Overstock.com 2009 Annual Report Download - page 11

Table of Contents
PART I
ITEM 1. BUSINESS
The following description of our business contains forward-looking statements relating to future events or our future financial or operating performance
that involve risks and uncertainties, as set forth above under "Special Note Regarding Forward-Looking Statements." Our actual results could differ
materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in Section 1A under the heading
"Risk Factors" and elsewhere in this Form 10-K.
Introduction
We are an online retailer offering closeout and discount brand and non-brand name merchandise, including bed-and-bath goods, home décor,
kitchenware, watches, jewelry, electronics and computers, sporting goods, apparel, and designer accessories, among other products. We sell these products
through an internet website located at www.overstock.com ("Website"). We also sell books, magazines, CDs, DVDs and video games ("BMMG"). We also
operate as part of our Website an online auctions business—a marketplace for the buying and selling of goods and services—as well as online sites for listing
cars and real estate for sale. In October 2009, we also launched O.biz, a website where customers can shop for bulk and business related items. Though our
two websites are located at different domain addresses, the technology and equipment and processes supporting the Overstock.com Website and the process of
order fulfillment described herein are the same for the O.biz website.
Our company, based in Salt Lake City, Utah, was founded in 1997. We launched the Website in March 1999. Our Website offers our customers an
opportunity to shop for bargains conveniently, while offering our suppliers an alternative inventory liquidation or sales channel. We continually add new,
sometimes limited inventory products to our Website in order to create an atmosphere that encourages customers to visit frequently and purchase products
before our inventory sells out. We offer approximately 168,000 non books and media products in multiple departments found under the shopping tab
("Shopping Tab" or "Shopping Section") on our Website, and offer approximately 661,000 media products in the Books & Media department. We sell
products primarily in the United States, with a small amount of products (less than 1% of sales) sold internationally.
As used herein, "Overstock.com," "we," "our" and similar terms include Overstock.com, Inc. and its subsidiaries, unless the context indicates otherwise.
Industry Overview
We deal primarily in closeout and discount merchandise. Closeout merchandise is typically available in inconsistent quantities and often is only available
to consumers after it has been purchased and resold by disparate liquidation wholesalers. We believe that the traditional liquidation market is therefore
characterized by fragmented supply and fragmented demand. We use the Internet to aggregate both supply and demand and create a more efficient market for
liquidation merchandise. Our objective is to provide a one-stop destination for discount shopping for products and services sold through the Internet.
Manufacturers and retailers traditionally hold inventory to buffer against uncertain demand within their normal, "inline" sales channels. Inline sales
channels are manufacturers' primary distribution channels, which are characterized by regularly placed orders by established retailers at or near wholesale
prices.
The disposal of excess, or overstock, inventory represents a substantial burden for many manufacturers, especially those who produce high-quality
branded merchandise. Manufacturers seek to avoid liquidating through traditional retail channels where the manufacturer's discounted products may be sold
alongside other full-price products. This can result in weaker pricing and decreased brand
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