Friday, March 18, 2005

Overstocked and Underauctioned, Part One

On February 20th, Overstock.com CEO Patrick Byrne posted a bold message on the Overstock auction message board.

"THE MOMENT TO STRIKE," Bryne's message began, noting the February 18 eBay fee increases and the opportunities these offered to grow Overstock.com listings. Bryne noted that Overstock's auction listings had soared from 50,000 to 90,000 in just the two days since eBay shot itself in the foot by annoying its members and doing exactly what low-cost retail operators never do: raise prices.

Since a full month has now elapsed since both the eBay move and Byrne's clarion call to his auction members, we now have some data to assess the impact of Byrne's call to action, and in ensuing posts will take a closer look at the results.

Suffice it to say, it does not appear at this point that eBay has anything to worry about from Overstock.com Auctions.

Jeff Matthews
I'm Not Making This Up

35 comments:

Its_strange said...

How come i get the feeling everyone knows who Bob really is but me ?

bob obrien said...
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Its_strange said...
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mfairview said...

Wow Jeff, you're averaging 1 OSTK slam for every 3 articles. Did Byrne kick your ass in a previous life? Or are you now on the RP payroll like your good buddy lapdog Herb. Hope you were able to negotiate for more vacation time or a better pay package. You seem to be working harder at it.

mfairview said...

By the way Jeff, it's 3/19/05. Do you currently hold a position in OSTK at this time (either long or short?)

bob obrien said...
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Its_strange said...

All this is going to happen while you remain anonymous ? Sorry Bob that doesn't fly . And i can't imagine the powers that be acting on the word of someone who refuses to reveal his identity .

"Enjoy the show, I guarantee you will never see anything else like this during your lifetime" I'm waiting Bob. Perhaps we can work a compromise. Why don't you have your lawyer pal go public with what you have. Put a face to the claims. Thats a start . I would think the gov would be more willing to listen if it had a face or contact .

Its_strange said...

who are you defrauding ? Well Bob i think yoou and others are trying to orchestrate a stock squeeze in NFI and OSTK and perhaps others . And you will be lone gone while your flock ends up holding the bag. I think you are running a pump and dump operation. I think thats the reason you will not reveal who you are

Its_strange said...
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Its_strange said...
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Its_strange said...
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bob obrien said...
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Its_strange said...

Funny thing grasshopper , i noticed a NFI post on Yahoo pointing to gay man and that being alright . But enough of that nonsense .

This naked shorting / hedge fund scam will become a show of a lifetime while the chief accuser remains anonymous ? While the chief accuser is long the stocks thought to be manipulated ? While the chief accuser offers tips and advise on the message boards and on his website. Well Bob i will be watching it all unfold . And i will be also watching NFI's and OSTK business model unfold

Ed said...

Non sequitur: Do you think we would meaningfully reduce the trade deficit if we could eliminate piracy of software and movie - our 2 most competitive global exports?

bob obrien said...
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Its_strange said...

When Bryne said the diamond deal was a " steal of a lifetime" did he mean no such deals are in the future ?

Why did NFI miss thier earnings estimate last quarter ? Does that explain why your view that the stock would be $120 by now was so wrong ?

Its_strange said...

Bryne is charismatic and a visionary ? Well you know the guy, i don't . But whats charismatic about calling reporters liars and sending bizarre emails ? Whats visionary about starting another internet retailor ?

Jeff Matthews said...

Bob O'Brien has been removed until he cleans up his act.

There is no cursing on this page. If you can't say what you have to say without using the 'f' word, you will not say it at all.

So, for now, "X-Files" O'Brien will not be saying it.

Jeff Matthews
I Am Not Making This Up

jfichthorn said...

So I'm surfing the overstock auction boards out of boredom. And what is the most obvious feature? 8 out of 10 items listed have 0 bids.

Jeff Matthews said...

We have a winner!

"jfichthorn" has hit one of the Overstock.com coffin-nails squarely on its head: a majority of the items listed on the auction site have no more than 1 bid.

I will flesh this point out in Part Two of "Overstocked and Underauctioned," coming tomorrow, but in the meantime, well done. A poster has finally published a certifiable fact.

