Overstock.com 2010 Annual Report Download - page 62
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Table of Contents
$1.6 million for the years ended December 31, 2010 and 2009, respectively. Since our business model is reliant on our relationships with our fulfillment
partners and the problem related to an internal record keeping issue on our part, we have made the determination to not seek recovery of these amounts from
our fulfillment partners and consequently have not recognized any related recoveries in our consolidated financial statements.
The other factors described above, did not have a significant effect on the change in gross profit.
Cost of goods sold includes stock-based compensation expense of $212,000 and $167,000 for the years ended December 31, 2010 and 2009,
respectively.
See "Executive Commentary" above for additional discussion.
Fulfillment costs
Fulfillment costs include all warehousing costs, including fixed overhead and variable handling costs (excluding packaging costs), as well as credit card
fees and customer service costs, all of which we include as costs in calculating gross margin. We believe that some companies in our industry, including some
of our competitors, account for fulfillment costs within operating expenses, and therefore exclude fulfillment costs from gross margin. As a result, our gross
margin may not be directly comparable to others in our industry.
The following table has been included to provide investors additional information regarding our classification of fulfillment costs, gross profit and
margin, thus enabling investors to better compare our gross margin with others in our industry (in thousands):
Year ended December 31,
2010 2009
Total net revenue $ 1,089,873 100% $ 876,769 100%
Cost of goods sold
Product costs and other cost of goods sold 842,064 78% 664,537 76%
Fulfillment and related costs 58,169 5% 47,480 5%
Total cost of goods sold 900,233 83% 712,017 81%
Gross profit $ 189,640 17% $ 164,752 19%
Fulfillment costs as a percentage of sales may vary due to several factors, such as our ability to manage costs at our warehouses, significant changes in
the number of units received and fulfilled, the extent to which we use third party fulfillment services and warehouses, and our ability to effectively manage
customer service costs and credit card fees. There have been no significant changes in our fulfillment costs during the year ended December 31, 2010.
See "Gross profit" above for additional discussion.
Operating expenses
Sales and marketing expenses
We advertise through a number of targeted online marketing channels, such as sponsored search, affiliate marketing, portal advertising, e-mail
campaigns, and other initiatives. We also use nationwide television, print and radio advertising campaigns to promote sales.
Sales and marketing expenses totaled $61.3 million and $55.5 million for the years ended December 31, 2010 and 2009, respectively, representing 5.6%
and 6.3% of total net revenue for those
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