Overstock.com 2005 Annual Report Download - page 20

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business, prospects, financial condition and results of operation. We cannot assure you that we will be able to expand our operations in
a cost-effective or timely manner or that our efforts to expand will be successful. Furthermore, any new business or Website we
launch that is not favorably received by consumers could damage our reputation or the Overstock.com brand. We may expand the
number of categories of products we carry on our Websites and these and any other expansions of our operations would also require
significant additional expenses and development and would strain our management, financial and operational resources. The lack of
market acceptance of such efforts or our inability to generate satisfactory revenues from such expanded services or products to offset
their cost could harm our business, prospects, financial condition and results of operations.
We may expand our international business, causing our business to become increasingly susceptible to numerous international
business risks and challenges that could affect our profitability.
We have begun to expand into international markets, and in the future we may do so more aggressively. International sales and
transactions are subject to inherent risks and challenges that could adversely affect our profitability, including:
• the need to develop new supplier and manufacturer relationships;
• the need to comply with additional laws and regulations to the extent applicable;
• unexpected changes in international regulatory requirements and tariffs;
• difficulties in staffing and managing foreign operations;
• longer payment cycles from credit card companies;
• greater difficulty in accounts receivable collection;
• potential adverse tax consequences;
• price controls or other restrictions on foreign currency; and
• difficulties in obtaining export and import licenses.
To the extent we generate international sales and transactions in the future, any negative impact on our international operations
could negatively impact our business. In particular, gains and losses on the conversion of foreign payments into United States dollars
may contribute to fluctuations in our results of operations and fluctuating exchange rates could cause reduced gross revenues and/or
gross margins from non-dollar-denominated international sales.
In order to obtain future revenue growth and achieve and sustain profitability we will have to attract customers on cost-
effective terms.
Our success depends on our ability to attract customers on cost-effective terms. We have relationships with online services,
search engines, directories and other Websites and e-commerce businesses to provide content, advertising banners and other links that
direct customers to our Websites. We rely on these relationships as significant sources of traffic to our Websites and to generate new
customers. If we are unable to develop or maintain these relationships on acceptable terms, our ability to attract new customers and
our financial condition could be harmed. In addition, certain of our online marketing agreements may require us to pay upfront fees
and make other payments prior to the realization of the sales, if any, associated with those payments. Accordingly, if these agreements
or similar agreements that we may enter into in the future fail to produce the sales that we anticipate, our results of operations will be
adversely affected. We cannot assure you that we will be able to increase our revenues, if at all, in a cost-effective manner. We
periodically conduct national television and radio branding and advertising campaigns. Such campaigns are expensive and may not
result in the cost effective acquisition of customers.
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