Overstock.com 2004 Annual Report Download - page 10

customers by telephone and e-mail. Our customer service staff answers approximately 85% of phone calls within 30 seconds, and responds to
approximately 98% of its e-mails within 12 hours. For our consumer business, we include a return shipment label in our customer's shipment to
facilitate product returns and, subject to certain conditions; we allow customers up to 20 days from date of shipment to initiate the return of most
purchased merchandise. In addition, we continually update and monitor our Websites to enhance the shopping experience for our customers.
Our objective is to become the dominant closeout Internet-based solution for holders of brand-name merchandise, allowing them to dispose of that
merchandise discreetly and with high recovery values, and to ultimately become a one-stop Internet-based discount shopping destination. We are pursuing this
objective through the following key strategies:
Establish strong relationships with manufacturers. With the growth in the scale of our operations, we believe we are becoming an efficient
liquidation channel for manufacturers and distributors. With scale comes the ability to buy in volume, and we believe manufacturers appreciate
our ability to liquidate their products without disturbing their traditional channels. Generally, manufacturers do not want their product offerings
sold as heavily discounted, closeout products in brick-and-mortar retailers, as is common today. We believe that as manufacturers learn of our
capabilities, they will increasingly recognize the attractiveness of Overstock as an efficient liquidation solution.
Optimize inventory management through the use of technology. Our merchandise buyers are supported by proprietary software that provides
nearly instantaneous information on product sales, margins and inventory levels. This technology enables us to make informed decisions and
quickly change prices in an effort to maximize sales volume, gross profits and return on inventory capital.
Optimize online marketing initiatives through the use of technology. Our marketing team is supported by proprietary software that enhances the
level of service provided to our customers and takes advantage of the unique characteristics of online distribution. Our software provides us
immediate feedback on the effectiveness of various marketing campaigns, allowing us to optimize our online marketing expenditures.
Maintain low customer acquisition costs. We believe that by utilizing targeted online campaigns, including direct e-mail campaigns (the results
of which we are able to quantify) as well as our internally developed national television and radio branding campaign, we will be able to keep our
per customer acquisition costs low.
In addition, we use our books, music and videos (BMV) department as a tool to acquire customers at a low cost. We intentionally price this
department with low margins in an effort to gain new customers efficiently, providing us the ability to introduce them to other products offered on
our Website.
Membership programs. In March 2004, we launched our frequent buyer's club, Club O. Members of Club O pay an annual fee of $29.95 and
receive a 5% discount on all non-travel and non-BMV products and $1 shipping per order, along with access to a special customer service
hotline. Additionally, in August 2004, we merged our B2B site (www.overstockb2b.com) into our B2C site, and opened a "Club O Gold"
membership program (into which our current B2B customers were grandfathered). The terms of this program include a higher annual fee
($99.95), Club O Gold pricing (that is, our B2C price less 5% on single product purchases and steeper discounts for products purchased in bulk),
and access to a special, small business-focused, customer service team. In addition, we have formed an alliance with Advanta Corp. to assist us
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