Overstock.com 2012 Annual Report Download - page 60

Download and view the complete annual report

Please find page 60 of the 2012 Overstock.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 151

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151

Table of Contents
Revenues declined by 22% in our direct business due primarily to a transition of some of our clothing and shoes category to a fulfillment partner
model to reduce seasonal inventory risks. Revenue from our fulfillment partner business increased by 1%. The direct business declined to 16% of total
revenue in 2011 from 19% in 2010, while our fulfillment partner business generated 84% of our total revenue in 2011 compared to 81% in 2010.
The decrease in net revenue for the year ended December 31, 2011 was primarily due to visits to our website decreasing 1% and new customer
growth decreasing 9%, partially offset by a slightly higher average order size.
We believe our revenues were negatively impacted during the first and second quarters of 2011 when Google Inc. notified us that it was penalizing
us in natural search results for noncompliance with some of Google's natural search guidelines. During this penalty period, we dropped significantly in
some of Google's natural search result rankings. We made changes to conform to Google's guidelines and on April 21, 2011 Google ended its
penalization of our natural search results. We were able to offset some of the negative impact to revenue by increasing expenditures in other marketing
channels.
Revenues were also hurt by a shift of marketing resources into our Club O loyalty program and away from coupons and other site-wide
promotions, which were less effective in generating revenues during the second and third quarter of 2011.
We also believe that our efforts to rebrand ourselves from Overstock.com to O.co hurt revenue growth in 2011 as it confused some prospective
customers who had trouble finding our website.
Total revenues from the Auctions, Cars, Insurance, Travel and Real Estate businesses were $1.7 million and $2.9 million for the years ended
December 31, 2011 and 2010, respectively. Total revenues from International sales were $8.8 million and $9.4 million for the years ended
December 31, 2011 and 2010, respectively.
See "Executive Commentary" above for additional discussion regarding revenue.

Our overall gross margins fluctuate based on our sales volume mix between our direct business and fulfillment partner business; changes in
vendor and / or customer pricing, including competitive pricing; inventory management decisions within the direct business; sales coupons and
promotions; product mix of sales; and operational and fulfillment costs.
51