That is what this site is about, and that is why "X-Files" O'Brien has been disappeared.

Jeff Matthews
I'm Not Making This Up

Its_strange said...

Why does OSTK keep its auctions up for 10 days ? Ebay knows the business and they keep the auctions up for 7 days . What does OSTK think it will benefit by this ?

BelowTheCrowd said...

Actually, eBay allows you to leave items up for anywhere between 1 and 10 days. 7 days is a "standard" auction, and in my experience 5 day auctions are the second most common. 10 day auctions are possible, but eBay charges you an extra fee for having it listed the extra time. Theory is that the longer it's out there, the greater the chance of it getting bidded up, but at a certain point there have got to be diminishing returns. Many people won't bother to bid more than a few days out, and some (like myself) make a point of trying to check in during the last five minutes, or even seconds.

Overstock probably are portraying this as an "advantage." After all, eBay charges extra for the 10 day listing, and they give it to you free.

SteveF said...
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SteveF said...

Here's what's really going on with Bob O'Brien's posts: Jeff needs to censor dissenting views. I read them over the weekend and there was nothing offensive or bad about them. Rather than changing one word in one post that as far as I can tell was used jokingly for effect, Jeff has elected to delete all Bob's posts - a handy way of silencing statements that show you to be an imbecile.

I challenge Jeff to reinstate those posts and put an asterisk through a letter of the offending word.

That won't happen. Because Jeff doesn't want you to see how much of this he is making up. And Bob nails the issues, which Jeff really doesn't like one bit.

Jeff Matthews said...

Unfortunately, "stevef" doesn't get it any better than "Bob O'Brien" didn't get it.

This is not a Yahoo message board with losers swapping misinformation along with the 'f' word. If any such losers want to curse on the web--jokingly or otherwise--they are quite free to do it elsewhere.

Therefore, I will not be "asterisking" anybody's posts here. My job is to provide information and a forum for informed commentary, not editing for uninformed message board refugees.

"Bob O'Brien" is free to post here when he meets the simple standards of this site. He will not be reducing those standards for others.

Jeff Matthews
I Am Not Making This Up

mfairview said...

Hey Jeff, can you post the list of offensive words so we're aware what they are so we don't pi** you off? (good thing I caught that and went back to clean it up!)

"My job is to provide information and a forum for informed commentary, not editing for uninformed message board refugees."

What absolute drivel. Bob's post are informative; just counter to your beliefs (God forbid someone disagrees with you here.) If you want to censor "uninformative" garbage, try looking at "its_strange" constant ramblings. How many times and how many different ways can he ask "Who are you bob? Are you Davidson?"? He obviously enjoy clogging up the board with that tired angle again and again and that seems to be OK by you. Very informative and educational indeed.

btw- it's 3/21/05. Do you currently hold a position in OSTK at this time (either long or short?)

milchmaid said...

Finally, there are some people who aren't afraid of Wall Street. Dr Byrne and Bob OBrien were smart enough to figure out about the naked shorting, the abuses of the brokerages, hedge funds and they couldn't be bought off. The DTCC is counterfeiting shares and the SEC is telling us this is true with the REGSHO list. Wake up and smell the coffee. If you don't stick up for the companies that are being abused, your next investment will be the one that gets driven into the ground. Senator Bennett doesn't think any of this is a laughing matter. By erasing Bob OBrien's comments, you look like you approve of the illegal activities and/or you are intimidated by someone who is a lot smarter than you are.

nabrum said...

Hey Jeff. Why did you delete all the responses? What are you afaid of????

BelowTheCrowd said...

What do any of the comments here (other than mine and a couple of others) have ANYTHING to do with the topic of the original post -- specifically the apparent slowness in OSTK's auction business?

Were this my blog I'd have deleted all the responses that had nothing to do with the subject under discussion. I'd applaud efforts to keep discussions on topic. There have been plenty of posts here about naked shorting, Bob O, etc. Maybe keep the comments in the right place?

SteveF said...

