The Evolution Of Overstock.com (OSTK)

Overstock.com, Inc. OSTK has grown from a $2 million entity to a massive billion-dollar corporation. In 2009, the company earned $8 million in GAAP and $39 million in free cash flow. Patrick Byrne, Overstock.com's president and CEO, said that he's hoping for even better numbers this year. “We will know over the next few weeks,” he told Benzinga during a recent interview. “It's evolved and our supply chains have gotten much more sophisticated.” Byrne said that it all comes down to the same basic point: where can they cut costs out of the normal retail system and pass the savings onto consumers? “It's really just a huge exercise in trying to find inefficiencies and getting more and more efficient,” he said. Looking ahead, Overstock.com is doing whatever it can to expand. It recently re-launched the Club O program this year, which greatly differs from the typical retailer rewards. “This is a points program, and unlike the points programs where you get 200,000 points and you earn a cupcake or something, our points are dollars,” Byrne revealed. “You can join Club O for $20 and for that you get year-round free shipping and 5% cash back in your account.” To be clear, Byrne said that it's real cash you're earning. “You can spend it on our site, or you can actually get gift cards,” he said, noting that if you get $100 you can turn it into a gasoline gift card. “So it's real money,” Byrne continues. “And if you get our credit card, you get 8% cash back on all your purchases with us.” When it comes to e-commerce, Byrne estimates that it is going to grow about 10% above the rate of the economy. “Because,” he says, “it's just a better business model and a better customer experience than normal shopping.” As a further example, Byrne said that if the US economy grows 0% and retail grows 0%, then you can expect to see online growth at about 10%. “So if the US economy grows 4% you can expect to see online at about 14% or more,” he said. But America isn't the only country poised for e-commerce growth. “I think that there are emerging markets that are much more wired than one would have expected, like Brazil,” Byrne remarked. “The last I heard, South Korea was the most wired nation, and maybe Norway is second. We are not really at the forefront of any of that.” “The biggest constraint in online shopping in the developing world is the delivery systems rather than the access to computers,” Byrne continues. “There are not well developed Fed Ex routes in Tanzania. I think it's more a logistics issue, which will probably be solved in the near future, but the emerging markets more than likely will not go through the same stages as the developed world.” To hear more from the Overstock.com CEO – including his thoughts on Jim Cramer and the New York financial press – don't miss Benzinga's full interview with Patrick Byrne.