Overstock.com 2004 Annual Report Download - page 18

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addition, manufacturers may decide not to offer particular products for sale on the Internet. If we are unable to maintain our existing or build new fulfillment
partner relationships or if other product manufacturers refuse to allow their products to be sold via the Internet, our business and prospects would suffer
severely.
We are partially dependent on third parties to fulfill a number of our fulfillment, distribution and other retail functions. If such parties are unwilling
or unable to continue providing these services, our business could be seriously harmed.
In our fulfillment partner business, although we now handle returned merchandise, we continue to rely on third parties to conduct a number of other
traditional retail operations with respect to their respective products that we offer for sale on our Websites, including maintaining inventory, preparing
merchandise for shipment to individual customers and timely distribution of purchased merchandise. We have no effective means 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
third parties' products, we are unable to fulfill these traditional retail operations ourselves. Our customers could become dissatisfied and cancel their orders or
decline to make future purchases if these third parties are unable to deliver products on a timely basis. If our customers become dissatisfied with the services
provided by these third parties, our reputation and the Overstock.com brand could suffer.
We rely on our relationships with manufacturers, retailers and other suppliers to obtain sufficient quantities of quality merchandise on acceptable
terms. If we fail to maintain our supplier relationships on acceptable terms, our sales and profitability could suffer.
To date, we have not entered into contracts with manufacturers or liquidation wholesalers that guarantee the availability of merchandise for a set
duration. Our contracts or arrangements with suppliers do not provide for the continuation of particular pricing practices and may be terminated by either
party at any time. Our current suppliers may not continue to sell their excess inventory to us on current terms or at all, and we may not be able to establish
new supply relationships. For example, it is difficult for us to maintain high levels of product quality and selection because none of the manufacturers,
suppliers and liquidation wholesalers from whom we purchase products on a purchase order by purchase order basis have a continuing obligation to provide
us with merchandise at historical levels or at all. In most cases, our relationships with our suppliers do not restrict the suppliers from selling their respective
excess inventory to other traditional or online merchandise liquidators, which could in turn limit the selection of products available on our Websites. If we are
unable to develop and maintain relationships with suppliers that will allow us to obtain sufficient quantities of merchandise on acceptable commercial terms,
such inability could harm our business, prospects, results of operation and financial condition.
We depend upon third-party delivery services to deliver our products to our customers on a timely and consistent basis. A deterioration in our
relationship with any one of these third parties could decrease our ability to track shipments, cause shipment delays, and increase our shipping costs
and the number of damaged products.
We rely upon multiple third parties for the shipment of our products. Because we do not have a written long-term agreement with any of these third
parties, we cannot be sure that these relationships will continue on terms favorable to us, if at all. Unexpected increases in shipping costs or delivery times,
particularly during the holiday season, could harm our business, prospects, financial condition and results of operations. If our relationships with these third
parties are terminated or impaired or if these third parties are unable to deliver products for us, whether through labor shortage, slow down or stoppage,
deteriorating financial or business condition, responses to terrorist attacks or for any other reason, we would be required to use alternative carriers for the
shipment of products to our customers. In addition, conditions such as adverse weather can prevent any carriers from performing their delivery
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