Overstock.com 2011 Annual Report Download - page 65
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Table of Contents
The following table has been included to provide investors additional information regarding our classification of fulfillment costs, gross profit and
margin, thus enabling investors to better compare our gross margin with others in our industry (in thousands):
Year ended December 31,
2011 2010 2009
Total net revenue $ 1,054,277 100% $ 1,089,873 100% $ 876,769 100%
Cost of goods sold
Product costs and other cost of goods sold 821,739 78% 842,064 78% 664,537 76%
Fulfillment and related costs 53,450 5% 58,169 5% 47,480 5%
Total cost of goods sold 875,189 83% 900,233 83% 712,017 81%
Gross profit $ 179,088 17% $ 189,640 17% $ 164,752 19%
Fulfillment costs as a percentage of sales may vary due to several factors, such as our ability to manage costs at our warehouses, significant changes in
the number of units received and fulfilled, the extent to which we use third party fulfillment services and warehouses, and our ability to effectively manage
customer service costs and credit card fees. There have been no significant changes in our fulfillment and related costs as a percentage of revenue during the
year ended December 31, 2011.
See "Gross profit" above for additional discussion.
Operating expenses
Sales and marketing expenses
We advertise through a number of targeted online marketing channels, such as sponsored search, affiliate marketing, portal advertising, e-mail
campaigns, and other initiatives. We also use nationwide television, print and radio advertising campaigns to promote sales.
The following table reflects our sales and marketing expenses for the years ended December 31, 2011 and 2010 (in thousands):
Year ended
December 31,
2011 2010 $ Change % Change
Sales and marketing expenses $ 61,813 $ 61,334 $ 479 0.8%
Sales and marketing expenses as a percent of net revenues 5.9% 5.6%
The increase in sales and marketing expenses as a percentage of net revenues is primarily due to increased spending in search marketing, increased in
part to offset the negative impact of the Google penalty on revenues as described above, partially offset by a decline in spending for affiliate marketing and
television advertising.
Sales and marketing expenses include stock-based compensation expense of $377,000 and $608,000 for the years ended December 31, 2011 and 2010,
respectively
Costs associated with our discounted shipping and other promotions, such as coupons, are not included in marketing expense. Rather they are accounted
for as a reduction of revenue and therefore affect sales and gross margin. We consider discounted shipping and other promotions as an effective marketing
tool, and intend to continue to offer them as we deem appropriate as part of our overall marketing plan.
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