By Rhonda Schaffler / www.supplychain247.com / August 11th, 2015
Ever wonder how Overstock fills its online orders? Overstock's CEO Patrick Byrne gives TheStreet's Rhonda Schaffler a tour of the company's nearly 700,000 square foot complex in Salt Lake City, Utah.
The facility is Overstock’s biggest distribution center in the country and also houses customer service operations and an art department, where items are photographed for the Overstock.com website.
Overstock’s CEO Patrick Byrne showed off an area called the mezzanine, where row after row of merchandise is held before workers pick up the goods for shipping.
“Unlike Amazon, you can’t really automate our picking because goods come in, and in the Overstock business goods are not perpetual. They come in, they roll over constantly,” he said.
Once a customer places an order, it is held in the computer system for about an hour or so in case the buyer changes his or her mind, and the order that arrives at the Salt Lake City warehouse is sent to a “picker” who uses a shopping cart to gather items, Byrne said.
“There’s all kinds of computer algorithms behind the scenes, which are doing everything to minimize the amount of foot traffic and getting the products that are ordered most often together, getting them grouped together in the warehouse, just to create efficiencies,” he said.
Goods are then stacked on trucks that ship out from the warehouse to locations across the country, with most of the orders received are shipped out within a few hours, Byrne said.
Overstock closely monitors customer feedback for its products, though Byrne conceded that he has had some product misses, like the time he ordered Epilady hair removers.
“That would probably be the dumbest purchase I ever made because it turns out at no price do American women really want that product,” he said.
Byrne said that one of his favorite products is jewelry, which attracts wholesale buyers.
Overstock CEO Targets International Opportunities
Overstock is getting ready to compete against Alibaba as it targets China and other international markets for growth.
Overstock this quarter expanded into China, and company CEO Patrick Byrne said he will be announcing Overstock’s entry into another major region of the world soon.
Byrne is excited about the opportunity in China.
“I’m a big fan of China. Love China,” he declared. “I don’t know if you know I was a student in China 32 years ago, I speak Chinese. I may be the reincarnation of a Shaolin Monk, is my theory, although I may have just watched too many old episodes of Kung Fu when I was a child.”
But can Overstock fight off the competition?
Byrne indicated there is opportunity as the online retail market continues to grow overall, and that Overstock’s international business accounts for only 2% of Overstock’s total revenue.
Byrne said it’s too early to make specific projections about international sales, but that it’s now cost effective for the company to expand abroad.
“For the first time, we can really move internationally without a lot of set-up costs, a lot of capital expenditure,” said Byrne. “We’ve never really gotten international right. We’ve spent a couple years now sort of ripping up the platforms and building the platform, really building our supply-chain platform to be country agnostic.”
Byrne also noted that Overstock is growing faster than the industry and has been for years.
“I think we’re about the most consistently profitable pure-play e-tailer I can think of,” Byrne said. ‘We have a great cash flow, so we’re really well-positioned.”
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