Overstock.com 2014 Annual Report Download - page 37

Table of Contents
We deal primarily in price-competitive, replenishable and closeout merchandise and use the Internet to aggregate both supply and demand to create
an efficient marketplace for selling these products. We provide manufacturers with a one-stop liquidation channel to sell both large and small quantities of
excess, closeout and replenishable inventory without disrupting sales through traditional channels. The merchandise offered on our Website is from a variety
of sources including well-known, brand-name manufacturers. We have organized our shopping business (sales of product offered through the Shopping
Section of our Website) into two principal segments—a "direct" business and a "partner" business. We currently offer approximately 683,000 non-BMMG
products and approximately 696,000 BMMG products. Consumers and businesses are able to access and purchase our products 24 hours a day from the
convenience of a computer, Internet-enabled mobile telephone or other Internet-enabled device. Our team of customer service representatives assists
customers by telephone, instant online chat and e-mail. We also derive revenue from other businesses advertising products or services on our Website. Nearly
all of our sales are to customers located in the United States. During the years ended December 31, 2014, 2013 and 2012 no single customer accounted for
more than 1% of our total net revenue.
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Our direct business includes sales made to individual consumers and businesses from our owned inventory and that are fulfilled primarily from our
warehouse in Salt Lake City, Utah. During the year ended December 31, 2014, we fulfilled approximately 10% of our order volume through our warehouse,
which generally ships between 2,000 and 5,000 packages per day and up to approximately 12,000 orders per day during peak periods, using overlapping
daily shifts.
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For our partner business, we sell merchandise of other retailers, cataloguers or manufacturers ("partners") primarily through our Website. We are
considered to be the primary obligor for the majority of these sales transactions and we record revenue from the majority of these sales transactions on a gross
basis. Our use of the term "partner" does not mean that we have formed any legal partnerships with any of our partners. We currently have relationships with
approximately 3,200 third parties who supply approximately 667,000 non-BMMG products, as well as most of the BMMG products, on our Website. These
third party partners generally perform the same fulfillment operations as our warehouses, such as order picking and shipping; however, we handle returns and
customer service related to substantially all orders placed through our Website. Revenue generated from sales on our Shopping site from both the direct and
partner businesses is recorded net of returns, coupons and other discounts.
Both direct and partner revenues are seasonal, with revenues historically being the highest in the fourth quarter, which ends December 31, reflecting
higher consumer holiday spending. We anticipate this will continue in the foreseeable future.
Generally, we require verification of receipt of payment, or authorization from credit card or other payment vendors whose services we offer to our
customers (such as PayPal and BillMeLater), before we ship products to consumers or business purchasers. From time to time we grant credit to our business
purchasers with normal credit terms (typically 30 days). For sales in our partner business, we generally receive payments from our customers before our
payments to our suppliers are due.
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We offer additional products or services that complement our primary offerings, but are not significant to our revenues. These include:
• Worldstock Fair Trade, a store within our Website that offers handcrafted products made by artisans all over the world, which emphasizes
sustainability, fairness, and transparency, and which we attempt to run at 0% profit by donating net profits to fund philanthropic projects in several
countries, including Guatemala, Kenya, Malawi, and Nepal;
• Main Street Revolution, a store within our Website that features products from small businesses across the United States who offer their products
using our national marketing and distribution channels;
• Supplier Oasis Fulfillment Services ("SOFS"), a single integration point through which our partners can manage their products, inventory and sales
channels, while tapping into a our distribution network;
• ecommerce marketplace channels, where some of our products are offered for sale in on-line marketplaces of other Internet retailers' websites;
• our international business where we offer products to customers outside the United States using U.S.-based third party logistics providers;
• Pet Adoptions, a free service and tab within our Website that leverages our technology to display pets available for adoption from shelters across the
United States;
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