CompUSA 2013 Annual Report Download - page 11

We may not be able to compete effectively with current or future competitors. The markets for our products and services are
intensely competitive and subject to constant technological change. The integration of formerly separate products such as cameras
and GPS devices into cell phones, and the adverse impact of the boom in tablets sales on PC and laptop sales, demonstrate how
rapid technological change can significantly effect the markets for the products we sell. We expect this competition and
technological change to further intensify in the future. Competitive factors include price, availability, service and support. We
compete with a wide variety of other resellers and retailers, including internet marketers, as well as manufacturers. Our North
America Tech retail operations face pressure from the ongoing migration of “brick and mortar”
sales to online/ecommerce sales
channels, and our ecommerce business faces pressure from competing with large, expanding ecommerce retailers. Many of our
competitors are larger companies with greater financial, marketing and product development resources than ours. The market for
the sale of industrial products in North America is highly fragmented and is characterized by multiple distribution channels such as
small dealerships, direct mail distribution, internet-
based resellers, large warehouse stores and retail outlets. We also face
competition from manufacturers’
own sales representatives, who sell industrial equipment directly to customers, and from regional
or local distributors. In addition, new competitors may enter our markets. This may place us at a disadvantage in responding to
competitors’
pricing strategies, technological advances and other initiatives, resulting in our inability to increase our revenues or
maintain our gross margins in the future.
In most cases our products compete directly with those offered by other manufacturers and distributors. If any of our competitors
were to develop products or services that are more cost-
effective or technically superior, demand for our product offerings could
decrease.
Our gross margins are also dependent on the mix of products we sell and could be adversely affected by a continuation of our
customers’ shift to lower-priced products.
Our United States subsidiaries collect and remit sales tax in states in which the subsidiaries have physical presence or in which we
believe sufficient nexus exists which obligates us to collect sales tax. Other states may, from time to time, claim that we have state-
related activities constituting physical nexus to require such collection. Additionally, many other states seek to impose sales tax
collection or reporting obligations on companies that sell goods to customers in their state, or directly to the state and its political
subdivisions, regardless of physical presence. Such efforts by states have increased recently, as states seek to raise revenues
without increasing the income tax burden on residents. We rely on United States Supreme Court decisions which hold that, without
Congressional authority, a state may not enforce a sales tax collection obligation on a company that has no physical presence in the
state and whose only contacts with the state are through the use of interstate commerce such as the mailing of catalogs into the state
and the delivery of goods by mail or common carrier. We cannot predict whether the nature or level of contacts we have with a
particular state will be deemed enough to require us to collect sales tax in that state nor can we be assured that Congress or
individual states will not approve legislation authorizing states to impose tax collection or reporting obligations on all e-
commerce
and/or direct mail transactions. A successful assertion by one or more states that we should collect sales tax on the sale of
merchandise could result in substantial tax liabilities related to past sales and would result in considerable administrative burdens
and costs for us and may reduce demand for our products from customers in such states when we charge customers for such taxes.
We insure for certain property and casualty risks consisting primarily of physical loss to property, business interruptions resulting
from property losses, worker’
s compensation, comprehensive general liability, and auto liability. Insurance coverage is obtained for
catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. Although we believe
that our insurance coverage is reasonable, significant events such as acts of war and terrorism, economic conditions, judicial
decisions, legislation, natural disasters and large losses could materially affect our insurance obligations and future expense.
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The markets for our products and services are extremely competitive and if we are unable to successfully respond to our
competitors
’
strategies our sales and gross margins will be adversely affected.
•
Sales tax laws may be changed or interpreted differently which could result in ecommerce and direct mail retailers having to
collect sales taxes in states where the current laws do not require us to do so. This could reduce demand for our products in such
states and could result in us having substantial tax liabilities for past sales.
•
Events such as acts of war or terrorism, natural disasters, changes in law, or large losses could adversely affect our insurance
coverage and insurance expense, resulting in an adverse affect on our profitability and financial condition.