In 1999, there was no real online bargain store.
Amazon.com, which launched as an internet bookstore in 1996, was beginning to popularize online shopping. But even then, there was a giant hole in the market. The novelty of shopping without ever leaving your house, without ever opening a catalog, was still fresh enough that no one was complaining about the lack of actual bargains available through online shopping. But that didn’t mean the niche wasn’t there.
Enter Patrick Byrne. Make that Doctor Patrick Byrne. Dr. Patrick Byrne the three-time cancer survivor. Dr. Patrick Byrne the three-time cancer survivor with a black belt in tae kwon do. Yes, I’m being serious.
Byrne’s one interesting guy. And, as it turns out, he’s pretty bright too, because when a company called D2-Discounts Direct approached him, Byrne had the foresight to not only envision the business’s potential, but the world of possibilities waiting to be explored in the world of online merchants.
D2-Discounts Direct was an internet startup. And sure, the internet bubble had just burst, with a whole slew of start-ups collapsing almost over night. But a lot of those companies had left over a hefty amount of unused inventory. This is what made D2’s business model unique. They took the inventory from other, failed, dot-com startups, and liquidated them online. Exploitative? Opportunistic? Meh. No more than an undertaker is exploitative. Even in death and bankruptcy, there are services that somebody needs to render. And D2 was rendering away.
The only problem with D2-Discounts Direct was that they were low on m
oney. They had made around half a million dollars liquidating excess inventory the year before, but to really grow, they needed an injection of capital, capital they hoped Dr. Byrne might be willing to provide.
“We were turned down by 55 different venture capitalists back in the day,” Byrne said in a 2003 interview on NPR. “What’s funny is, since then, we liquidated 18 dot-coms funded by the same guys who turned us down for money. If I weren’t as mature as I am, I would take some undue satisfaction in that,” Byrne joked. “The truth is, I had to sell so much of my other holdings to get Overstock funded.”
Byrne invested $7 million, the majority of his net worth, into D2, taking a 60% stake in the company in 1999. That same year, he became CEO and renamed the company Overstock.com. Within a year, Overstock had made more than a million dollars.
Back then, Overstock.com was selling less than 100 products. Over the years, the company has expanded, and so to have its product offerings. The company now offers over 800,000 products. And they’ve moved on from just liquidating the inventories of failed businesses. Some items in their inventory are made specifically for Overstock.com. Overstock also manages other retailers’ supply inventories.
Like many intelligent people, Byrne has made a habit of surrounding himself with other intelligent, competent people who keep the company expanding and succeeding. One such person, Overstock SVP Jacob Hawkins, was featured in Michael Miller’s 2008 book, Online Marketing Heroes. “Each store is there trying to fill a consumer niche,” Hawkins says, describing the company’s inception. “Patrick Byrne, our CEO, realized in the late ’90’s that the value niche had not yet been fuilfilled on the internet. He saw Overstock.com as an opportunity to fill that niche.”
Hawkins offers this advice to online business owners and business marketers: “You need to see what your competition is doing, and make sure that you can be competitive. You need to make sure that you go out there and find what the third-party service providers are offering to help you better manage your business. You need to make sure you get the tools that will allow you to be successful online.”
If there’s one thing Overstock.com is, it’s competitive. By the company’s estimates, since 1999, shoppers of Overstock.com have saved millions of dollars off the suggested retail prices of products available through the website.
So, how has it all worked out for Dr. Patrick Byrne and Overstock.com? Last year, Overstock recorded over $875,000,000 in revenue. Nearly a billion dollars, an almost unbelievable amount of money.
Sure, competitor Amazon.com’s revenue is around $14 billion, but I’ll just chalk that up to a head start. Besides, Byrne’s made it clear he’s in the game for the long term. As Warren Buffet once told him–yes, he knew Warren Buffett (did I mention he tried his hand at professional boxing, too?)–when you make an investment or buy a stock, you should make your decision as if the market were going to close down for five years. Your actions shouldn’t be based on the prospect of overnight gain, but long-term growth. Always look to the future of a company. And that’s exactly what Byrne is doing with Overstock.com.