My observation is that one of, what, 5 posts you deleted had "bad" language. I note that the post immediately after the first one you deleted, still present, by its_strange, has the offensive word "bug*uck crazy" in it with an asterisk. I just thought that you could do the same so everyone could enjoy the benefits of free speech. I recall that none of the other posts had objectionable language, so the truth is you don't like the information in Obrians posts. I can see why, they mostly proved your whole rationale to be in error. So away they go. You do your readers a disservice by stooping to this petty a level, but it sounds like they mostly understand what it is your up to, so you lose the credibility here. Obrian touched a raw nerve about your objectives and the vapidness of your position. No wonder you deleted him. Am I next? Is anyone that proves you to be wrong next?

mfairview said...

"What do any of the comments here (other than mine and a couple of others) have ANYTHING to do with the topic of the original post -- specifically the apparent slowness in OSTK's auction business?"

How's this.. I just checked, they currently have 145,362 auctions. This is up about 115k since I started tracking them a month ago (300% rise). Admittedly small potatoes to Ebay, but here's the kicker. They have SEVERAL revenue streams (Store, BMV, Travel, etc.) and undoubtedly growing. I think they plunked all of 2M down to get auctions up and running. AND they just turned profitable this past Quarter after several years in the biz. Jeff's a bit short-sighted (to say it nicely) to focus on bits and pieces of the company in his attempt to discredit them across several blogs (Am I the only one who thinks he's a bit obsessive here?)

Here's more... The CEO (Byrne) doesn't take a salary, he recently refused a bonus due to him, and has never sold 1 share of OSTK. In fact, he's spent SEVERAL millions of dollars of his own money to purchase shares on the open market. And Jeff calls him a scam artist? If he is, then I admit that he's got me fooled.

On top of it all, read the story on World Stock (another Byrne's creation). It's inspiring to say the least: http://www.overstock.com/cgi-bin/d2.cgi?SEC_IID=5083&PAGE=STATICPAGE&PAGE_ID=1328&TID=WORLDSTORE20041103&IID=BOTTOMLINK:8
(pasted at the end of this posting)

Know this: There are 3 sides to every story. His side, her side, and the truth. Don't just take my word for it, and certainly Jeff's words is worth as much as the ether it's printed on (his actions are even worth less). Do your own DD.

----

Since 1983 I have spent a fair bit of my life in China, Thailand, Cambodia, Vietnam, and the Levant. Like many visiting such places, I was overwhelmed by the destitution I saw there. Perhaps as a result, my graduate studies centered on philosophy and development theory, yet over time I grew skeptical of the advice the West has offered the world’s poor for the past fifty years, and of the bromides of the World Bank, the IMF, NGOs, and charities.

Years after I left such academic matters behind me to become an investor, the opportunity arose to create an Internet outlet store. From the start we designed Overstock with one mission: to create an e-retailer optimized for liquidation: that is, to work within fractured supply channels of numerous, scattered vendors, scooping up products in lots too small to be moved efficiently through mass retail.

In 2001 I took a break from Overstock to visit India and Southeast Asia. Unlike an earlier visit to Cambodia in the 1980s, this time I was able to travel widely by motorcycle. As I went from village to village, I came across small groups of artisans making first-rate silver and woodwork, table settings, silks, and home d├ęcor products. Some of these cooperatives included the disabled, many of whom had lost limbs to landmines, or women with no legitimate job opportunities at all. One afternoon I crashed my motorcycle on a dirt path and lay tolerably banged up in the tropical sun, watching farmers work their fields. Some children took me to their village, and that night, sitting on a cot in the dark, perhaps under the influence of too much of their painkiller, I reflected on what I had seen. I remembered a Hanoi nail factory I had visited in 1988, staffed and managed almost entirely by the blind (to this day, one of the most incredible things I ever witnessed). I thought about the famous Grameen Bank of Bangladesh, a pioneer in micro-credit for village entrepreneurs (often women) who take loans to buy small capital goods, such as sewing machines, to support themselves. I thought about similar small cooperatives of artisans in Lebanon, Palestine, and Peru, which I had either seen or read about.

I lay there speculating from the economic and business perspectives I lacked as a youth, and saw a common thread running through these communities, a thread I had previously missed. They have in common, of course, their poverty, coupled with a desire for work, self-respect, and the chance to provide for their families. Yet beyond their disabilities, obstacles, and lack of capital, a larger problem confronts them all: their output comes into the world through highly fractured supply channels of numerous, scattered producers, in lots too small to be moved efficiently through the mechanisms of mass retail.

