Expanding the range of internet addresses: how Overstock.com capitalizes on a new alternative

Citation

(2010), "Expanding the range of internet addresses: how Overstock.com capitalizes on a new alternative", Journal of Consumer Marketing, Vol. 27 No. 1. https://doi.org/10.1108/jcm.2010.07727aag.001

Expanding the range of internet addresses: how Overstock.com capitalizes on a new alternative

Article Type: Internet currency From: Journal of Consumer Marketing, Volume 27, Issue 1

Edited by Dennis A. PittaUniversity of Baltimore

One of the truths in online marketing is that the simpler the domain name, the more successful it will be to find. Thus, Buy.com, is simple, short, descriptive, and after one use, customers can remember exactly what it is like and whether they want to buy there again. More complicated names like, WorldWideMilitaria.com, present the possibility of mistyping or confusion with another internet site, WorldMilitaria.com. Domain names have virtually no size limit. As a test, functioning domain names up to 1,700 characters have been created. Entering that one by hand would be a nightmare with little chance of success. In reality, the watchword in choosing domain names is: short, appropriate, descriptive, and memorable. In any case, short is arguably the most important of the factors for attracting first time surfers.

The name game is serious and attempts to highjack or counterfeit existing names have been common. Perhaps the most embarrassing instance occurred with the US Presidential web site, WhiteHouse.gov. At one time, unwary surfers who entered WhiteHouse.COM by mistake, were treated to an internet pornography site. Fortunately, someone made the owners an offer they could not refuse and the new site now concentrates on health care. While the name suggests the presidential site, it is not directly related to politics.

So what is the best name? It probably depends but a one letter name would be the ultimate in ease. For example, A.com would be easy to remember, easy to type and might be descriptive for a number of products or services. Perhaps the ultimate might be E.com, perfect for an e-commerce related site. One of the realities is that with the three main domains,.com.gov. and.net, the number of one letter domains is limited to a theoretical maximum of 78. The issue is moot, none of the abovementioned domains offers a single letter domain name. Recently, however, a new alternative has arrived, from the.BIZ domain.Biz was released in 2001 and has about 2 million domain names registered. Until now, none was a one character name.

ICANN, the Internet Corporation for Assigned Names and Numbers, recently granted.biz registry NeuStar (NYSE: NSR) the right to release one and two character.biz domain names. Industry reports note that the domain names will be released in two phases. The first phase requires “requests for proposal” (RFP). In this phase, the applicant must describe how it will use and promote the domain name. NeuStar started accepting RFPs for 36 one-character letter and number domains on 1 June 2009. It promised to respond to the RFPs by 30 July 2009. In the event that a domain was not allocated during the RFP process, NeuStar designed an auction process to dispose of unallocated domains. Following the allocation of all one character domains, NeuStar will perform a similar procedure for two character domain names. News reports state that all proceeds from the process will be reinvested to promote the.biz brand.

One would guess that a one character domain name would be valuable but until recently there was no empirical data about how valuable they might be. One of the industry success stories, Overstock.com decided that a one character name would be beneficial in its strategy. The company looked at the natural choice, O.biz. Early on it pursued that choice and achieved a surprising success. Overstock.com CEO and Chairman Patrick Byrne confided that its purchase of the O.BIZ domain name cost a whopping.....$300.00, ICANN’S the minimum charge. In fact, Overstock.com paid $600 for two one character domain names, O.biz (the letter O) and 0.biz (the number 0). Operationally, securing the domain names was straightforward and, even including the cost of management and attorneys, was inexpensive. The more interesting aspect is the strategic extension that Overstock.com planned.

O.BIZ, its potential and synergies

Current users of Overstock.com find the web site attractive for numerous reasons. First, the merchandise sold is often of very high quality at a very reasonable price. Consumers would find it difficult or impossible to search for equivalent value. Overstock.com leverages a number of efficiencies to provide quality, convenience and value. First, its size enables it to exploit the overstock market and gain closeout prices. A closeout price is substantially discounted from retail but requires a closeout buyer to buy the entire inventory available. Most smaller companies cannot afford the financial investment required to buy a series of closeouts.

Second, its degree of customer service is world class. CEO Byrne proudly announced that the company achieved the number two place in customer evaluations of customer service. Only American retailer, L.L. Bean scored higher at number one. That level of service requires a no questions asked return policy that could be quite costly. A highly efficient and accurate promotion and distribution policy is vital for reducing the cost of returns.

In fact, Overstock.com’s infrastructure is highly efficient. Its investment in fulfillment technology reduces its marginal costs of service to quite low levels. In fact, the retail supply chain is optimized for larger shipping lot sizes than the company uses to satisfy consumers. In fact, the changes in infrastructure needed to satisfy a different audience. As Byrne states, the change needed would just “bolt onto” the existing Overstock.com structure for check out. The changes in credit card processing, customer service, and fraud protection, would be de minimus.

These factors have led to a strategic shift. Overstock.com remains committed to its core audience, the consumer. However, the company is poised to extend its market to retailers. One problem small to medium sized retailers face is lack of critical mass to exploit economies of scale in purchasing and distribution. A vendor that can supply smaller quantity sizes at attractive prices should find a ready market among such retailers. Mindful of their fulfillment and purchasing capabilities, the company targeted smaller retailers.

O.BIZ [www.o.biz]

As this column is being written, Overstock.com has started to develop its new entity, O.biz. Its public relations states that: “on October 31st, Overstock.com will launch O.biz, a new site where customers and small businesses can piggy-back on the buying power of Overstock.com to save money on bulk and business purchases.” O.biz promises the same safe and secure technology behind Overstock.com as well as comparable award winning customer service.

Initially, O.biz will focus on Office, Hotel and Restaurant-related products. It will also offer bulk quantities and pricing for many of the products found on Overstock.com. Over time, O.biz customers can expect new offerings in other areas.

The web site, O.biz, is, at this moment up on the web as an inactive placeholder. It features a notice that it is “brought to you by Overstock.com” and notes that it will become active on 31 October 2009.

In fact, O.biz targets two niches. The first focuses on office, restaurant, hotel, and janitorial supplies. That niche targets the need for excellent customer service. The second targets small retailers which need small lots at closeout prices. As mentioned above, overstock buyers need to buy an entire inventory to reap the close-out pricing. O.biz can afford to supply heavily discounted quantities that provide attractive pricing for lots as small as 6-12 items. That provides an impressive financial benefit to retail customers.

It remains to be seen how successful O.biz becomes. However, it seems to be in the right position armed with robust operational tools and has few competitors.

Implications for marketers

The new.BIZ domain may offer internet marketers a means of bracketing their existing domain names as self protection. Alternatively, it may make it easier to create “look alike” web sites confuse consumers and lure them away from existing sites.

Then too, the.BIZ domain may offer existing companies the opportunity to extend their franchises in different markets, just like Overstock.com did with O.biz. It seems that this newest web development signals another stage in the internet’s maturity and provides marketers with another opportunity.

In our next issue, we will investigate other informative sites and invite readers to submit their favorite internet sites for our consideration.

Reader requests

Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to: dpitta@ubalt.edu for prompt attention.