Overstock.com 2009 Annual Report Download - page 26

Table of Contents
adverse effect on our customers' satisfaction with us. In any of these circumstances, we may be unable to engage alternative carriers on a timely basis, upon
terms we find acceptable, or at all. Changing carriers, or absence of carrier availability could have a negative effect on our business, prospects, operating
results and financial condition. Potential adverse consequences effecting customer satisfaction include:
reduced visibility and accuracy of order status and package tracking;
delays in order processing and product delivery;
increased delivery costs, resulting in reduced profit margins; and
reduced shipment quality, which may result in delivery of damaged products.
We depend upon our credit card processor and payment card association.
Our customers primarily use credit cards to buy from us. We are dependent upon our credit card processor to process the sales transactions and remit the
proceeds to us. The credit card processor has the right to withhold funds otherwise payable to us to establish a reserve based on its assessment of the inherent
risks of credit card processing and its assessment of the risks of processing our customers' credit cards, and has done so from time to time in the past. The
credit card processor may establish, increase or decrease the amount of any reserve at any time. Any increase in the amount of the reserve established by the
processor would have an adverse effect on our cash flow, and any material unexpected increase could have a material adverse effect on our liquidity, business,
prospects, results of operations and financial condition.
We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could
change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines
and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, process electronic funds transfers, or facilitate
other types of online payments, and our business and operating results could be adversely affected.
A significant number of merchandise returns could harm our business, financial condition and results of operations.
We generally allow our customers to return products, subject to our returns policies. If merchandise returns are significant, our business, prospects,
financial condition and results of operations could be harmed. Further, we modify our policies relating to returns from time to time and any policies intended
to reduce the number of product returns may result in customer dissatisfaction and fewer repeat customers.
Our pricing strategy may not meet customers' price expectations or result in net income.
Demand for our products is generally highly sensitive to price. Our pricing strategies have had, and may continue to have, a significant impact on our net
sales and net income. We often offer discounted prices, free or discounted shipping as a means of attracting customers and encouraging repeat purchases.
Such offers and discounts may reduce our margins. In addition, our competitors' pricing and marketing strategies are beyond our control and can significantly
impact the results of our pricing strategies. If we fail to meet our customers' price expectations in any given period, or if our competitors decide to engage in
aggressive pricing strategies, our business and results of operations would suffer.
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