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Overstock.Com Case

In: Business and Management

Submitted By Rhoads77
Words 1006
Pages 5
Eric Rhoads
Overstock.com -
Competition from substitutes is high in a .com business model. It limits the margins you can charge as it is easy to just go to other websites from your own couch.
Rivalry between established competitors is a real concern in the online retailer business. Overstock has Amazon and Ebay as direct competitors. Amazon focuses more on new merchandise but if they see great sales by Overstock they can use their current supply chain to start delivering the “overstocked” items with little core change to their business. Ebay is focused more on used items and would have a harder time adjusting its business model to compete with Overstock make parallel.
Threat of entry is also a concern. At this time (2004), internet stocks are trading at a premium and capital can be collected from venture capitalists without the normal scrutiny of having to show profits. They also do not require a huge capital investment in a storefront.
The buyer’s bargaining power is on the lower side because they do not buy at big volumes but “bargain” by substitutes (see a).
The supplier’s bargaining is what overstock.com uses as its competitive advantage. The suppliers want to move the inventory as fast as possible and are willing to take a loss just to get some return on the inventory.
The long-term structure of internet retailing has a hard time showing showing a constant profit. The margins are very small as the competition is intense and the bar of entry is low. It is amplified by the business model of Overstock where they are offering more savings than normal (targeting bargain hunters).
2. Overstock’s main strategy for creating a competitive advantage is two-fold:
Create a one-stop shop that simplifies the liquidation of over-produced products. This helps them prevent channel conflict (selling discount products through regular channels), single point of…...

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