Overstock.com 2012 Annual Report Download - page 102
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Table of Contents
If the return is not a result of a product defect or a fulfillment error and the customer initiates a return of an unopened item within 30 days of
delivery, for most products we refund the full cost of the merchandise minus the original shipping charge and actual return shipping fees. However, we
reduce refunds for returns initiated more than 30 days after delivery or that are received at our returns processing facility more than 45 days after initial
delivery.
If our customer returns an item that has been opened or shows signs of wear, we issue a partial refund minus the original shipping charge and
actual return shipping fees.
Revenue is recorded net of estimated returns. We record an allowance for returns based on current period revenues and historical returns
experience. We analyze actual historical returns, current economic trends and changes in order volume and acceptance of our products when evaluating
the adequacy of the sales returns allowance in any accounting period.
The allowance for returns was $10.6 million and $10.9 million at December 31, 2012 and 2011, respectively.
Revenue is recorded net of credit card chargebacks. We maintain an allowance for credit card chargebacks based on current period revenues and
historical chargeback experience. The allowance for chargebacks was $182,000 and $187,000 at December 31, 2012 and 2011, respectively.
Cost of goods sold includes product costs, warehousing costs, outbound shipping costs, handling and fulfillment costs, customer service costs and
credit card fees, and is recorded in the same period in which related revenues have been recorded. Cost of goods sold, including product cost and other
costs and fulfillment and related costs are as follows (in thousands):
We expense the costs of producing advertisements the first time the advertising takes place and expense the cost of communicating advertising in
the period during which the advertising space or airtime is used. Internet advertising expenses are recognized as incurred based on the terms of the
individual agreements, which are generally: 1) a commission for traffic driven to the Website that generates a sale or 2) a referral fee based on the
number of clicks on keywords or links to our Website generated during a given period. Advertising expense is included in sales and marketing
expenses and
F-15
Total net revenue $ 1,099,289 100% $ 1,054,277 100% $ 1,089,873 100%
Cost of goods sold
Product costs and other cost of
goods sold 848,842 77% 821,739 78% 842,064 78%
Fulfillment and related costs 52,017 5% 53,450 5% 58,169 5%
Total cost of goods sold 900,859 82% 875,189 83% 900,233 83%
Gross profit $ 198,430 18% $ 179,088 17% $ 189,640 17%