Overstock.com 2004 Annual Report Download - page 22

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We may not be able to compete successfully against existing or future competitors.
The online liquidation services market is new, rapidly evolving and intensely competitive. Barriers to entry are minimal, and current and new
competitors can launch new Websites at a relatively low cost. Our consumer Website currently competes with:
other online liquidation e-tailers, such as SmartBargains;
traditional retailers and liquidators, such as Ross Stores, Inc., Walmart Stores, Inc. and TJX Companies, Inc.; and
online retailers and marketplaces such as Amazon.com, Inc., Buy.com, Inc. and eBay, Inc., which have discount departments.
Our Website competes with liquidation "brokers" and retailers and online marketplaces such as eBay, Inc.
We expect the online liquidation services market to become even more competitive as traditional liquidators and online retailers continue to develop
services that compete with our services. In addition, manufacturers and retailers may decide to create their own Websites to sell their own excess inventory
and the excess inventory of third parties. Competitive pressures created by any one of our competitors, or by our competitors collectively, could harm our
business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service or marketing
decisions or acquisitions that could harm our business, prospects, financial condition and results of operations. For example, to the extent that we enter new
lines of businesses such as third-party logistics, or discount brick and mortar retail, we would be competing with large established businesses such as APL
Logistics, Ltd., Ross Stores, Inc. and TJX Companies, Inc., respectively. We have recently entered the online auctions business in which we compete with
large established businesses including eBay, Inc.
Many of our current and potential competitors described above have longer operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources than we do. In addition, online retailers and liquidation e-tailers may be acquired by, receive
investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Some of our competitors may be
able to secure merchandise from manufacturers on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more
aggressive pricing or inventory availability policies and devote substantially more resources to Website and systems development than we do. Increased
competition may result in reduced operating margins, loss of market share and a diminished brand franchise. We cannot assure you that we will be able to
compete successfully against current and future competitors.
Our operating results depend on our Websites, network infrastructure and transaction-processing systems. Capacity constraints or system failures
would harm our business, prospects, results of operations and financial condition.
Any system interruptions that result in the unavailability of our Websites or reduced performance of our transaction systems would reduce our
transaction volume and the attractiveness of the services that we provide to suppliers and third parties and would harm our business, prospects, operating
results and financial condition.
We use internally developed systems for our Websites and certain aspects of transaction processing, including customer profiling and order verifications.
We have experienced periodic systems interruptions due to server failure, which we believe will continue to occur from time to time. If the volume of traffic
on our Websites or the number of purchases made by customers substantially
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