LOS ANGELES, Calif. — Start-up website FreeOverstock.com, owned by New Venture Company, claims to give away overstock merchandise for absolutely nothing. Sure, there’s plenty of free stuff on the web. Free fonts, free screen savers, free music… many with a free virus attached. And it’s a given that nobody gives away valuables like toasters, MP3 players, and jewelry. You know what they say, there’s no such thing as a free lunch.
But all that could be changing. The aptly-named internet start-up, FreeOverstock.com claims to be giving away all its goodies for squat. So what’s the catch?
Self-described “webpreneur” and founding partner Sarkis Chakarian agrees, “There is a catch. Someone does pay for our products. But it’s not the consumer.” According to Sarkis, retailers and wholesalers alike pay his company to offload products they can’t afford to keep on shelves.
“It makes perfect sense when you think about it,” says Sarkis. “Unmoving overstock becomes a liability because it costs money to rent warehouse space, to hire security guards, to keep an accurate inventory. Overstock also will cost a company in taxes. It’s expensive to keep around.”
“It might sound crazy that a company would pay to give away its products, but not when they’ve been laying around for a few years taking up precious warehouse space. In the long run, it’s actually cheaper to unload it,” Sarkis continues.
It appears consumers can order any number of products displayed on FreeOverstock for absolutely nothing. “The customer pays a nominal shipping and handling fee,” adds Sarkis. “We would love to offer free shipping, but that’s impossible since we’re giving away everything!”
And just in case you’re wondering if those shipping and handling fees are exorbitant, wonder again because when we ordered a silver pendant from FreeOverstock, we only ended up paying $6.95. That’s approximately 70-cents more than regular Post Office prices. Not exactly a huge markup.
Sarkis explained, “On average, it costs us about a dollar to handle and package an item. So yeah, we have to charge a bit more than the post office. But not much.”
Where then, are they making money? Everyone knows you can’t just give away stuff for free. It defies the laws of nature. It’s like saying what goes up must come… up.
“Granted, you won’t find a Rolls Royce on our site but the goods are pretty solid. Average value twenty to thirty bucks. Sometimes as high as fifty. Our margins are slim, but overall we’re profitable because the wholesalers actually pay us to get rid of their excess stock. Sometimes it’s more of a hassle to auction it off than to just give it away.”
It remains to be seen how long FreeOverstock.com will be with us. But needless to say, it’s a great idea that may be, as Sarkis puts it, “too good to be true.”
[tags]webpreneur Sarkis Chakarian, New Venture Company, FreeOverstock online shopping[/tags]