Overstock.com 2010 Annual Report Download - page 61

Table of Contents
business model in the current economic environment and we do not currently foresee any material shifts in mix.
Total revenues from Auctions, Cars and Real Estate businesses were $2.9 million and $2.1 million for the years ended December 31, 2010 and 2009,
respectively. Total revenues from International sales were $9.4 million and $5.1 million for the years ended December 31, 2010 and 2009, respectively.
See "Executive Commentary" above for additional discussion regarding revenue and revenue growth.
Gross profit
Our overall gross margins fluctuate based on our sales volume mix between our direct business and fulfillment partner business; changes in vendor and /
or customer pricing, including competitive pricing, and inventory management decisions within the direct business; sales coupons and promotions; product
mix of sales; and operational and fulfillment costs.
Gross margins for the past eight quarterly periods and years ending December 31, 2010 and 2009 were:
Q1
2010 Q2 2010 Q3 2010 Q4 2010 FY 2010 Q1 2009 Q2 2009 Q3 2009 Q4 2009 FY 2009
Direct 13.8% 11.7% 9.1% 9.0% 10.7% 12.9% 18.0% 11.8% 11.9% 13.3%
Fulfillment
Partner 18.8% 19.4% 18.7% 19.0% 19.0% 21.0% 21.3% 20.7% 18.1% 19.9%
Combined 17.9% 18.0% 16.9% 17.0% 17.4% 19.5% 20.7% 19.3% 17.1% 18.8%
Direct Gross Profit and Gross Margin—Gross profit for our direct business increased 12.5% to $22.5 million for the year ended December 31, 2010,
from $20.0 million for 2009. Gross margin for the direct business decreased to 10.7% for the year ended December 31, 2010, from 13.3% 2009. The decrease
in gross margin for the year ended December 31, 2010 is primarily due to pricing initiatives that were implemented beginning in the third quarter of 2009 and
an increase in returns related costs, partially offset by leverage gained on fixed warehousing costs due to increased revenues. Gross profit for our direct
business was essentially unchanged at $6.3 million for the three months December 31, 2010, and $6.6 million for the same period in 2009. Gross margin for
the direct business decreased to 9.0% for the three months ended December 31, 2010, from 11.9% for the same period in 2009. The decrease in gross margin
for three months ended December 31, 2010 is primarily due to pricing initiatives including holiday promotions and mark-downs of slow-moving inventory
(primarily on apparel and shoes), partially offset by a shift in sales mix to higher margin products along with leverage gained on fixed warehousing costs due
to increased revenues.
Fulfillment Partner Gross Profit and Gross Margin—Gross profit for our fulfillment partner business increased 15.5% to $167.1 million for the year
ended December 31, 2010, from $144.7 million for 2009. Gross margin for the fulfillment partner business decreased to 19.0% for the year ended
December 31, 2010, from 19.9% for 2009. The decrease in gross margin for the year ended December 31, 2010 is primarily due to pricing initiatives that were
implemented beginning in the third quarter of 2009, partially offset by a shift in sales mix to higher margin products as well as lower returns-related costs.
Gross profit for our fulfillment partner business increased 9.7% to $53.2 million for the three months ended December 31, 2010, compared to $48.5 million
for the same period in 2009. Gross margin for the fulfillment partner business increased to 19.0% for the three months ended December 31, 2010 compared to
18.1% for the same period in 2009. The increase in gross margin was primarily due to a reduction in product costs, including reductions from suppliers
participating in promotions, along with a shift in sales mix to higher margin products, partially offset by pricing initiatives.
During reviews of our partner billing system for returns, we discovered that we had underbilled our fulfillment partners for certain fees and charges
related to returns of approximately $819,000 and
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