Overstock.com 2004 Annual Report Download - page 17

generate significant revenues to achieve profitability, and we may not be able to do so. Even if we do achieve profitability, we may not be able to sustain or
increase profitability on a quarterly or annual basis in the future. If our revenues grow more slowly than we anticipate, or if our operating expenses exceed our
expectations, our financial results would be harmed.
We will continue to incur significant operating expenses and capital expenditures as we:
enhance our distribution and order fulfillment capabilities;
further improve our order processing systems and capabilities;
develop enhanced technologies and features;
expand our customer service capabilities to better serve our customers' needs;
expand our product offerings, including our auctions site, our travel site and our custom design jewelry site;
rent additional warehouse and office space;
increase our general and administrative functions to support our operations; and
maintain or increase our sales, branding and marketing activities, including maintaining existing or entering into new online marketing
arrangements, and continuing or increasing our national television and radio branding campaigns.
Because we will incur many of these expenses before we receive any revenues from our efforts, our losses may be greater than the losses we would incur
if we developed our business more slowly. Further, we base our expenses in large part on our operating plans and future revenue projections. Many of our
expenses are fixed in the short term, and we may not be able to quickly reduce spending if our revenues are lower than we project. Therefore, any significant
shortfall in revenues would likely harm our business, prospects, operating results and financial condition. In addition, we may find that these efforts are more
expensive than we currently anticipate, which would further increase our losses. Also, the timing of these expenses may contribute to fluctuations in our
quarterly operating results.
If we fail to accurately forecast our expenses and revenues, our business, operating results and financial condition may suffer and the price of our
stock may decline.
Our limited operating history and the rapidly evolving nature of our industry make forecasting operating results difficult. We may not be able to quickly
reduce spending if our revenues are lower than we project. Therefore, any significant shortfall in revenues would likely harm our business, prospects,
operating results and financial condition and cause our results of operation to fall below the expectations of public market analysts and investors. If this
occurs, the price of our securities may decline.
We depend on our relationships with third party fulfillment partners for a large portion of the products that we offer for sale on our Websites. If we
fail to maintain these relationships, our business will suffer.
During 2004, we had fulfillment partner relationships with approximately 380 third parties whose products we offer for sale on our Websites. At
December 31, 2004, these products accounted for approximately 80% of the non-BMV products available on our Websites. We do not have any long-term
agreements with any of these third parties. Our agreements with third parties are terminable at will by either party immediately upon notice. In general, we
agree to offer the third parties' products on our Websites and these third parties agree to provide us with information about their products, honor our customer
service policies and ship the products directly to the customer. If we do not maintain our existing or build new relationships with third parties on acceptable
commercial terms, we may not be able to offer a broad selection of merchandise, and customers may refuse to shop at our Websites. In
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