Overstock.com 2012 Annual Report Download - page 18

Table of Contents
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
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
We have a history of significant losses. If we do not maintain profitability, our financial condition and our stock price could suffer.
We have a history of losses and we may incur operating and net losses in the foreseeable future. At December 31, 2012, our accumulated deficit
was $247 million. We need to generate significant revenues to maintain profitability, and we may not be able to do so. Although we had net income of
$14.7 million in 2012, we incurred a net loss of $19.4 million in 2011. We may be unable to maintain profitability in the future. If our revenues grow
more slowly than we anticipate or decline, or if our expenses exceed our expectations, our financial results would be harmed and our business,
prospects, financial condition and results of operations could fall below the expectations of public market analysts and investors.
We are an e-commerce business and we depend on the continued use of the Internet and the adequacy of the Internet infrastructure.
Our business depends upon the widespread use of the Internet and e-commerce. Factors which could reduce the widespread use of the Internet for
e-commerce include:
•actual or perceived lack of security of information or privacy protection;
•cyber attacks or other disruptions or damage to the Internet or to users' computers;
•significant increases in the costs of transportation of goods; and
•taxation and governmental regulation.
We depend on our relationships with independent fulfillment partners for a large portion of the products that we offer for sale on our Website. If
we fail to maintain these relationships, our business will suffer.
At December 31, 2012, we had relationships with approximately 2,100 independent fulfillment partners whose products we offer for sale on our
Website. Products provided by our fulfillment partners accounted for 86% of our net revenues for the year ended December 31, 2012. If we do not
maintain our existing relationships or build new relationships with fulfillment partners on acceptable commercial terms, we may not be able to maintain a
broad selection of merchandise, and our business and prospects would suffer severely. Our agreements with fulfillment partners are generally
terminable at will by either party upon short notice.
We depend on our fulfillment partners to perform certain services regarding the products that we offer.
In general, we agree to offer the fulfillment partners' products on our Website and these fulfillment partners agree to conduct a number of other
traditional retail operations with respect to their respective products, including maintaining inventory, preparing merchandise for shipment to individual
customers and delivering purchased merchandise on a timely basis. We may be unable to ensure that these third parties will continue to perform these
services to our satisfaction or on commercially reasonable terms. In addition, because we do not take possession of these fulfillment parties' products
(other than on the return of such products), we are generally unable to fulfill these
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