Overstock.com Inc. is no longer trying to sell its retail division. The retailer spent most of last year looking for prospective buyers.
And, to combat competitor Wayfair Inc. and rectify its deteriorating traffic from organic search, Overstock “hit full throttle on advertising” at the start of 2018 to increase its traffic, CEO Patrick Byrne told investors this week, according to a Seeking Alpha transcript. “We lost a bundle of your capital on that and I’m sorry about that,” he said.
Now that it is making a shift, Overstock is refocusing on profitability, he said. Byrne now plans for “explosive growth” this year.
“While we know last year was disappointing, I made the mistake of trying to compete on the same terms of our main opponent. That was a terrible mistake,” Byrne said. “We’ve returned to our normal way of operating business, and that’s being about profitability. This year, I’m committing that we will generate at least $10 million of positive operating cash flow from the retail business.”
Overstock plans to reduce customers acquisition costs through a combination of improved organic traffic and more efficient paid marketing, chief strategy officer Seth Moore said. “We’re increasingly confident that we’ve identified effective strategies to recover our ranking,” he said.
Overstock.com’s search engine optimization plummeted for 16 consecutive months in 2017 and the first half of 2018 because it didn’t rank in the top 10 and three results for its keywords, Moore said. Those are the positions in Google that generate traffic and revenue, he added. This week, Overstock reported six consecutive months of improving its keyword rankings in the top 10, including a 66% increase in top-tree keyword rankings since October. However, it is still not back to its 2017 levels.
The retailer reported that its sales, revenue and profit all decreased in the fourth quarter ended Dec. 31. For the fourth quarter, retail net revenue decreased to $446.7 million, down 1.2% from $452.0 a year earlier. Overstock points to a 4% decrease in orders and a 13% decrease in marketing spend, such as paid search, social media ads and TV ads, as the reasons for the decreased in sales.
Gross profit for the retail arm in the fourth quarter decreased 4.9% to $81.6 million from $85.8 million. Across its retail, blockchain and other ventures, Overstock took a loss of $47.9 million for the quarter compared with $96.8 million a year earlier.
For the year, retail revenue reached $1.80 billion up 4.0% from $1.73 billion in 2017. However, Overstock took a net loss of $217.6 million in 2018 compared with $111.9 million in 2017.
On a positive note, Overstock reported a 36% year-over-year increase in paid subscribers to its Club O loyalty program, which is the retailer’s largest driver of retention, Moore said.
Overstock also detailed its progress on Medici Ventures Inc.—its wholly owned blockchain subsidiary focused on applying blockchain technologies to existing industries—which it launched in 2014.
Overstock.com was one of the first retailers to accept payments with blockchain technology via bitcoin, and Overstock even paid some of its Ohio business taxes using bitcoin.
However, Overstock has been investing beyond just currency and using blockchain for supply chain and voting. Overstock says its vision for Medici is a government-as-a-service platform where blockchain is the “tech stack for civilization,” president of Medici Ventures Jonathan Johnson said.
Overstock is No. 32 in Internet Retailer 2018 Top 500.