We use cookies. You have options. Cookies help us keep the site running smoothly and inform some of our advertising, but if you’d like to make adjustments, you can visit our Cookie Notice page for more information.
We’d like to use cookies on your device. Cookies help us keep the site running smoothly and inform some of our advertising, but how we use them is entirely up to you. Accept our recommended settings or customise them to your wishes.

Patrick Bryne: How I Screwed Up At Overstock And How Our Customers Fixed it

patrick bryne One of the absolute best presentations I heard at Shop.org Marketing Workshop last week in Scottsdale was the keynote by Patrick Bryne, the CEO of Overstock.com. In his talk, he described how Overstock "came of the rails" due to growth and tech snafus, and how refocusing on the customer saved the firm and returned them to growth and profitability. Patrick's key tip:
Take your toughest meanest most uncompromising exec and put her over customer service.
For example, at Overstock, Customer Service has the power to pull SKUs off the website if they deem the item unacceptable from a returns or complaints level -- and this is without checking in first with Merchandising! Patrick also praised Reicheld's Net Promoter Score. That resonated -- our firm tracks NPS too and places great value in the responses. Here are my quickly scribbled notes from Patrick's excellent keynote:
Patrick Bryne, Overstock 4/9/08 Scottsdale AZ 'How I screwed up at Overstock and Our Customers Fixed it' Safe harbor disclaimer 800K skus, 840 EEs, 550 partners IPO 2002 25th of IR100 89% CAGR 2000 thru 2005 reaching $1B in 5 years very small capex squeezing a penny, duct tape, 'running on shoelaces' grown to $500b (?) on a capex of $2m inception to date started investing capex in 2004 had to shut down parts of site at xmas in 2004 due to load accounting team coming in to work at midnight to 6a so as to not tax system ‘then the shoelaces broke’ in 2005, convinced need 'forklift upgrade' in IT forklift upgrade: buy so much new hardware / software it comes on a forklift we spent $44 mil in 2005 capex, competing w/ folks who spent $1b/ year in tech upgrades went disastrously concerned we couldn't make it thru xmas 05 without 3 big system upgrades each of 3 upgrades was a 18 month project itself, yet we did all in 6 months total disaster, ‘came off rails’ growth collapse, we began to shrink, lose top line when your revenue shrinks like that, need to cut op. ex. really hard to cut op. ex at same speed as accelerating tailspin inv turns down tech expense up -- these investments require additional investment, you have to keep funding these things, tech expense still up 100% EBITA went from positive a few million to negative 30 mil the most important number is net promoter score reicheld’s ultimate question average NPS is 8%, overstock at 60% NPS before tailspin, NPS among folks who talked to us 0% when after we went into tailspin, NPS across customers who contacted us fell to -37% NPS the financial problems are disastrous, but NPS problems worse, that is where it starts OVSTCK not named among top 200 customers in terms of cust service three envelopes joke env #1: blame the employees env #2: blame the market env #3: prep 3 envelopes so we considered culture everything that has gone wrong over the years has been when we didn't put enough into corporate culture corp culture: * "saving paperclips" -- it isn't the saving, it is the attitude * "be - know - do" --> from army -- google the phrase ‘skills of being a soldier’ the most leverage comes from who the person is, the "be" where you get the biggest payback spend time selecting people who wouldn't be political, etc we lived off our fat stores for a while * customer-centricity we were too product focused, and not customer focused there is so much more math you can do on SKUs, customers are more touchy-feely more and more analytics get developed to non-customer metrics, this is the natural course and must be fought one principle on how to be customer-centric: "take your toughest meanest most uncompromising exec and put her over customer service" she debates with me all the time you put that person over customer service and the whole company adapts customer care knows where the bodies are buried 'lets track returns by category, and look into anomalies' -- eg furniture buyer is buying beds and too many lack all the parts if too many customers call in angry about the missing bed posts, now CS has power to take it off the site "we've have too many complaints about this line so we took a million dollar line off the site" more power to the CS department it has tremendous impact, letting CS take SKUs off the site it doesn't back on the site until CS signs off as OK save yourself returns, save angry customers, and buyers get mad -- so be it we let CS knowledge drive our programs and fix our prcessed "they know where the bodies are buried" results: one year later, OVSTCK was 4th in named as giving great service bean, zappos, amazon, overstock we're in the top 4 when you ask 8000 random customers "who gives great service" this all comes back to putting the right exec over CS we got tech expense under control, in fact we cut tech spend 30% Q4-2007 revenue finally crossed opex we'll be announcing our numbers for Q1 soon inventory turns turns spiked and then dropped and stabilized, after flushing out the ground EBITA is positive again, though modest now that valley of EBITA dip on that chart is quite a story, that's 20 years off my life 'How I screwed up at Overstock and Our Customers Fixed it' Q&A
Join the Discussion