Overstock.com 2005 Annual Report Download - page 17

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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.
At December 31, 2005, we had fulfillment partner relationships with approximately 460 third parties whose products we offer for
sale on our Websites. These products accounted for approximately 80% of the non-BMV products available. 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 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 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.
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