Overstock.com Targets Small Businesses with B2B Site

Internet liquidator Overstock.com on Tuesday launched a new business-to-business (B2B) site, OverstockB2B.com, aimed at helping small business owners buy liquidated merchandise at deep discounts.

According to Overstock, traditional liquidation channels squeeze out mom-and-pop operations with limited budgets and shelf space, because most manufacturers prefer to sell their excess inventory in large volume. OverstockB2B overcomes this difficulty by purchasing the merchandise itself and then reselling it to small businesses.

Overstock chief executive officer Patrick Byrne told the E-Commerce Times that it was a "no-brainer" for Overstock to open a B2B branch, because 5 percent to 10 percent of Overstock customers were small businesses.

Byrne said that the OverstockB2B has been open in a "soft launch" phase for about two weeks and was already seeing repeat customers.

Keeping Shelves Stocked

Gartner senior research analyst Gale Daikoku told the E-Commerce Times that OverstockB2B would help fill a need for small businesses, at least in the short-term.

"Mom-and-pops are fighting for their life to defend their businesses against the Wal-Marts and the Targets stealing their customers over margins," Daikoku said. "They need reliable sources that they can leverage that will help them keep their shelves full and grow their business."

Daikoku added: "Even mom-and-pops must have ongoing trusted relationships they can turn to which translate into a recurring source for goods. In this case, OverstockB2B is providing an opportunity to find liquidated bargains -- but that will not necessarily translate into a long-term channel for sourcing goods."

OverstockB2B also faces competition, according to Daikoku, from traditional liquidators and online operations such as RetailExchange.com and even online auction giant eBay.

Bulk Discounts

Merchandise at OverstockB2B, according to the company, is offered at discounts of up to 40 percent off the wholesale price and up to 75 percent off the manufacturer's suggested retail price (MSRP).

Businesses shopping at OverstockB2B will have access to the same merchandise available to consumers at Overstock. Those firms purchasing one item will pay the same price as consumers, but businesses buying in bulk can save significantly.

For example, an American Tourister overnight bag with a retail value of US$169 will cost consumers shopping at Overstock $33.85. However, businesses purchasing 10 or more will pay $15.90 each.

OverstockB2B is not offering its corporate customers the option of using purchase orders to purchase goods on credit. All orders must be prepaid with a credit card, a bank or wire transfer, or a check. Byrne said that in the future, as OverstockB2B builds relationships with repeat customers, it might establish a credit arm.

Testing the B2B Waters

Overstock is not the first retailer to venture into the B2B waters. In April, brick-and-click retailer KB Toys opened a B2B site, KBwholesale.com, to focus on "the underserved market for wholesale and closeout toys."

Even mighty Amazon.com (Nasdaq: AMZN) is preparing to take on the wholesale market. The e-tailer announced earlier this month that it plans to roll out an institutional sales program during the second half of 2001 that will allow consumers to make purchases on credit.

Institutions and businesses will be able to set up Amazon accounts with multiple buyers and will be able to access order histories by purchaser.