Overstock.com vs Amazon

Running head: OVERSTOCK.COM VS AMAZON.COM 1

Overstock.com vs Amazon.com

Introduction to IMC

August 31, 2010

OVERSTOCK.COM VS AMAZON.COM 2

Overstock.com vs Amazon.com

Is Amazon too big for their britches and is Overstock.com really stocked at all? These

are the questions that come to mind while sifting through the more than 28 million items that are

offered on Amazon.com or after repeatedly seeing “this item is out of stock” on Overstock.com.

As a consumer seeking to purchase a tent for an upcoming camping trip, both Amazon.com and

Overstock.com were analyzed to compare their operations and evaluate the purchasing

experience they offer to their customers. Additionally, the methods used by Amazon.com and

Overstock.com to build relationships with customers are examined to determine which

company’s methods are more effective.

A Comparison of Operations

Created in 1994, Amazon.com sought to be the largest online bookstore on the Internet.

Today Amazon.com offers a smorgasbord of products as they strive to fulfill their mission “to be

Earth's most customer-centric company where people can find and discover virtually anything

they want to buy online” (Amazon.com, 2010, p. 1). Amazon.com’s high value on convenience

and functionality of their website can be attributed to the $800 million that has been spent on

technology since 1997, as pointed out by Jeff Bezos, the founder of Amazon.com in a video

lecture posted on MIT World (MIT World [MIT], 2006). This is more than the amount spent on

marketing and warehousing however ease of use is crucial as customers cannot buy what they

cannot find. Physical distribution centers are also key to customer satisfaction, as customers

demand fast, dependable fulfillment of their orders. Though Amazon.com does house and

distribute many of the products sold on their website, they do also allow some third-party drop

shipping. According to their 2009 Annual Report, since 1997, the size of distribution centers for

Amazon.com has grown from 285,000 square feet to 17,587,000 square feet. This tremendous


increase is the result of Amazon.com expanding from their initial direct sales, to now allowing

affiliates and partners, both individuals and manufacturers, to sell products using the technically

advanced e-commerce technology developed by Amazon.com. To handle the fulfillment of

orders and provide superior customer service, Amazon.com currently employs 24,300 full and

part-time employees, as compared to 614 employees in 1997. Word of mouth, is primarily what

has propelled Amazon.com to be one of the top online e-commerce retailers, however substantial

marketing dollars are also spent on online advertising such as “Associates program, sponsored

search, portal advertising, and other initiatives….and to a lesser extent, traditional advertising”

(Amazon.com, 2009, p. 57). For Amazon.com growing the number of developers that use their

technology, is ultimately what will grow their customer base and their business, but do more

customers necessarily translate to happy, repeat customers?

Founded in 1999, Overstock.com whose mission is to provide “online shoppers the best

value and a superior customer service” (Overstock.com, n.d., p. 1), is able to retain more

customers with only a fraction of the manpower and distribution capacity of Amazon.com.

Staffed with approximately 1,300 employees, and distribution centers totaling 1,002,678 square

feet, Overstock.com continues to achieve their overall objective by beating out Amazon.com for

2 years in a row in the 2010 National Retail Federation (NRF) customer service rankings of all

U.S. retailers (which included all retail formats), placing #2 on the list of the 8,600 consumers

that were surveyed. Considering that prior to 2006, Overstock.com was not ranked by NRF

among the top 50, speaks wonders to the company’s ability to restructure and reposition

themselves as leaders in customer service (“PR Newswire“, 2010). Unlike Amazon.com,

Overstock.com uses a mix of traditional, offline mediums such as television, radio and print ads

in addition to non-traditional, on-line mediums such as “online campaigns…portals, keywords,


search engines, affiliate marketing programs, banners, e-mail and direct mail campaigns”

(“Overstock.com 2009 Annual Report“, 2009, p. 14). Whereas Amazon.com views technology

as the key to future success, Overstock.com believes that having the ability to employ and retain

the right people is what will ensure their future. The fact that in 2009, Overstock.com “granted a

total of 366,000 restricted stock units to employees” (“Annual Report“, 2009, p. 62) is evidence

of that philosophy. Overstock.com does acknowledge that technology or the lack thereof can be

detrimental to their business as shopping convenience and order fulfillment are factors that

consumers use rate their overall purchase experience, however they firmly believe that

employees trained to provide superior customer service are at the forefront of a company’s

success.

