Johnson is not concerned with delayed shipping times during the holiday season because Overstock.com is a high-volume United Parcel Service of America Inc. customer and receives priority status, he says. As a result, the web retailer’s suppliers can provide customers with reliable delivery expectations.

The web retailer has a good sense of delivery times depending on the customer’s location and can provide accurate delivery estimates. For example, A customer living in Chicago ordering a package that will ship from a fulfillment center in Dallas will receive a different delivery estimate compared to someone living in Maine. Delivery estimates are unique for each customer based on where the item is going and whether it is a large freight shipment or a small parcel, Johnson says.

Overstock.com emails customers with delivery estimate updates. “When someone orders a couch, they’re not expecting it tomorrow,” says Johnson, “But if we say we’re going to get it to them by next Thursday, we better get it to them by next Thursday.”

Overstock.com’s holiday outlook

This holiday season, Digital Commerce 360 projects that U.S. online consumer spending is set to grow a far more modest 12.1% year over year. However, digital revenue for the November-December period is expected to surpass the $200-billion mark for the first time—reaching $215.45 billion in ecommerce sales.

Johnson is “very comfortable” with Overstock.com reaching top line growth 12%. “In fact, it’s a little bit pessimistic,” he adds.

In Q4 2020, Overstock.com’s revenue increased 84% year over year. “I think it’s really important to look at year over two-year [2021 over 2019] right now because the pandemic is such a hump that we have to see are we really keeping it or are we not,” says Johnson.

And thus far, Overstock is keeping it, he says. For its second and third quarter, year over two-year [2021 over 2019], the retailer is still over 100% growth in each of those quarters, Johnson says.

To appeal to holiday shoppers, Overstock.com now offers KitchenAid appliances as well as other more giftable items, beyond its typical furniture selection. Shoppers can browse by holiday category, including Thanksgiving, Christmas, Hanukkah and other celebratory events like the Fourth of July or Mother’s Day. Sections are broken down so shoppers can browse lower-priced gifts for him or her, kids and baby, pets and coworkers, among others.

Holidays customers can also shop for home holiday decor, such as holiday ornaments, lighting, artificial wreaths, garlands and Christmas trees.

“We’re one of the places that people can still purchase and get their Christmas tree in time to set it up after Thanksgiving this year,” Johnson says.

Expanding loyalty program benefits to app users

Overstock.com continues to devote time to developing and testing its app for mobile devices (phones and tablets), in an effort to increase consumer use. This includes building features and improving customer experience during browsing and check out. Sales on mobile devices reached the company’s highest level for mobile-related sales in Q3, Johnson says.

“It’s a small, low double-digit percentage—but it’s significant for us. It was the highest ever,” he adds.

Johnson says the online retailer regards the mobile app as a retention tool as well as a tool to acquire new customers. Overstock.com is testing app-specific promotions, expanded notifications, and offering insights like similar products a customer might enjoy based on their shopping behavior on Overstock.com.

In 2022, Overstock.com also plans to expand the benefits of its loyalty program, Club O, to app-only users as well invest in efforts to extend its reach to shoppers through marketing and social media channels.

Current Club O loyalty members remain a “relatively small group” but it’s a group with a high purchase repeat rate, Johnson says.

“We believe the technical foundation we have laid over the last 18 months will empower us to continue enhancing the app and help us ensure the experiences we are deploying will meet customer needs,” Johnson says.

Overstock.com is No. 31 in Digital Commerce 360’s 2021 Top 1000. In April 2021, Overstock.com sold its cryptocurrency segment to a venture capital firm. Medici Ventures, which launched as a wholly owned subsidiary of Overstock.com, transferred to Pelion MV GP LLC. It is expected to offer digital securities, blockchain technologies, and exchanges. Previously, Overstock.com announced Medici Ventures had migrated to a limited partnership while partnering with Pelion Venture Partners to act as the general partner of the fund.

“Blockchain in a limited partnership. A venture capital firm fully funded that and doesn’t take any management time or any capital resources [from Overstock.com],” Johnson says.

In Q3 2021 for the three months ended Sept. 30, Overstock.com reported:

• Net revenue of $689.4 million, a 4% decrease from $717.8 million in Q3 2020.
• Net income of $30.4 million, a 26% increase from $23.4 million a year earlier.

LTM and gross margin:

• Last 12 months (LTM) net revenue per customer increased by 23% percent, reaching $325, up from $265 in 2020. Orders per active customer shifted to 1.68 from 1.63.
• Gross margin of 22.7%, an improvement of 270 basis points year over two, versus pre-pandemic.

For the nine months ended Sept. 30, Overstock.com reported:

• Net revenue of $2.14 billion, a 16% increase from $1.82 billion in 2020.
• Net income of $356.4 million, a 157% increase from $43.4 million a year earlier.

Percentage changes may not align exactly with dollar figures due to rounding.