Overstock.com 2012 Annual Report Download - page 19

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Table of Contents
traditional retail operations ourselves. If our customers become dissatisfied with the services provided by these third parties, our business and reputation
and the Overstock.com brand could suffer.
Risks associated with the suppliers from whom our products are sourced and the safety of those products could adversely affect our financial
performance.
Global sourcing of many of the products we sell is an important aspect of our business. We depend on our ability to access products from qualified
suppliers in a timely and efficient manner. Political and economic instability, the financial stability of suppliers, suppliers' ability to meet our standards,
labor problems experienced by our suppliers, the availability of raw materials, merchandise quality issues, currency exchange rates, transport availability
and cost, transport security, inflation, and other factors relating to the suppliers and the countries in which they are located are beyond our control.
Further, our customers count on us to provide them with safe products. Concerns regarding the safety of products that we source from our suppliers
and then sell could cause shoppers to avoid purchasing certain products from us, or to seek alternative sources of supply for all of their needs, even if
the basis for the concern is outside of our control. Any lost confidence on the part of our customers would be difficult and costly to reestablish. As
such, any issue regarding the safety of any items we sell, regardless of the cause, could adversely affect our financial performance. Further, we sell
products manufactured for us by third parties, some of which may be defective. If any product that we sell were to cause physical injury or injury to
property, the injured party or parties might bring claims against us as the manufacturer and/or retailer of the product. Our insurance coverage may not be
adequate to cover claims that could be asserted. Even unsuccessful claims could result in the expenditure of funds and management time and could have
a negative impact on our business.
Manufacturers may refuse to sell to us or through our site.
We rely upon our fulfillment partners and other suppliers for the product offerings sold on our website and other products and services we use to
run our business. Our ability to retain or attract new fulfillment partners and other suppliers may depend in part on our financial performance. Poor
financial performance could result in suppliers choosing to limit or suspend doing business with us or require us to prepay for our purchases. Further,
some manufacturers are unwilling to offer products for sale on the Internet or on sites like ours. Our inability to source and offer popular products could
be a significant problem for us.
Our business depends on our Website, network infrastructure and transaction-processing systems.
As an e-commerce company, we are completely dependent on our infrastructure. Any system interruption that results in the unavailability of our
Website or reduced performance of our transaction systems could reduce our ability to conduct our business. We use internally and externally developed
systems for our Website and our transaction processing systems, including personalization databases used for internal analytics, recommendations and
order verifications. We have experienced periodic systems interruptions due to server failure and power failure in the past, which we expect will
continue to occur from time to time. We have also experienced and may continue to experience temporary capacity constraints due to sharply increased
traffic during sales or other promotions and during the holiday shopping season. Capacity constraints can cause system disruptions, slower response
times, delayed page presentation, degradation in levels of customer service and other problems. In the past we have also experienced difficulties with
our infrastructure upgrades. Any future difficulties with our transaction processing systems or difficulties upgrading, expanding or integrating aspects
of our systems may cause system disruptions, slower response times, and degradation in levels of customer service, additional expense, impaired
quality and speed of order fulfillment or other problems.
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