Overstock.com 2014 Annual Report Download - page 26

Table of Contents
Significant merchandise returns could harm our business.
We allow our customers to return products, subject to our returns policies. If merchandise returns are higher than we expect, 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 policies intended to
reduce the number of product returns may result in customer dissatisfaction and/or 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, and free or discounted shipping as a means of attracting customers and encouraging repeat
purchases. Such offers and discounts reduce our margins. In addition, our competitors’ pricing and marketing strategies are beyond our control and can
significantly affect the results of our pricing strategies. If we fail to meet our customers’ price expectations, or if we are unable to compete effectively with our
competitors when they engage in aggressive pricing strategies or other competitive activities, our business would suffer.
If the products that we offer on our Website do not reflect our customers’ tastes and preferences, our sales and profit margins would decrease.
Our success depends in part on our ability to offer products that reflect consumers’ tastes and preferences. Consumers’ tastes are subject to frequent,
significant and sometimes unpredictable changes. Because some of the products that we sell consist of manufacturers’ and retailers’ excess inventory, we
have limited control over some of the products that we are able to offer for sale. If our merchandise fails to satisfy customers’ tastes or respond to changes in
customer preferences, our sales could suffer and we could be required to mark down unsold inventory, as we have in the past, which would depress our profit
margins. In addition, any failure to offer products in line with customers’ preferences could allow our competitors to gain market share. This could have an
adverse effect on our business.
The loss of key personnel or any inability to attract and retain additional personnel could affect our ability to successfully grow our business.
Our performance is substantially dependent on the continued services and on the performance of our senior management and other key personnel.
Our performance also depends on our ability to retain and motivate our officers and key employees. The loss of the services of any of our executive officers or
other key employees for any reason could harm our business. Occasionally, members of senior management or key employees may find it necessary to take a
leave of absence due to medical or other causes. In early 2013 our Chief Executive Officer and then Chairman of the Board, Dr. Patrick M. Byrne, took a two-
month personal leave of absence for medical reasons. Leaves of absence for temporary or extended periods may harm our business. We do not have
employment agreements with any of our key personnel and we do not maintain “key person” life insurance policies. Our future success also depends on our
ability to identify, attract, hire, train, retain and motivate other highly-skilled technical, managerial, editorial, merchandising, marketing and customer service
personnel. Competition for such personnel is intense. Our failure to retain and attract the necessary technical, managerial, editorial, merchandising,
marketing, and customer service personnel could harm our business.
In order to obtain future revenue growth and sustain profitability, we will have to attract and retain customers on cost-effective terms.
Our success depends on our ability to attract and retain customers on cost-effective terms. We have relationships with online services, search
engines, affiliate marketing websites, directories and other website and e-commerce businesses to provide content, advertising banners and other links that
direct customers to our Website. We rely on these relationships as significant sources of traffic to our Website and to generate new customers. In the past we
have terminated affiliate marketing websites as a result of efforts by certain states to require us to collect sales taxes based on the presence of those third party
Internet advertising affiliates in those states, and we are likely to do so again in the future if necessary. If we are unable to develop or maintain these
relationships, or develop and maintain new relationships for newly developed and necessary marketing services on acceptable terms, our ability to attract
new customers and our financial condition would suffer. In addition, certain of our online marketing agreements may require us to pay upfront fees and make
other payments prior to the realization of the sales, if any, associated with those payments. Current or future relationships or agreements may fail to produce
the sales that we anticipate. We periodically conduct television and radio branding and advertising campaigns. Such campaigns are expensive and may not
result in the cost-effective acquisition of customers. Other means of utilizing social media campaigns to attract or retain customers are expensive and may not
result in cost-effective acquisition or retention of customers.
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