How can Overstock.com measure performance?

Overstock.com is a very interesting site. I have heard about it before, but never really spent time on it and certainly never purchased anything from it. I went on it recently and it has EVERYTHING. You can buy furniture, shoes, bedding, rugs, sports equipment, and the list goes on. Even more impressive, you can sell your car or even your house through the site.

It is half shopping model, half auction model. It’s pretty wild.

Looking through the site, I came to the conclusion that this pure play business is following the brokerage model. It is basically a site that manages auctions and allows for people to sell their items. All the leftovers or “overstock” from manufacturers are bought up and sold on this site, providing reasonably priced items to people who like to buy online. Exchange seems to be the key in this model, with the site picking up a degree of profits from the sales.

Overstock’s latest TV campaign is a little strange, featuring a husband and wife country duo who came to fame on the CMT competition, “Can You Duet.” Something about it the spot appears familiar, but I can’t quite put my finger on it.

Maybe it is a bit Mastercard-esque?

There are plenty of performance metrics that Overstock might use to evaluate their success. The two major breakdowns of these metrics are web analytics and user-engagement metrics.

Web analytics study the user behavior on the web-pages, so to determine the actions of the user on the site, they can measure: site traffic, pages most frequently viewed, clicking patterns of users as they navigate through the site, how long they stay on one page, and whether the time spent on the page ends in a purchase.

Overstock looks like a site that I could spend hours on, easily. I’m sure that how consumers navigate through the site really tells a great deal about what product categories are more successful or what users like. Cookies, server logs and page tags work together to not only track but adapt to the patterns of consumers. Overstock can also measure how successful its special promotions are based on whether consumers click through or purchase.

Another set of metrics comes from the social or user engagement metrics. Overstock, considering its social element and do-it-yourself model, probably finds these engagement metrics helpful because they can measure the participation rather than the views. Users can rate products and give reviews on the site. In the auction portion, sellers and buyers are evaluated too. The more people are writing reviews, the more time they are spending on the site. How much a person engages is a good indicator of brand loyalty and future continued use. Engagement metrics also measure downloads and how often a site is bookmarked.

A metric tool that has come to be widely accepted as an effective method to measure online success is the balanced score card. Overstock could use this as well to evaluate their overall success.

The four components of the scoring are: customer perspective, internal perspective, learning growth perspective and financial perspective.

When Overstock considers any customer service awards, the number of complaints, or the number of abandoned shopping carts, for example, that is looking at the customer perspective.

How fast the company returns emails, the supply chain updates and evaluating the more basic functions of the business deals with internal perspective.

In the online world, it seems that growth has become more important than the bottom-line. The number of new services/products offered by Overstock and the sales in different sectors are good indicators of company success and describes the learning growth perspective. As far as I know, automobile sales and real estate were not initially part of the Overstock model, so I’m sure during the early stages of these sectors they really looked at growth in the numbers of houses listed and cars purchased.

What firms typically see as traditional metrics, such as market share, sales and ROI, represent the financial perspective. These numbers have always been the most powerful in our sense of economy. However, in web 2.0 when it is almost impossible to see huge market share increases, the metrics are more subtle and engagement focused.