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From the Corner Office – Patrick Byrne

The dot-com era was a doozy for bad business, and it is
tough to single out the worst perpetrators because there
were so many. So, it’s impressive to see a business that
not only survived that era, but is doing well in today’s
economy. Such is the case with Overstock.com, led by
CEO Patrick Byrne.

Byrne understood that to succeed
online, you have to harness the unique
power of the Internet; that is, an
Internet company’s business proposition
must be different than that of an
offline company.

Byrne realized the Web offered an
online opportunity that could not be
easily duplicated offline in the physical
world. Specifically, people looking for
bargains and closeouts had to drive
to obscure outlet centers in far-off
locations, but he calculated correctly
that there was a huge market for a sort
of online closeout warehouse. When
presented with the opportunity to take
over Overstock.com’s financially failing
predecessor, he saw the potential in a
Web site offering closeouts.

But what to name the new venture, here in the height of the
dot-com era, circa 1999? Therein lay the second secret of his
success—a great name. Byrne gathered his team and asked for
suggestions. Many were thrown out, but once someone said
“Overstock.com” it was fairly unanimous. “It was a great name that
created a self-explanatory brand,”
Byrne says.

With no outside funding,
Overstock.com was launched,
offering about 100 closeouts or
otherwise discontinued products.
He took the Utah-based company
public in 2002—the same year
BusinessWeek named Byrne one
of the 25 most influential people
in e-business. Today, Overstock
offers almost 700,000 products.
The company is valued at $60
billion, and annual sales approach
$1 billion.

Byrne also has sought to make
online retail opportunities available
to the less fortunate. In 2001,
he began Worldstock.com as
a marketplace for handcrafted
products created by underprivileged artisans in the United States
and in developing countries. Overstock’s margins are lower on
these products to provide more profit—60 percent on average—to
the supplier.

Byrne brings a unique résumé to the position. He formerly was
the CEO of Centricut LLC, an industrial manufacturer, and then
ran Fechheimer Brothers Inc., a Berkshire Hathaway company. He
has undergraduate degrees in Asian studies and philosophy from
Dartmouth College, a master’s from Cambridge University as a
Marshall Scholar and a doctorate in philosophy from Stanford.

His interest in philosophy heightened after he was stricken with
cancer after college and was in treatment for some three years,
he says. To help raise awareness of the disease and money for the
Dana-Farber Cancer Institute, he bicycled across the United States in
2000—his fourth cross-country cycling venture.

So how did Byrne guide Overstock.com to grow so big, so fast,
especially at a time when so many of its competitors crashed and
burned? One reason, Byrne says, is customers get real value at
Overstock.com: “Because it’s a closeout business, we really have no
bread-and-butter products. Instead, what we have to offer are the
best prices online.”

While offering good value at great prices is a tried-and-true business
model, especially online, another reason the company took off
like it did is because it used some decidedly old media tools, namely,
a very clever television ad.

“Have you discovered the secret of the Big O?” asks a beautiful
woman. Of course, the Big O she was referring to was Overstock.com
and its great prices. It was a memorable ad, and in fact, says Byrne,
“it was a phenomenon. It put us on the map and made all the difference.
We ran it for three years.”

But a great name and smart advertising are only a couple of pieces
of the Overstock success puzzle. Byrne attributes the continued
growth to several factors, all of which are good lessons for anyone
in business.

Offer great customer service. This is especially true in this challenging
economy and online. Today, people are looking for value and,
as such, customers are far less loyal to brands and businesses than
they were even a few years ago. Accordingly, one way to keep them
around, or snag them in the first place, is to make “great customer
service” more than just a throw-in phrase in a mission statement, but
rather an integral part of your business culture.

This is even more important if you have an online business, Byrne
says, as customers cannot physically experience your commitment
as they can at, say, Nordstrom. Overstock.com, he says, “takes
customer service very seriously. We train all of our people to be
friendly and fair and to be great to all customers.” As customers deal
with Overstock employees via online chats, e-mail and phone calls,
exceptional customer service is taught in a variety of ways. “We
like to build relationships,” Byrne says.

So, how great is Overstock.com’s customer service? Pretty
great, apparently. In 2008, the National Retail Federation named
it No. 2 in customer service nationwide (L.L. Bean was No. 1).
This recognition applies to all national retail businesses, online
and off.

Byrne credits his senior vice president, Stormy Simon, for
much of the customer-service success. Says Byrne, “If you want
to make your company customer-centric, just take the most stubborn,
unbending, hardheaded, customer-loving employee you
have, and put her over in customer service. The company gets
customer-centric quicker than you ever thought possible.”

Offer great products. Overstock.com offers, as they say, namebrand
products for less. Whether it’s an Xbox or a top-rated DVD,
Overstock has it. They sell cars, handmade goods from around
the world and clothes for toddlers. People love outlet malls, and
that is the whole idea behind Byrne’s baby. It combines the value,
branding and products of the outlet mall with the convenience
of online shopping. As Byrne says, “Whether it’s a high-end or a
low-end product, we have it, and we sell it at the best prices.”

Offer great value for the money. “People always want to save
money, so our business model works in both good and bad economies,”
he says. And aside from everyday low prices, Overstock
built its brand by offering daily specials and $1 shipping to new
customers. It all adds up to a great value.

Byrne also has some tips for other entrepreneurs in this challenging
economy. “Of course,” he says, “you need to be conservative
with your capital at this time, but one thing remains the
same: Successful entrepreneurs find a need and fill it. It is almost
an altruistic calling.”

Find a need and fill it. Great advice. And if it turns out that you
have something left over after you fill that need, just call Patrick
Byrne. He would be happy to list it on Overstock.com.

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