Overstock.com’s auction chief launches
the site with a mix of vision and DIY chutzpah
By Mary Wagner
Determined do-it-yourselfers have been known to build anything from treehouses to airplanes, given the desire, a willingness to educate themselves about the task, and a certain fearlessness about plunging into the unknown.
The same formula works for building a business, too. That explains how Holly MacDonald-Korth, marketing analyst and self-educated IT whiz, engineered the launch of the recently-debuted Overstock Auctions at Overstock.com Inc. in less than a year.
‘I love auctions’
“I love auctions,” says MacDonald-Korth, who recently was appointed vice president of auctions at Overture after guiding auctions from their skunkworks beginnings in a corner of the company’s warehouse to fully-realized site that links to Overstock.com’s home page. With both enthusiasm and smarts, the 29-year-old MacDonald-Korth has been such a quick study that Overstock.com CEO Patrick Byrne has called her the company’s “secret weapon.” It’s one reason he recruited her from a job as analyst with the Federal Reserve when Overstock Auctions were still nothing more than an idea with no timeline attached.
It was a major segue from MacDonald-Korth’s original plan. “I thought I was going to work on Wall Street,” says the Detroit-area native, who graduated with a degree in business administration from the University of Miami in 1999 after taking time off to work with her father at his investment banking firm.
After interviewing with a few investment banks post-college, she instead opted for the Fed and a position with the agency’s Board of Governors. New York was still on MacDonald-Korth’s to-do list, however, and when she put out feelers for a new job more than a year later, she re-connected with Byrne. They’d met previously through friends while she was still at the University of Miami, once spending an evening at the unlikely venue of a Miami nightclub talking economics. After a day and half of interviews in New York, MacDonald-Korth was sold on Overstock, its business model and its prospects. Wall-Street’s loss was to be Overstock’s gain: MacDonald-Korth left Washington D.C. for Overstock’s Utah headquarters four years ago and has been there ever since.
A niche
Byrne’s frequent habit has been to hire people whom he believes will contribute, then let them find their own niche in the company, and MacDonald-Korth was no exception. “I was hired to come in and see where I fell,” she says. Because her job at the Fed had been data-intensive, she initially landed as an analyst in the marketing department, where she set about establishing marketing metrics for Overstock.com. In working with online analytics, she began to develop a knowledge of IT systems and eventually moved to Overstock’s IT department. Soon after she arrived there to solve a minor business problem handed off to IT to resolve, MacDonald-Korth personally wrote an application to fix it, using basic scripting language she’d learned at the Fed.
That got her a job offer within IT as an in-house programmer—if she’d teach herself the programming language Overstock used. Not a problem: “I went out and bought a book about it, read it, got one assignment and did it, and then I got more, and that’s how I became a programmer,” she says. Within a year, she took that knowledge back to the marketing department and a job as marketing director. Responsible for handling Overstock’s portal advertising deals, she managed the metrics, helping to figure how to make the ad programs profitable, and in the process helped move the operations of the marketing department onto a more scientific basis.
Overstock Auctions started to take shape in the late fall of 2003. A career path discussion with Byrne coincided with his sense that the time was right to move auctions at Overstock off the back burner. A regular eBay shopper and, like Byrne, an admirer of eBay’s business model, MacDonald-Korth saw opportunities to differentiate Overstock Auctions from eBay’s offer. She lobbied for and got the job of building the auction business from the ground up.
Quitting the marketing department, she set up shop with a handful of other Overstock staffers in a corner of the company’s warehouse. Familiar with online auctions as a buyer, her first priority in developing Overstock auctions was learning how to sell online. She and the team moved desks, shelves, and most of any merchandise returned to Overstock by customers to their warehouse office and quietly started selling the items on eBay, under MacDonald-Korth’s personal handle. “We started this business on eBay just like someone probably would start it in their garage. I really wanted to understand all the problems a small business would face,” she says.
Co-existence
Within four months, the experiment had created an eBay power seller and was bringing in revenues of about $30,000 per week. In February 2004, MacDonald-Korth and Sam Peterson, Overstock Auctions CTO, used that experience to begin writing the requirements for building the auction site. To expedite their time to market, they secured an outsourced development team for the initial programming, eventually hiring developers in house to help finish the job.
Overstock Auctions debuted in September, with the strategy of giving online buyers and sellers an alternative to the auction space’s dominant player. “Our goal is not to get people to leave eBay, but to look at us too,” says MacDonald-Korth. “Our other goal is to get people who haven’t been auction customers to become auction customers.”
To address both of those objectives, Overstock Auctions seeks to leverage synergies it believes it shares with eBay—a degree of overlap between online users who shop Overstock.com and those who shop eBay—while at the same time taking care to differentiate itself from eBay on a number of significant points. For example, it offers listing fees that it says are 30% lower than eBay’s, and it offers discounts on listing fees for volume sellers, which eBay does not.
Overstock Auctions also uses what MacDonald-Korth calls a “soft close,” designed to offset “sniping.” It’s a practice—often executed by software programs designed for the purpose—in which a buyer enters the last seconds of an auction to scoop up the item with a higher bid, leaving other bidders who’ve participated in the auction since its outset no time to respond. It’s a topic that has some eBay buyers grumbling, including MacDonald-Korth, who was once sniped out of a chandelier in the final 3 seconds of an auction after diligently watching and bidding for days. So it’s different at Overstock: if any bids are entered within the final 10 minutes of an auction, other bidders are e-mailed with the information and the auction is extended by another 10 minutes to give them an opportunity to place a new bid.