The Purchasing Experience

The technological infrastructure of Overstock.com is competitive with Amazon.com.

Upon entering the home page of both sites a number of basic similarities appear such as search

bars, my account, shopping cart, browse by department, the ability to sign-in, and your basic

about us, and privacy policy disclaimer. A number of differences were also recognized such as

with Amazon.com, advertisements cluttered the side bars, and selling/making money with

Amazon buttons and links were prominently displayed. Amazon.com’s home page is clearly not

just for the everyday consumer seeking to purchase products, but also targets businesses,

developers and advertisers. A large static image of a Kindle, the featured item, dominates the

home page boasting of Amazon.com’s latest business venture. Lastly, the lack of a “contact us”

link or button with a customer service phone number, indirectly informs it consumers that if you

need to contact us for any reason, good luck. The home page of Overstock.com was definitely

geared more towards the consumer with invitations to join their O rewards club, sweepstakes,


discounts through O-mail, mobile phone applications, social-networking through Facebook and

Twitter, a psychology of color button, multiple featured products, hot items, clearance items,

redline deals, and more deals invite and entice consumer to spend time on their site because there

is sure to be something there for them. Most impressive is the “online help center” and “contact

customer service” links which provide consumers with the ability to call, e-mail or engage in

real-time live chats. Additionally, Overstock.com provides links to their on-line community and

the ability to bid on products. Lastly, in addition to shopping for regular, low to mid-range priced

products on Overstock.com, consumers can also purchase luxury or high-end priced products

such as cars and real estate.

By simply typing the word “tent” into the search field, both sites sorted through their vast

inventories and populated the screen with the results. The search results for Amazon.com were

vast, 1,182 to be exact. However, the site allowed the consumer to further define the search by

price, tent capacity, brand, customer reviews, discounts ranging from 10 to 70 percent and

sellers. Additionally, shipping price and estimated arrival dates were provided, along with a

display of final purchases made by customers with similar searches. Once the exact item of

interest was found, a page with a detailed product description and features, stock availability,

other suggested items for purchase, product ads from external websites, customer reviews and

links to other sponsored sites selling similar products, populated the page. For a consumer not

familiar with some of the third-party sellers listed, shopping on Amazon.com could lead to fear

and uncertainty. Additionally, with the product ads from external websites, links to sponsor sites

for similar products, and the vast selection to choose from, a simple purchase can turn into a

timely research project frustrating consumers and leading them to ultimately look elsewhere.

With Overstock.com the search results were much easier. A generic search of the word “tent”


resulted in 259 matches. Consumers were similarly provided with a method to further define the

search result by price, brand, clearance, new products, and best sellers. By clicking on an item of

interest, consumers are then provided with an in-depth product description, a star rating, a

savings comparison, shipping price and information, and payment options. Overall

Overstock.com provides a more simplified purchasing experience, by focusing primarily on

providing the consumer with the product they seek, at a low price, minus the clutter.

As a consumer, the problem encountered with attempting to find similar products on each

of the websites was that though Amazon.com offered a vast selection, it was too time-consuming

too sift through all of the products to feel assured that the right product was purchased. With

Overstock.com because they are a close-out liquidator, often times a particular product was out

of stock, resulting in continued searching for a less preferred product.

