Amazon.com 2003 Annual Report Download - page 22

position regarding sales and use taxes on Internet sales. If any of these initiatives addressed the Supreme Court’s
constitutional concerns and resulted in a reversal of its current position, we could be required to collect sales and
use taxes in states other than Washington, North Dakota, and Kansas. The imposition by state and local
governments of various taxes upon Internet commerce could create administrative burdens for us and could
decrease our future sales.
We Source a Significant Portion of Our Inventory from a Few Vendors
Although we continue to increase our direct purchasing from manufacturers, we source a significant amount
of inventory from relatively few vendors. However, no vendor accounts for 10% or more of our inventory
purchases. We do not have long-term contracts or arrangements with most of our vendors to guarantee the
availability of merchandise, particular payment terms, or the extension of credit limits. If our current vendors
were to stop selling merchandise to us on acceptable terms, we may not be able to acquire merchandise from
other suppliers in a timely and efficient manner and on acceptable terms.
We May Be Subject to Product Liability Claims if People or Property Are Harmed by the Products We
Sell
Some of the products we sell may expose us to product liability claims relating to personal injury, death, or
property damage caused by such products, and may require us to take actions such as product recalls. Certain
businesses and individuals also sell products using our e-commerce platform that may increase our exposure to
product liability claims, such as if these sellers do not have sufficient resources to protect themselves from such
claims. Although we maintain liability insurance, we cannot be certain that our coverage will be adequate for
liabilities actually incurred or that insurance will continue to be available to us on economically reasonable
terms, or at all. In addition, some of our vendor agreements with our suppliers and third party sellers do not
indemnify us from product liability.
We Could Be Liable for Breaches of Security on Our Website and Fraudulent Activities of Users of Our
Payments Program
A fundamental requirement for e-commerce is the secure transmission of confidential information over
public networks. Although we have developed systems and processes that are designed to protect consumer
information and prevent fraudulent credit card transactions and other security breaches, failure to mitigate such
fraud or breaches may adversely affect our operating results.
The law relating to the liability of providers of online payment services is currently unsettled. In addition,
we are aware that governmental agencies have investigated the provision of online payment services and could
require changes in the way this business is conducted. We guarantee payments made through our payments
program available to sellers on Marketplace and certain other programs up to certain limits for buyers, and we
may be unable to prevent users from fraudulently collecting payments when goods may not be shipped to a
buyer. As our payments program grows, our liability risk will increase. Any costs we incur as a result of liability
because of our payments program’s guarantee or otherwise could harm our business. In addition, the
functionality of our payments program depends on certain third-party vendors delivering services. If these
vendors are unable or unwilling to provide services, our payments program and our businesses that use it may not
be viable.
We May Not Be Able to Adapt Quickly Enough to Changing Customer Requirements and Industry
Standards
Technology in the e-commerce industry changes rapidly. We may not be able to adapt quickly enough to
changing customer requirements and preferences and industry standards. Competitors often introduce new
products and services with new technologies. These changes and the emergence of new industry standards and
practices could render our existing websites and proprietary technology obsolete.
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