Finally it was too obvious even for me to miss! The central problem of artisan production and liquidation are indistinguishable: How does one marry scattered small-lot production to mass demand? Because their central problem is the same, the structure of the liquidation market is precisely that of the market for artisans’ goods. And by one of those weird coincidences that seem to govern my life, I had spent two years building the most effective mechanism ever created for marrying scattered supply to mass demand: Overstock.com.
Internet Retailing Meets Artisans: Missions and Dilemmas

Upon returning to the States from Cambodia, I formulated plans for Worldstock, a store within Overstock devoted solely to carrying the works of artisans, especially disadvantaged artisans, and selling them as inexpensively as possible so as to maximize the amount of return for them. The first questions that needed to be addressed were, of course, ethical.

One obvious question concerns child labor. The essence of trade is that it is conducted by free and rational agents, yet children are not “free and rational” in any relevant sense. Children working in factories cannot meaningfully choose the condition of their employment, and so their output is morally tainted. (I decided, however, that children might legitimately help their parents in informal, cottage-industry settings, if their work were limited and they go to school.)

Beyond this, however, I found that I was stepping onto a battlefield strewn with landmines. For example, how can an American liquidator negotiate fairly with a supplier from a poor country in a context of asymmetric power, information, and capital? Would providing new economic opportunities to traditional cultures reinforce entrenched patterns of the oppression of women? Should trade be conducted with people working in countries whose governments are guilty of human rights violations, or would that support tyranny?

Over time I arrived at the best set of principles I could formulate, based on my own personal observations, education, and experience. I chose them by reflecting on the products with which I hope to build Worldstock: goods whose purchase would support women, disabled people, and traditional artisans such as Native Americans, or other disadvantaged people, goods produced through micro-credit, and goods whose production or consumption is carried out in an environmentally sound manner. The common denominator of all our Worldstock products, I decided, would be sustainability: the businesses we will support are those that sustain rather than use up people, cultures, and natural resources.
Economic Sustainability

One way goods can be socially responsible is by offering sustainable livelihoods to disadvantaged people: for example, casualties of war (such as land-mine victims and widows); aboriginals and traditional peoples bypassed by over-centralized development; and women with no viable job opportunities who have fallen on hard times. Through trade we seek to provide stable employment which is healthful enough that it does not “use up” workers in the short term, and with which people can build a life for themselves in the long term. By purchasing their products, our customers are in effect bypassing a top-heavy, hand-out approach to poverty, opting instead for an organic approach that nurtures local cultures and practices.
Cultural Sustainability

Development often causes massive cultural dislocations. For example, efforts to stimulate job creation in cities can lead to increasing urban unemployment as stimulatory effects get washed out by waves of workers forsaking traditional crafts for urban jobs. By buying the products of artisans working in traditional settings, we aim to support traditional practices while ameliorating the cultural disruptions that often accompany development.
Environmental Sustainability

Goods can contribute to environmental sustainability. For example, organizations such as the Worldwatch Institute and One World Products, Inc., aim to save the Brazilian rain forest by researching and selling replenishable products from it rather than burning it for pasture. Moreover, some goods are surrogates for commercial goods, but are produced in nonindustrial, eco-friendly ways.
Worldstock Adoptive Principles

Corporations are often accused of disingenuousness concerning the socially responsible practices of which they boast, so suspicion haunts any firm making claims such as those outlined above. Consequently, along with the foregoing principles governing what products we acquire, we are also committed to the following principles governing our pricing, negotiations, and disclosure.

Razor-thin margin pricing

Some retailers buy goods that contribute to economic, cultural, or environmental sustainability, but then mark them up 300 or more, with the result that only a small fraction of the sales proceeds actually gets to the producers. We have decided on a radically different course. While a small profit is necessary to afford the ever larger inventories that growth requires, my dream is to price our Worldstock goods inexpensively so as to grow the department rapidly and spread the model to as many people as possible. So while the answer to the question, “What percentage of the price actually goes to the producers?” varies by product, in general, it runs in the range of 60 - 70 of your purchase price goes to the producers. The remainder is pretty much entirely consumed in our own costs of importing, duties, handling, shipping, credit card fees and marketing.

