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Overstock.com’s Club O rewards program bolsters Q3 results

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Overstock.com’s growing Club O rewards program helped to drive 18% revenue growth and $3.5 million in net income for the third quarter ended Sept. 30.

"In Club O, we built what we believe is the best, most generous loyalty program on the Internet, with free shipping, 5-25% rewards on products, and books priced at Amazon prices but with 15% rewards, all for $19.95 per year,” said chairman and CEO Patrick Byrne. “Our Club O customers are rewarding us with their business. In addition, with the opening of our new warehouse in Pennsylvania, we are now providing even faster delivery to our customers on the east coast."

The company reported total net revenue of $301.4 million for the quarter, an 18% increase from $255.4 million for the prior-year quarter. The growth in net revenue was primarily due to a 16% increase in average order size, from $147 in last year’s quarter to $170 in this quarter, coupled with a 2% increase in orders. Net income was $3.5 million for the quarter.

The company’s gross profit for the quarter was $59.2 million, a 27% jump from $46.5 million for the prior-year quarter, representing 19.6% of total net revenue for the period. The increase in gross profit was primarily due to higher revenue and a shift in product sales mix into higher margin home and garden products.

During this year’s third quarter, Google tested and later implemented changes to its search engine algorithms which reduced Overstock.com’s ranking in certain Google search results and slowed its revenue growth in the natural search channel. While the company worked on adapting to Google's changes, it emphasized other marketing channels such as sponsored search, which experienced higher revenue growth but with higher marketing expenses as a percentage of revenue than for natural search.

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