Salt Lake City-based e-commerce retailer Overstock.com launched a new effort this week to help small and minority-owned businesses sell their goods online. Through the Main Street Revolution Initiative, Overstock plans to provide small companies with new ways to market and distribute their products online.
I caught up with Overstock's CEO Patrick Byrne to talk about the initiative and what benefits a digital retailer like Overstock can bring to small businesses across the country.
Why did you decide to start Main Street Revolution?
I was in Tulsa, Oklahoma a few months ago, visiting with a few black ministers and black business people and the idea came to me. You've got all of these wonderful small businesses. They generally serve their local market. I realized this should be getting online. We can take their original products and help them reach a national audience. There is a market more and more for people talking and acting locally. There are all kinds of non-food products too that are made by small businesses. So it's possible for someone in Dubuque, Iowa to shop locally, but be buying the work of a craftsman in Vermont. By getting that craftsman's work up on our site, you're still achieving the same effect. The real place where jobs are created in America is small business. That's where 80% of the private sector new jobs get created.
How much of a departure from Overstock's usual model is this?
We've had lots of small business suppliers before but we've never had a team in the company whose job it was to hook up with small businesses. The goal is to find people with five or fewer employees and minority owned businesses. But that isn't a cut off. We're open to working with any small business, even if it has more than five employees.
Two weeks ago I gave a talk at a Hispanic Chambers of Commerce. The response has been fantastic. The Chambers of Commerce have been ecstatic, I think they're going to do a lot of heavy lifting for us.
What does a small business get from partnering with Overstock?
Well, if you have your own website, there are a lot of things you have to do. You have to advertise your website, and that creates a lot of cost. You have to do natural search if you want the search engines to find it. We've worked hard to make sure our site is scanned very well by Google and Microsoft and Yahoo. Generally better than a small guy is going to be able to do by himself.
Our partners are getting all the benefits of our network. They don't have to deal with the cost of maintaining their website, the supply chain, credit card customer service, or return handling. We do all that for our customers. Our partners just focus on making their products and drop shipping them out. We're handling the whole front end. It's unrealistic to expect a small chair manufacturer in Vermont, let's say, to do all the technical things that we're doing on behalf of our suppliers.
On the technology side, there are simple integrations that any mom and pop can do. There are also other integrations for people who sell mass amounts of products. It's super automated and very simple for people to get up on our site. We have whole teams of people who hold the hand of our suppliers. It takes about an hour to get them comfortable and using our site.
How is it different than working with a site like Etsy?
One difference is our volume. We already have a mass consumer audience. We're a billion dollar company. We have anywhere from 12 to 15 million people a month coming here. Some of the products might be similar, but ours probably have a wider breadth. Etsy is more of a marketplace. Ours is not so much of a marketplace, the consumer is buying from us.
What's the business model for this? Will businesses pay Overstock to participate?
We have a spread we negotiate. It varies by product and category. We don't do a standard 15% or 20% commission. It's all negotiated individually. It's generally in the range of a 20% markup, but it varies by the type of product.
The buyers negotiate. For example, the T-shirts we're selling with urban themes. If those are available at $40, we don't want him putting them up on our site for $100 and hoping the vendor gets an occasional juicy sale. Our buyers are going to shop and make sure they're good prices. The partner agrees they will drop ship the product anywhere in the US for such and such a price. They build into it their own cost of handling it. We can tell them where their average shipment is going to go. We're adding a small layer to that. But to get on our site, the deals have to be good deals.
How do you guarantee Overstock's low prices on the scale that small businesses work with?
It depends. If they're making the things, they can give good value. If they're a mom and pop retailer who is buying goods in China and bringing it over to sell it, they're probably not going to be able to compete with our supply chain or the supply chain of other suppliers.
It's really more for the American small businesses that are making something. It's more for that than a boutique that's reselling things.
Why are you getting into local now?
The idea came two months ago. We've already developed a special store called World Stock that works with artisans in the developing world. It has about 10,000 people and 50 countries. I think it's probably the biggest fair trade organization in the US. It really got me thinking a few months ago that these small businesses should have a national audience.
I think it can really turn around some pernicious trends. There's been all this talk since The Long Tail came out about long tail consumption. There's also a long tail in the production environment. Very small, niche producers of things haven't been able to get their products in front of mass audiences, because of the cost built into the mass distribution model. The internet lets that be solved. You can solve it by creating your own website, but ultimately, we're doing that plus handling a lot of other aspects and buildling the brand that will draw customers to your product. We're lowering the bar you have to get over to start playing in this field.
What are your plans over the next year with the program?
My first milestone is 100 partners. I'd like to get 100 new partners as soon as possible. I thought it would take a few months. I think it will happen more quickly. We already have a couple people like this. When we get some more, we're going to create the site.