For most of its history, Overstock.com Inc. (OSTK) has made headlines for pretty much all of the wrong reasons.
The primary culprit was its volatile founder and longtime CEO Patrick Byrne. From waging war on naked short sellers to sleeping with a Russian spy, Byrne’s shenanigans often made you forget what Overstock actually did: buying liquidated inventory on the cheap and reselling the merchandise online.
Since Byrne resigned in 2019, the company has tried to regain stability and respectability by refocusing itself as a mere, honest-to-God seller of goods for the American home. And Overstock recently took a big step towards that goal by reportedly paying $21.5 million to acquire Bed Bath & Beyond’s brand out of bankruptcy.
Rapid Growth and Then Lots of Crazy
When Overstock debuted in 2002, during the early days of the Internet and e-commerce, the company pioneered an intriguing business model.
The company would purchase excess brand name merchandise on the cheap like clothing, electronics, and jewelry from distressed retailers or those just looking to get rid of unsold inventory and resell them to consumers at big discounts. Such a model, of course, has long existed in retail but Overstock was one of the first to exploit the Internet’s speed and scope to offer consumers a broad array of products.
As the company rapidly expanded over the next decade, things got wacky. Byrne made it a mission, which escalated to what felt like a personal vendetta, to attack large Wall Street firms like Goldman Sachs and Morgan Stanley, which he believed were improperly shorting Overstock shares.
In 2011, Overstock committed the worst sin an e-commerce retailer could commit: it pissed off Google. Overstock tried to scheme Google’s search algorithms by getting colleges and universities to post links to its website in exchange for providing discounts to faculty and students. Google punished Overstock by knocking its website several pages deep into its search results.
At times, Overstock made business moves that weren’t illegal or unethical but still overshadowed -- and arguably distracted -- from its core business of selling stuff.
The company developed software that would allow it to distribute shares online and bypass its arch enemies: Wall Street firms. Overstock acquired the naming rights to the Oakland A’s stadium. And it became the first major retailer to accept Bitcoin as payment and invested heavily in blockchain technology.
Rebranding As a Respectable Home Goods Retailer
The controversial Byrne exited Overstock in 2019 and since then, the company has attempted to stay on the straight and narrow. The company’s raison d’etre is now just to sell home goods.
In a presentation to investors earlier this year, Overstock CEO Jonathan Johnson touted the company’s strong market position as a “value” retailer, in which it competes with low price leaders Walmart, (WMT), Amazon (AMZN) and Ikea.
By acquiring the Bed Bath & Beyond brand, Johnson is taking Overstock into what the company calls the “home expertise” market (which means higher prices and higher profits) along the lines of Target Corporation (TGT), Williams-Sonoma, Restoration Hardware, and Wayfair.
But Bed Bath & Beyond offers Overstock another important benefit: ordinary credibility. And it really doesn’t get any less controversial than Bed Bath & Beyond.
Just ask Michael Keaton or Will Farrell.
