Overstock.com 2013 Annual Report Download - page 44
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Table of Contents
The increase in fulfillment partner gross margin for the year ended December 31, 2013 is primarily due to higher revenue and a shift in product sales
mix into higher margin home and garden products.
Cost of goods sold includes stock-based compensation expense of $154,000 and $272,000 for the years ended December 31, 2013 and 2012,
respectively.
Fulfillment costs include all warehousing costs, including fixed overhead and variable handling costs (excluding packaging costs), as well as credit
card fees and customer service costs, all of which we include as costs in calculating gross margin. We believe that some companies in our industry, including
some of our competitors, account for fulfillment costs within operating expenses, and therefore exclude fulfillment costs from gross margin. As a result, our
gross margin may not be directly comparable to others in our industry.
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):
Total revenue, net
$1,304,217
100%
$1,099,289
100%
Cost of goods sold
Product costs and other cost of goods sold
999,519
77%
848,842
77%
Fulfillment and related costs
57,038
4%
52,017
5%
Total cost of goods sold
1,056,557
81%
900,859
82%
Gross profit
$247,660
19%
$198,430
18%
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. Fulfillment and related costs remained relatively flat during the year ended December 31, 2013 as compared to
2012.
See “Gross profit and gross margin” above for additional discussion.
We use a variety of methods to target our consumer audience, including online campaigns, such as advertising through keywords, product listing ads,
display ads, search engines, affiliate marketing programs, social coupon websites, portals, banners, e-mail, direct mail and viral and social media
campaigns. We also do brand advertising through television, radio, and print ads.
The following table reflects our sales and marketing expenses for the years ended December 31, 2013 and 2012 (in thousands):
Sales and marketing expenses
$91,609
$63,467
$ 28,142
44.3%
Sales and marketing expenses as a percent of net revenues
7.0%
5.8%
Sales and marketing expenses as a percentage of revenue increased from 5.8% to 7.0% for the year ended December 31, 2013 as compared to the
same period in 2012, primarily due to increased expenditures in the sponsored search marketing channel due to a higher proportion of our revenue coming
through that channel.
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