Overstock.com 2010 Annual Report Download - page 20

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Table of Contents
terminated or impaired or if these third parties are unable to deliver products for us, whether through labor shortage, slow down or stoppage, deteriorating
financial or business condition, responses to terrorist attacks, natural disasters, or for any other reason, we would be required to use alternative carriers for the
shipment of products to our customers. In addition, conditions such as adverse weather or natural disasters can prevent any carriers from performing their
delivery services, which can have an adverse effect on our customers' satisfaction with us. In any of these circumstances, we may be unable to engage
alternative carriers on a timely basis, upon terms we find acceptable, or at all. Changing carriers, or absence of carrier availability, could have a negative
effect on our business, prospects, financial condition and results of operations. Potential adverse consequences effecting customer satisfaction include:
reduced visibility and accuracy of order status and package tracking;
delays in order processing and product delivery;
increased delivery costs, resulting in reduced profit margins; and
reduced shipment quality, which may result in delivery of damaged products.
We depend upon our credit card processors and payment card associations.
Our customers primarily use credit cards to buy from us. We are dependent upon our credit card processors to process the sales transactions and remit the
proceeds to us. The credit card processors have the right to withhold funds otherwise payable to us to establish a reserve based on their assessment of the
inherent risks of credit card processing and their assessment of the risks of processing our customers' credit cards, and have done so from time to time in the
past. The credit card processors may establish, increase or decrease the amount of any reserve at any time. Any increase in the amounts of the reserves
established by the processors would have an adverse effect on our cash flow and liquidity, and any material unexpected increase could have a material adverse
effect on our business, prospects, financial condition and results of operations.
We are also subject to payment card associations' operating rules, certification requirements and rules governing electronic funds transfers, which could
change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines
and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate
other types of online payments, could have a material adverse effect on our business, prospects, financial condition and results of operations.
A significant number of merchandise returns could harm our business, financial condition and results of operations.
We generally allow our customers to return products, subject to our returns policies. If merchandise returns are significant, our business, prospects,
financial condition and results of operations could be harmed. Further, we modify our policies relating to returns from time to time and any policies intended
to reduce the number of product returns may result in customer dissatisfaction and fewer repeat customers.
Our pricing strategy may not meet customers' price expectations or result in net income.
Demand for our products is generally highly sensitive to price. Our pricing strategies have had, and may continue to have, a significant impact on our net
sales and net income. We often offer discounted prices, and free or discounted shipping as a means of attracting customers and encouraging repeat purchases.
Such offers and discounts may reduce our margins. In addition, our competitors' pricing and marketing strategies are beyond our control and can significantly
impact the results of our pricing strategies. If we fail to meet our customers' price expectations in any given period, or if our competitors decide to engage in
aggressive pricing strategies, our business, prospects, financial condition and results of operations would suffer.
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