Overstock.com has grown significantly from its original offerings to include cars, auctions and real estate. What is your process of developing new ideas for the company, and how do you remain focused on your core competencies and mission?
Some of the ideas are not testable — you either do them or not do them. What we’ve learned is we don’t want to sink $10 million into an idea without knowing whether it will work or not. We try to find inexpensive ways to get new ideas live and see if our customer base is attracted and wants to use them.
What we’ve discovered is that as long as we stay within our fairway — our customers are looking for discount shopping, to save money and for us to wrap that up with exceptional customer service — adding services to that profile works for us. The homes and cars fit our shopper profile — value shoppers — and seem to work.
There are other things we’ve tried to do that didn’t fit. Those were stillborn. Now, as we do new things and develop new departments, we test by getting a small number of products out and then see how our customers react to it.
You have millions of loyal customers who come back time and time again. What are some of the lessons you’ve learned on how to build customer loyalty?
We have a saying: The customer isn’t always right, but the customer always deserves justice. The truth is there are people out there who buy a diamond ring from you, take it, pop out the diamond and slip in a cubic zirconium and send it back to you. But the customer deserves justice.
It begins with the customer service function and having the right people there. They can’t be bureaucratic. They can’t view things in black or white. They have to understand that every situation is different. But on the other hand, they can’t be pushovers. They have to always be doing what’s fair by the customer. If they do that, customers recognize that.
American Express and the National Retail Federation conduct a poll every year. A few years ago we were No. 4; now, we’re No. 2. People name us one of the best for customer service, ahead of Zappos.com (No. 3) and Amazon.com (No. 4). So yes, you have to have the pricing right. And yes, you have to deliver. But the mechanics have to be in place. Then, you have to smother it in customer service that operates by a real theory of justice. And you can only do that by having the right people running customer service.
Customer service isn’t some backroom cost center. In fact, when we teach newcomers to our company the business, we explain that our company is like a Grecian temple. The pillars are all these different departments — marketing, branding, buying, technology — but the roof of the temple is customer service. The customer service department is sort of the boss to the entire company.
That’s the quickest way to make your company customer-centric. First, put the right people in charge of customer service; then make it the boss. It changes how you view the customer.
Another one of your passions is education. Why is education such an important part of success?
Our human capital development side is critical. I used to look at HR as not a function I spent a lot of time thinking about. That was a big mistake. At Apple, the head of HR reports directly to Steve Jobs. I thought about that. Our payroll is at $45 million. If you rented a machine for $45 million a year, you would certainly spend a couple million [dollars] tweaking it, trimming it and making sure you were getting the best.
I hired Steve Tryon a few years ago and he developed ‘O’ University. There are 500 or 600 courses that are online and there’s a job matrix set up. It’s really second to none. For every job in the company, there is a specific set of courses you have to take. Some of the courses are general, like business math and basic accounting. Some are more advanced, like negotiating skills. We’ve developed a course for every job in the company, with certifications. We tie raises to people working through the course material. A course may just be an hour, but it has a test at the end. We have an unbelievable human capital development program. It’s been a real key to our success. Right now, we’re spending $2 million or more a year in this area.
You’re well-known for your personal and corporate philanthropy. What drives that philosophy?
A lot of CEOs are Republicans and talk about small government. They don’t want government to do this or that. As a leader, you’re also aware of a lot of problems in society. So it’s hypocritical to argue that government shouldn’t be working to improve things and to simultaneously argue that and not do things about it yourself. If you’re in the camp of government shouldn’t be big, you have to roll up your own sleeves and help fix things yourself. To me, that’s education and corruption in our capital markets. If we can focus on those two areas, that will determine the health of our country.
HOW TO REACH: Overstock.com, www.overstock.com
Dustin S. Klein is executive editor of Smart Business Network. Reach him at [email protected].
