O.co Shutters at Least Three Businesses, As It Questions New Commerce Models

O.co has shut down three of its product categories, and a fourth is on hold, after some of its experiments over the past couple of years have not penciled out.

In July, the Salt Lake City-based company, which is also known as Overstock, discontinued the year-old Eziba, a boutique site that mimicked flash sales sites like Gilt Groupe, Rue La La and One Kings Lane.

Meanwhile, on its homepage, the company has also been cutting back. After six years, it shut down its auctions category, which was similar to eBay; earlier this year, it shuttered real estate, which allowed people to browse homes for sale and receive discounts on real estate services.

And finally, one of its newest ventures is also on hold.

In March, O.co launched a vacations tab, which offered discounted hotel rooms. It is expected to relaunch later next month with a new partner.

In an interview, O.co President Jonathan Johnson explained the cutbacks.

He said that auctions and real estate in particular didn’t seem to fit its model. The two categories weren’t things you could easily add to the shopping cart and buy right away. The real estate tab was a referral service, and auctions required haggling.

Meanwhile, Johnson said, Eziba cannibalized sales from its main site.

Eziba was a modern boutique that featured large photos of the products, in contrast to Overstock’s more straightforward, traditional e-commerce layout, which stressed searching for items displayed in small thumbnail pictures. Eziba offered a dozen or so products at a time by email, as compared to the hundreds of thousands of items found daily on Overstock.

“We watch and see what competitors are doing,” Johnson said. “We thought private sales sites would be good to experiment with … What we learned was that it wasn’t bringing us any new customers.”

Johnson concluded that they could offer the same deals on Overstock.

He also said manufacturers were concerned that by offering discounts on items for Eziba, it was hurting future sales over the next week or month.

“We did not see the lift in Eziba that we were hoping,” he added.

The 12-year-old company is stuck with a model that surfaced when shopping first became prevalent on the Internet. With 2010 revenues of $1.1 billion, it all of a sudden appears out of style compared to smaller start-ups that are able to raise millions of dollars in venture capital.

And even while those more trendy companies get all of the attention, a majority of sales still are occurring on traditional megasites, like eBay, Amazon and the Overstocks of the world.

One business Johnson said the company investigated but never launched was daily deals.

“We did some development on the Groupon model,” he said. “But we aren’t bullish on the model. The merchants we talked to said it brings in a nonloyal, coupon-using customer that doesn’t come back. I wish them (Groupon) the best, but there’s 600 other Groupon-like competitors. It wasn’t the right time to say ‘me, too.'”

The vacations tab is expected to relaunch in December with a new provider, and will offer a larger array of products, including hotels, rental cars and airfare. It will rejoin three other categories — shopping, cars and insurance. In a note to users, it says: “We promise we aren’t lying by the pool or sitting under a beach cabana, but are hard at work exploring even better vacation destinations, packages and exclusive deals.”

The company also continues to expand internationally. Today, it ships to 91 countries, and in the next two to four weeks, expects to add another 23 countries. The shift from using O.co instead of Overstock was to support visitors in more languages.

In the three months ended Sept. 30, the company’s revenues fell 2 percent to $239.7 million, from $245.4 million in the year-ago period. Its losses also widened to nearly $8 million from $3 million.

The company attributed the decrease in revenues to several reasons, including lower conversion rates, 8 percent fewer new customers compared to last year, and its rebranding efforts.

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— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google