Overstock.com 2010 Annual Report Download - page 25

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Table of Contents
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, and Ltd., Ross Stores, Inc., respectively. In the past we have entered the online auctions, car listing and real estate listing businesses in which we
compete with large established businesses including eBay, Inc., AutoTrader.com, Inc. and Realtor.com.
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 provide assurance that we will be
able to compete successfully against current or future competitors.
Our operating results depend on our Website, network infrastructure and transaction-processing systems. Capacity constraints or system failures
would harm our business, prospects, financial condition, and results of operations.
Any system interruptions that result in the unavailability of our Website 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, financial condition and
results of operations.
We use internally developed systems for our Website and certain aspects of transaction processing, including personalization databases used for internal
analytics, recommendations and order verifications. We have experienced periodic systems interruptions due to server failure and power failure, which we
believe will continue to occur from time to time. If the volume of traffic on our Website or the number of purchases made by customers increases
substantially, we will need to further expand and upgrade our technology, transaction processing systems and network infrastructure. We have experienced
and expect to continue to experience temporary capacity constraints due to sharply increased traffic during sales or other promotions and during the holiday
shopping season. Capacity constraints can cause unanticipated system disruptions, slower response times, delayed page presentation, degradation in levels of
customer service, impaired quality and delays in reporting accurate financial information.
Our transaction processing systems and network infrastructure may be unable to accommodate increases in traffic in the future. We may be unable to
project accurately the rate or timing of traffic increases or successfully upgrade our systems and infrastructure to accommodate future traffic levels on our
Website. In addition, we may be unable to upgrade and expand our transaction processing systems in an effective and timely manner or to integrate any newly
developed or purchased functionality with our existing systems. For example, in the past we have experienced difficulties with our implementation of
infrastructure upgrades, which resulted in our inability to upload new products to our Website for a period of time. Any such difficulties with our transaction
processing systems or other difficulties upgrading, expanding or integrating various aspects of our systems may cause unanticipated system disruptions,
slower response times, and degradation in levels of customer service, additional expense, impaired quality and speed of order fulfillment or delays in reporting
accurate financial information.
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