Overstock.com CEO details the tough retail environment, discounting, and bitcoin

Overstock.com CEO Jonathan Johnson joins Yahoo Finance Live to discuss post-pandemic growth, inflation, consumer spending, retail competition, and the company’s cryptocurrency investment.

Video Transcript

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BRIAN SOZZI: Rising inventories have been rocking the retail space, as companies continue to overestimate consumer spending power. But the excess goods may provide a new opportunity for companies like Overstock. Joining us now to discuss is Overstock CEO Jonathan Johnson. Jonathan, good to see you, as always, here. So when you survey the landscape and you start to see these inventories pile up in many retailers, does it scream like a recessionary environment to you?

JONATHAN JOHNSON: Well, there’s no question it’s a very tough retail environment right now. We actually think that’s great for Overstock’s business model. We’re an asset light. We don’t own inventory. So we’re not sitting on a bunch of inventory. It’s yellowing.

We are able to sell our inventory, our inventory that we list on our site, because of our smart value proposition. Customers are cutting back on discretionary spending. But when they spend, they want a smart value. They want to stretch those dollars, get the most they can for what they’re willing to spend. That’s exactly what Overstock offers.

BRIAN SOZZI: Jonathan, Guggenheim out with a note this morning, voicing some concern about the growth rates in your business against this consumer spending slowdown. How have things– how have they been looking in recent weeks?

JONATHAN JOHNSON: Well, look, there’s no question that consumers hit pause on this discretionary spending, particularly in the home goods market. But we think it’s a pause. It’s not a stop. The good news about the American consumer is, she always comes back. I do think people are worried about gas prices and inflation.

Again, we think our business model where we’re offering– we have a good value proposition. We’ve got product at any price point, always a deal. We think that when the consumer comes back, we’ll be poised to be there.

In the meantime, we remain focused on our mantra– sustainable, profitable market share growth. We think our balance sheet is strong. We’re controlling the controllables so that we’re profitable, doing our best to maintain and take market share in this tough environment.

BRAD SMITH: And Jonathan, Brad here. What have you noticed in terms of the spend levels for those who are still buying on overstock.com? Has that started to kind of trickle down or trickle lower, if you will, given some of the other high costs that they are navigating right now?

JONATHAN JOHNSON: Yeah, that’s an interesting question, Brad. Our first quarter print, we announced that we had the highest average order value that we’ve had in our history. People are still spending. They’re just looking for value when they do so. So as we continue to complete our journey to be a home company, providing dream homes for all. Our AOV will go up because we’re moving out of kind of lower price point goods. And the consumers are willing to spend if the value is there.

BRAD SMITH: Certainly, and it comes back to finding valuable products. But I wonder in this environment where retail companies and even a lot of the online ecommerce retail companies have had to look across their inventory and say, all right, we clearly have too much that we need to start to churn through now, have you had to hit pause on some of the partnerships, where you typically would be taking in that inventory from? Or do you just continue to move forward, holding on to that for a time when the consumer does come back?

JONATHAN JOHNSON: Well, we’re always working to increase the breadth and depth of our SKUs. And we’re having success doing that. You do mention one kind of difficulty for us. And that’s when some of our competitors who own inventory choose to liquidate it and lose money. That makes the competition more stiff. And sometimes we have to remove product from our site for a time, while others are liquidating. But we’ve been able to remain competitive and are working to maintain profitability and working to grow market share.

BRIAN SOZZI: Jonathan, I’ve started to travel the malls a little more recently, looking for a good deal. And I’ve been surprised by some of the discounting a lot of big retailers are offering right now. Has discounting crossed that line into irrational zone?

JONATHAN JOHNSON: No, I think it’s coming back to kind of a more normal place. You have to remember, a year ago, we were in a very different place where supply was underpacing demand. Today, it’s probably the opposite. But I think that there are retailers that are discounting big, but I think most of us are looking at this the long run. Most of our partners have a long historical perspective, know that if they worked to maintain price to go sell through their inventory in due course. And so I don’t think it’s irrational yet, but there are certainly deals to be had, including deals to be had on Overstock.

BRAD SMITH: John, you know I always love to get your sense on this crypto landscape here, considering the history that Overstock has had, one of the first retailers– the first online retailer to accept Bitcoin as a form of payment. In this crypto winter broader that we’re seeing right now, you know, what most notably have you been keeping an eye on? And are you still HODLing at this point, even the small amount of Bitcoin that Overstock has in comparison to some of the other whales out there?

JONATHAN JOHNSON: Yeah, we’re still holding, or HODLing, our Bitcoin. One thing I monitor is the amount of Bitcoin that’s spent on Overstock each week. It’s always been less than a percent, a very small percentage of our revenue. But during crypto winter, it’s really dried up to where almost no one is spending Bitcoin or crypto to buy goods on Overstock. So I think people are– traders will trade in and out. HODLers aren’t spending like they were when Bitcoin was at a higher price.

BRAD SMITH: If they stopped spending in Bitcoin, is that something that Overstock thinks about sunsetting at that point?

JONATHAN JOHNSON: No, it’s an easy program for us to keep. We like it. It keeps our toe in the water in this space. If it went to 0 for a long period of time, sure, we might turn it off. But I don’t see that in the future. I think Bitcoin’s taken a break. And as you know, more than cryptocurrency, we’re really bullish on blockchain technology. We have a portfolio of companies. We have a venture capital firm managing. We think tZERO, Bit, GrainChain. These blockchain technology companies have a bright, bright future.

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