Fair negotiation

I am a capitalist. As you read this, I’m doing everything I can to edge out the competition. That's how we sell TVs, jewelry, and computers at the prices we do. But that hypercompetitive mentality is not appropriate for Worldstock. When disparities in wealth, options, and information between two parties go beyond a certain level, negotiations can no longer be fair. We do not want to chisel Peruvian widows in order to “get the goods,” and I have no doubt that socially conscious consumers don’t want us doing that on their behalf. Consequently, for this department, we do not negotiate roughly with suppliers, but rather remind them that if they charge us too much, we will not be able to sell their products or place reorders; lower prices to me will create higher volume for them. In effect, the buying behavior of our customers dictates how hard the producers themselves face pushback. I could think of no fairer system.

Transparency

Principled disagreement exists among proponents of fair trade.

For example, some Worldstock products are purchased from development organizations, NGOs, nonprofits and micro-credit banks, which organize producer associations and in some cases (landmine survivors, for example) provide training for producers. Some believe that socially responsible goods should be acquired only through such agencies to ensure credibility.

Others claim that limiting purchases to such agencies perpetuates a mindset of dependency, which says, “An agency, not individual initiative, offers the only way to get ahead.” For example, imagine that in my own travels I find (as I have) a small workshop in a village in the Bekka Valley of eastern Lebanon, where a few women work together, making exquisite shawls. Their products do not carry the imprimatur of any UN organization or development agency, but in my view their wares are appropriate for Worldstock. Should I forgo the shawls because they lack the certification of an NGO, or should I trade in them to reward their initiative?

My answer to this dilemma is simple: transparency. We buy socially responsible products from reputable fair-trade importers, NGOs, micro-credit facilities, humanitarian organizations, and directly from artisans themselves. All producers sign a statement of principles concerning the manner in which the goods are produced, and we conduct our own investigation of such suppliers and their reputations. Therefore, a customer who trusts my claim that buying a given shawl contributes to the well-being of a village in eastern Lebanon can buy the shawl knowing where it came from. On the other hand, that customer might choose to buy only those products we acquire through formal channels, such as Rehab Craft Cambodia (an NGO building a self-sufficient business channel for Cambodians with disabilities). By providing sourcing information in our product descriptions, we minimize dilemmas about social responsibility: we are honest and transparent and let the customer decide.
Conclusion

Artisans around the world have trouble reaching their natural markets due to poverty, poor information, and the disadvantage of being small-lot producers in an age of high technology and mass distribution. Yet they are capable of making exquisite centerpiece products. These artisans could feed their families, vaccinate their babies, and send their children to school, if we in the developed world were to purchase the high-quality goods they know how to make. We realized that Overstock could bridge this global gap. The result is Worldstock, a store emphasizing sustainability, fairness, and transparency while empowering artisans to achieve their dreams for themselves and their families.

Sincerely,
Patrick M. Byrne
CEO

Jeff Matthews said...

The "its strange" post with the stupid message board language is gone, as it should be. I hadn't seen it until "stevef" correctly pointed out that it violated the clean-language policy here.

Unfortunately, "stevef"'s post quoting the "its strange" post also had to go.

Stupid message board language is not welcome here. Facts are.

Jeff Matthews
I'm Not Making This Up

mfairview said...

As a preface to World Stock, read Dr. Byrne's recent interview with Charlie Rose. An interesting observation on why he [Byrne] prefers to give money to [hire] women:

http://www.ncans.net/charlierose.htm

SteveF said...

Jeff, you never addressed the point I made. Obrians posts other than the first one contained no objectionable language, so what are you using as your premise for censorship on those? Can't be language.

Its_strange said...

Bob beleives knowing the shorts name , address and holdings is germane to the story . He mentions Rocker partners often . He mentions others as well . He suggests there is something dishonest between the shorts and the press . He even suggests the SEC is a tool of the shorts. He mentions reporter by name . Clearly he believes thier identity is germane to the story . I think knowing who created the NFI website, NCANS and who took out the Washington Post ad is reasonable .