Social networking
Overstock auctions also incorporate a twist on social networking, with the idea that establishing a degree of personal connection between buyer and seller—even if one step removed—can increase confidence in the buying decision. The auction page offers users the opportunity to build personal networks from the site. Registered users can invite friends online to join their network. When viewing an auction listing, users who have established a personal network through the site can click a link to see whether the seller of the item is connected in any way to their personal network. Every auction transaction at Overstock also builds a business network, separate from the individual personal networks, that is visible to any auction user. Users can check the business network connections of any seller to see which auction users the seller has done business with, and how they rated the seller.
Industry observers say there are enough issues attached to eBay affecting both buyers and sellers to create an opportunity for auction platforms that offer an alternative. Scot Wingo, CEO of ChannelAdvisor Corp., which develops software that facilitates selling on eBay, sees one of the most powerful differentiators for Overstock Auctions as its decision to extend auctions in response to last-minute bids.
“As a buyer on eBay, your best strategy is to snipe; otherwise, you’re just competing with yourself. So the behavior of the eBay buyer has moved more toward sniping,” he says. But beyond creating a universe of disgruntled buyers aced out of a prize at the last moment, sniping also is bad for sellers, Wingo believes. “When bidders can no longer snipe, they are not gaming the system by waiting for the auction clock to run out. All the bids are out there, and the item clears at its real market value,” he says.
Wingo is less sure about the potential ability of social networking to drive auctions at Overstock, though if buying from a known entity and not from a stranger helps to reduce fraud, he says it could be a plus.
New kind of customer
In addition, Overstock faces a challenge in managing the economics of auctions, which differ from those that drive success in e-commerce, he contends. “For every item at an auction, you soak up a number of buyers. In e-commerce you typically have one buyer per item, so it’s different from a customer acquisition perspective. We’ll have to see how they navigate through that,” he says.
Perhaps more significant than any other measure, MacDonald-Korth says Overstock Auctions attempts to distinguish itself in terms of its culture, encouraging informal communication between the buying and selling community and the company as it builds itself. She’s regularly on the message boards, as is Byrne, to both receive and respond to community input on the auctions. Some user feedback already has resulted in changes, for instance, in how some categories are sorted. MacDonald-Korth says Overstock Auctions also has worked directly with sellers of one-of-a-kind items to promote them to the buyer audience, the recent auction for the 700th home run ball hit by San Francisco Giants player Barry Bonds being one example. “We want to keep that kind of flexibility alive,” says MacDonald-Korth, who contends the competition has gotten too big for many such personal interactions with users.
In fact, with a target goal of about 100,000 items on offer at any given time, Overstock Auctions is currently dwarfed by what’s available on eBay. But if it’s an organization’s size that helps shape its culture, that raises the obvious question: what happens to Overstock Auction’s’ desire for a flexible, more transparent exchange with its users as it gains traction and gets bigger?
That’s one of the challenges that promises to keep MacDonald-Korth, who’s demonstrated a willingness to switch jobs, departments and states for an interesting opportunity, firmly planted at the head of Overstock’s auction business for the foreseeable future. “I have no other plans than to grow Overstock Auctions into all that it can be,” she says. “I have at least another year’s worth of ideas for the Auctions to get off the ground.”
mary@verticalwebmedia.com
How eBay is evolving
its selling model
By Paul Demery
Just when some thought eBay—with more than 100 million registered users and over $30 billion in gross merchandise sales this year—may have reached a saturation point, it comes out with bold new ways to expand. It now offers a print catalog and lets buyers post listings of what they want.
Just in time for the start of the holiday shopping season, eBay launched its first catalog, Holiday 2004, on Nov. 15. With 116 products listed in 32 pages, the catalog was sent to millions of registered eBay users. The rationale for the catalog is that instead of relying on shoppers to initiate shopping by logging on and searching its site, eBay present them with ideas. The full-color catalog, co-produced with Sausalito, Calif.-based Haggin Marketing, showcases products that category managers have determined to be the hottest gift items—ranging from digital cameras to fashion apparel to Toyota Prius hybrid gas-electric cars. “These are the products we’ve projected to be in the highest demand this holiday season,” a spokesman says.
But there’s a catch: The products listed in the catalog aren’t necessarily available. “EBay doesn’t actually sell anything, so we can’t guarantee that catalog products will be on our site,” the spokesman says. “But we’re not worried about disgruntled customers, because with the breadth of items on eBay, we believe shoppers will find what they’re looking for.”
And to help shoppers find something—in effect, to have sellers find buyers—eBay also launched in the fall its Want It Now service. In its first week, more than 29,000 would-be buyers opted into the free service at WantItNow.eBay.com with lists of things they were looking to buy.
EBay registered sellers can freely browse the Want It Now listings and click a link to respond to a buyer. The seller is allowed to send only a 10-digit item number that the buyer can then input into the eBay search function to find the seller’s product page, a restriction that prevents the seller from using the Want It Now service to immediately cross-sell additional merchandise, eBay says.
