Overstock.com 2012 Annual Report Download - page 62
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Table of Contents
$822,000 for the years ended December 31, 2011 and 2010, 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 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, such as operational and fulfillment costs did not have a significant impact on the change in gross margin.
Cost of goods sold includes stock-based compensation expense of $193,000 and $212,000 for the years ended December 31, 2011 and 2010.
See "Executive Commentary" above for additional discussion.
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):
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 and related costs as a
percentage of revenue during the year ended December 31, 2011.
See "Gross profit" above for additional discussion.
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.
53
Total net revenue $ 1,054,277 100% $ 1,089,873 100%
Cost of goods sold
Product costs and other cost of goods sold 821,739 78% 842,064 78%
Fulfillment and related costs 53,450 5% 58,169 5%
Total cost of goods sold 875,189 83% 900,233 83%
Gross profit $ 179,088 17% $ 189,640 17%