Overstock.com 2010 Annual Report Download - page 54

Table of Contents
Fulfillment partner revenue
Fulfillment partner revenue is derived from merchandise sales through our Website which fulfillment partners ship directly to consumers and businesses
from warehouses maintained by our fulfillment partners.
We operate an online auction service as a part of our Website. The Auctions business allows sellers to list items for sale, buyers to bid on items of
interest, and users to browse through listed items online. With limited exceptions, we are not considered the seller of the items sold on the auction site and
have no control over the pricing of those items. Therefore, for these sales, only the listing fees for items listed and commissions for items sold are recorded as
revenue during the period items are listed or items are sold. Revenue from the auctions business is included in the fulfillment partner segment.
We operate an online site for listing cars for sale as a part of our Website. The cars listing service allows dealers to list vehicles for sale and allows
buyers to review vehicle descriptions, post offers to purchase, and provides the means for purchasers to contact sellers for further information and negotiations
on the purchase of an advertised vehicle. Revenue from the cars listing business is included in the fulfillment partner segment.
We operate an online site for listing real estate for sale as a part of our Website. The real estate listing service allows customers to search active listings
across the country. Listing categories include foreclosures, live and on-line auctions, for sale by owner listings, broker/agent listings and numerous aggregated
classified ad listings. Revenue from the real estate listing business is included in the fulfillment partner segment.
International business
We began selling products through our website to customers outside the United States in August 2008. As of December 31, 2010, we sell to customers in
over 90 countries. We do not have sales operations outside the United States, and are using a U.S.-based third party to provide logistics and fulfillment for all
international orders. Revenue generated from our international business is included in either direct or fulfillment partner revenue, depending on whether the
product is shipped from our leased warehouses or from a fulfillment partner.
Club O loyalty program
We have a customer loyalty program called Club O for which we sell annual memberships. We record membership fees as deferred revenue and we
recognize revenue ratably over the membership period. The Club O program allows members to earn reward dollars for qualifying purchases made on our
Website. We also have a co-branded credit card program (see "Co-branded credit card program" below for more information). Co-branded cardholders are
also Club O members and earn additional reward dollars for purchases made on our Website, and from other merchants. Reward dollars earned may be
redeemed on future purchases made through our Website. Club O reward dollars expire 90 days after the customers Club O membership expires. We account
for these transactions as multiple element arrangements and allocate value to the elements using their relative fair values. We include the value of reward
dollars earned in deferred revenue and we record it as a reduction of revenue at the time the reward dollars are earned.
We recognize revenue for Club O reward dollars when: (i) customers redeem their reward dollars as part of a purchase at our Website, (ii) reward dollars
expire or (iii) the likelihood of reward dollars being redeemed by a customer is remote ("reward dollar breakage"). Due to the loyalty program's short history,
currently no reward dollar breakage is recognized until the reward dollars expire. However, in the future we plan to recognize such breakage based upon
historical redemption patterns.
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