Building Relationships

As more companies have come to realize that it is “more cost effective to retain

customers than to acquire new ones” (Belch & Belch, 2009, p. 9), building relationships with

customers is important for future profits. Overstock.com does a better job at building a solid

customer relationship by offering more interaction on their website. For example, their search

bar prompts “What would you like to save on today.” At the top of their home page, a link to

“Free Shipping on Your First Order” taunts instant savings. Likewise, “What do you think of our

new look,” solicits feedback from consumers while, a video about the new features is available

for viewing. From their O rewards club, to their sweepstakes, and social networking sites,

Overstock.com invites consumers to do more than shop but rather become a member of their

community. When clicking on the “community” link at the top of the home page, consumers are

welcomed with “we’re glad you’re here” and invited to “become a part of the Overstock.com


family,” to partake in forum discussions, blogs, YouTube videos, and mingle with Facebook and

Twitter.

Amazon.com on the other hand, appears more interested in building a business

relationship from afar rather than an up close and personal customer relationship. By not

providing easy to find phone numbers that enable customers to readily reach a live person, to

their random ad banners, invitations to sell, and cluttered product pages, customers are left

frustrated to navigate aimlessly around Amazon.com fending for themselves. Overstock.com

believes that their call center makes the difference as “every customer interaction can be seized

as an opportunity to build trust and create advocates” (“Business Wire“, 2009, p. 1).

Conclusion

Amazon.com is no doubt much larger than Overstock.com with more customers, more

products and more revenue, but have they gotten too big to meet the relationship needs of their

customers? Click after click, consumers are deprived of the humanistic qualities that most

companies such as Overstock.com seek to provide customers. The brick-and-mortar online

buying experience at Amazon.com is more like a “Do-it-yourself” how-to website stocked with

detailed instructions on how to sell your products on a fast-growing, capitalistic online platform,

where low prices, reliable delivery, and obscure and hard-to-find items (Amazon.com, 2009)

brings pride. Overstock.com continually seeks to expand their “customer service capabilities to

better serve our customers’ needs” (“Overstock.com 2009 Annual Report“, 2009, p. 21). The

minor annoyance that sometimes they do run out of stock is overlooked by their competitive

pricing and superior customer service. This is what customers look for, and this is what keeps

customers coming back. When Overstock.com says they are available 24 hours a day, 7 days a

week, they don’t just mean online.


References

Amazon.com. (2009). 2009 Amazon.com annual report. Retrieved August 31, 2010, from

http://phx.corporate-ir.net/External.File?

item=UGFyZW50SUQ9Mzc2NjQyfENoaWxkSUQ9Mzc1Mjc3fFR5cGU9MQ==&t=1

Amazon.com. (2010). Media kits: Overview. Retrieved August 31, 2010, from

http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-Mediakit

Belch, G. E., & Belch, M. A. (2009). Advertising and promotion: An integrated marketing

communications perspective (8th ed.). New York, NY: McGraw-Hill /Irwin.

MIT World . (Producer). (2006). Opening keynote and keynote interview with jeff bezos [on-

line]. Available from http://mitworld.mit.edu/video/417.

Media kits: Overview. (2010). Retrieved August 31, 2010, from

http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-Mediakit

Overstock.com 10-K annual report: filed 3/31/2010. (2009). Retrieved August 31, 2010, from

http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-

sec&seccat01.1_rs=21&seccat01.1_rc=10

Overstock.com maintains #2 rank in customer service among all U.S retailers, trailing only to

L.L. Bean but besting Zappos and Amazon. (2010, January 13). PR Newswire. Retrieved

from http://investors.overstock.com/phoenix.zhtml?c=131091&p=irol-

newsArticle&ID=1374619&highlight=

Overstock.com, Comcast and ING Direct share ways to leverage customer experience for growth

and a strengthened front line at the call center summit. (2009, October 29). Business

Wire. Retrieved from


http://www.businesswire.com/news/home/20091029005913/en/Overstock.com-Comcast-

ING-Direct-Share-Ways-Leverage

Overstock.com. (n.d.). Who we are. Retrieved August 31, 2010, from

http://www.overstock.com/about?TID=FOOT:AboutOverstock

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Overstock.com vs Amazon