Overstock.com 2007 Annual Report Download - page 20

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fulfilling orders, which may reduce the volume of goods we sell and the attractiveness of our products and services. In addition, we may be unable to
adequately staff our fulfillment and customer service centers during these peak periods and delivery and other fulfillment companies and customer service co-
sourcers may be unable to meet the seasonal demand.
If we fail to accurately forecast our expenses and revenues, our business, operating results and financial condition may suffer and the price of our
securities may decline.
Our limited operating history and the rapidly evolving nature of our industry make forecasting operating results difficult. We have recently completed
several large, complex and expensive infrastructure upgrades in order to increase our ability to handle larger volumes of sales and to develop or increase our
ability to perform a variety of analytical procedures relating to our business, and we are continuing the work to upgrade and further expand these and other
components of our infrastructure. We have experienced difficulties with the implementation of various aspects to the upgrades of our infrastructure, and have
incurred increased expenses as a result of these difficulties. As a result of these expenditures, our ability to quickly reduce spending if our revenues are lower
than we project is limited. Therefore, any significant shortfall in the revenues for which we have built and are continuing to build our infrastructure 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 Website. If we
fail to maintain these relationships, our business will suffer.
At December 31, 2007, we had fulfillment partner relationships with approximately 730 third parties whose products we offer for sale on our Website.
We depend on our fulfillment partners to provide a large portion of the product selection we offer, as these products accounted for approximately 90% of the
non-BMMG products available on our Website. We plan to continue to expand the number of fulfillment partner relationships and the number of products
offered for sale by our fulfillment partners on our Website. 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 Website 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 relationships 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 Website. 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 Website, 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
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