14% Margins? Nice one, Overstock…
When people find out I work for an internet retailer in Utah they usually ask me what I think about Overstock (based in SLC). I think that Overstock is a company fighting an uphill battle (appealing primarily to a very price-sensitive demographic), but I do think that the company has a lot of potential when they start running the company to generate profits as opposed to just revenues.
I had no idea, however, what a thin margin they were operating on - see Google Finance for some quarterly numbers. You can calculate their gross margin by dividing the gross profit by the gross revenue. You will see that in their most recent reported quarter (Q2 2006) they showed a 14.4% gross margin - ouch!
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As a customer I have been really impressed by Overstock’s prices and their ridiculous shipping costs. For our company we order all our shipping materials from them saving us about $100 per month in shipping alone. $1 shipping for a $400 dollar order is unbelievable–that might explain the 14% gross margin. But on the other-hand they have a loyal customer. But will that equate to higher revenues in the long-run by losing on their shipping & handling…they seem to think so.
Comment by David Kasteler — October 3, 2006 @ 8:52 pm
Dave, thanks for your comment - I agree that the consumers are getting a good deal with Overstock. It’s the investors who I feel aren’t getting a fair shake. As I was reminded by a friend recently, though, nobody is getting rich on Overstock right now and they very well could pull off an Amazon-like transformation to profitability. I sincerely hope that they do.
Comment by admin — October 4, 2006 @ 8:43 am