Overstock.com 2005 Annual Report Download - page 19

characterized by rapid technological change, obsolescence and price erosion (for example, computer hardware, software and consumer
electronics), and because we sometimes make large purchases of particular types of inventory. In addition, we often do not receive
warranties on the merchandise we purchase. Further, beginning July 1, 2003, we started accepting returns of products sold through our
fulfillment partners, and we have the risk of reselling the returned products.
In the recent past, we have recorded charges for obsolete inventory and have had to sell certain merchandise at a discount or loss.
It is impossible to determine with certainty whether an item will sell for more than the price we pay for it. Because we rely heavily on
purchased inventory, our success will depend on our ability to liquidate our inventory rapidly, the ability of our buying staff to
purchase inventory at attractive prices relative to its resale value and our ability to manage customer returns and the shrinkage
resulting from theft, loss and misrecording of inventory. If we are unsuccessful in any of these areas, we may be forced to sell our
inventory at a discount or loss.
We have grown quickly and if we fail to manage our growth, our business will suffer.
We have rapidly and significantly expanded our operations, and anticipate that further significant expansion will be required to
address potential growth in our customer base and market opportunities. This expansion has placed, and is expected to continue to
place, a significant strain on our management, operational and financial resources. Some of our officers have no prior senior
management experience at public companies. Our new employees include a number of key managerial, technical and operations
personnel, and we expect to add additional key personnel in the future. To manage the expected growth of our operations and
personnel, we will be required to improve existing and implement new transaction-processing, operational and financial systems,
procedures and controls, and to expand, train and manage our already growing employee base. If we are unable to manage growth
effectively, our business, prospects, financial condition and results of operations will be harmed.
The loss of key personnel or any inability to attract and retain additional personnel could affect our ability to successfully
grow our business.
Our performance is substantially dependent on the continued services and on the performance of our senior management and
other key personnel, particularly Patrick M. Byrne, our President. Our performance also depends on our ability to retain and motivate
other officers and key employees. The loss of the services of any of our executive officers or other key employees for any unforeseen
reason, including without limitation, illness or call to military service, could harm our business, prospects, financial condition and
results of operations. We do not have employment agreements with any of our key personnel and we do not maintain "key person" life
insurance policies. Our future success also depends on our ability to identify, attract, hire, train, retain and motivate other highly-
skilled technical, managerial, editorial, merchandising, marketing and customer service personnel. Competition for such personnel is
intense, and we cannot assure you that we will be able to successfully attract, assimilate or retain sufficiently qualified personnel. Our
failure to retain and attract the necessary technical, managerial, editorial, merchandising, marketing and customer service personnel
could harm our revenues, business, prospects, financial condition and results of operations.
We may be unable to manage expansion into new business areas which could harm our business operations and reputation.
Our long-term strategic plan involves expansion of our operations to offer additional types of products and services. We cannot
assure you that our efforts to expand our business in this manner will succeed. Because we were unable to generate significant traffic
for our former B2B site, in the third quarter of 2004, we merged the B2B site into our main website, and opened our Wholesale bulk
purchase program. Our failure to succeed in this market or other markets or other product or service offerings may harm our
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