Overstock.com 2005 Annual Report Download - page 7

market, and many of the companies that do offer overstock or liquidation merchandise are focused on single product lines.
Lastly, small retailers are under competitive pressure from large national retailers. Small retailers generally do not have
purchasing leverage with manufacturers; consequently, they are more likely to pay full wholesale prices and are more likely to receive
inferior service. We believe that small retailers generally do not have access to the liquidation market because liquidation wholesalers
are most often interested in liquidating large volumes of merchandise, rather than the small quantities appropriate for small, local
retailers.
The Overstock Solution
Overstock provides manufacturers with a one-stop liquidation channel to sell both large and small quantities of excess and
closeout inventory without disrupting sales through traditional channels. Key advantages for manufacturers liquidating their excess
inventory through Overstock include:
• Resolution of channel conflict. Channel conflicts arise when a manufacturer's excess inventory is sold through the same
channel as their other product offerings. Since excess inventory is usually sold at a discount, sales of the manufacturer's other
product offerings may be impacted as a consumer in a retail store may opt for the excess product or become confused by the
pricing and model discrepancies. By using Overstock, manufacturers have an alternative and independent channel where they
can sell excess inventory without the fear of hindering the sale of their other products.
• Single point of distribution. Manufacturers often use multiple liquidation sources to clear their excess inventory. Multiple
sources create additional logistics issues that they would rather avoid. By using Overstock, manufacturers have a single source
for the distribution of excess inventory.
• Improved control of distribution. By using Overstock, manufacturers can monitor what kind of customer, whether individual
consumer or small retailer, ultimately purchases their merchandise. In addition, a manufacturer can request that its products be
offered in only one of our sales channels in order to avoid sales channel pollution.
• Improved transaction experience. By having a reliable inventory clearing channel, manufacturers are able to more quickly and
easily dispense of their excess merchandise.
Overstock also offers consumers a compelling alternative for bargain shopping. Key advantages for consumers include:
• High quality and broad product selection. Much of the merchandise offered on our Websites is from well-known, brand-name
manufacturers. We typically have approximately 62,000 non-BMV products and approximately 725,000 BMV products
(books, magazines, CDs, DVDs, video cassettes and video games) in eight major departments.
• Convenient access on a secure site. Our customers are able to access and purchase our products 24 hours a day from the
convenience of their computer. We do not sell any personal information about our customer base to third parties.
• Responsive customer service and positive shopping experience. Our team of customer service representatives (which includes
employees, temporary employees and outsourced staff) assists customers by telephone, instant online chat and e-mail. Our
customer service staff answers approximately 85% of phone calls within 30 seconds, and responds to approximately 98% of its
e-mails within one business day. For our consumer business, we include a return shipment label in our customer's shipment to
facilitate product returns and, subject to certain conditions; we allow customers up to 20 days from date of shipment to initiate
the return of most purchased
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