Overstock.com 2006 Annual Report Download - page 46

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efficient market for liquidation merchandise. Our objective is to provide a one-stop destination for discount shopping for products and
services proven to be successfully sold through the Internet.
Our Business
Overstock utilizes the Internet to create a more efficient market for liquidation merchandise. We provide consumers and
businesses with quick and convenient access to high-quality, brand-name merchandise at discount prices. Our shopping business
includes both a "direct" business and a "fulfillment partner" business. During the year ended December 31, 2006, no single customer
accounted for more than 1% of our total revenue. Products from our direct segment and fulfillment partner segment are available to
both consumers and businesses through our Wholesale bulk purchase program.
Direct business
Our direct business includes sales made to individual consumers and businesses, which are fulfilled from our warehouses in Salt
Lake City, Utah or our outsourced warehouses located in Plainfield, Indiana. During the year ended December 31, 2006, we fulfilled
approximately 39% of all orders through our warehouses. Our warehouses generally ship between 10,000 and 12,000 orders per day,
and up to approximately 34,000 orders per day during peak periods, using overlapping daily shifts.
Fulfillment partner business
For our fulfillment partner business, we sell merchandise of other retailers, cataloguers or manufacturers ("fulfillment partners")
through our Website. We are considered to be the primary obligor for the majority of these sales transactions, and we assume the risk
of loss on the returned items. As a consequence, we record revenue from the majority of these sales transactions involving our
fulfillment partners on a gross basis. Our use of the term "partner" or "fulfillment partner" does not mean that we have formed any
legal partnerships with any of our fulfillment partners. We currently have fulfillment partner relationships with approximately 540
third parties which post approximately 26,000 non-BMMG products, as well as most of the BMMG products and a portion of our
current travel offerings, on our Websites.
Our revenue from sales on our shopping site from both the direct and fulfillment partner businesses is recorded net of returns,
coupons and other discounts. Our returns policy for products other than those sold in our Electronics and Computers department
provides for a $4.95 restocking fee and the provision that we will accept product returns initiated within thirty days after the shipment
date. We charge a 15% restocking fee (instead of the $4.95 restocking fee) on all items returned for non-defective reasons from the
Electronics and Computers department.
Unless otherwise indicated or required by the context, the discussion herein of our financial statements, accounting policies and
related matters, pertains to our shopping sites (Shopping and BMMG) and not necessarily to our auction or travel tabs on our
Websites.
Wholesale business
In August 2004, we merged our B2B site (www.overstockb2b.com) into our B2C site, and opened a "Club O Gold" membership
program (into which our B2B customers were grandfathered). During 2005, we integrated this program into our "Wholesale" tab. For
this tab, we have added a number of suppliers specific to various industry verticals, such as florist supplies, restaurant supplies, and
office supplies.
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