Overstock.com 2014 Annual Report Download - page 44

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Table of Contents
The increase in partner revenue for the year ended December 31, 2014, as compared to 2013, was primarily due to an increase in sales of home and
garden products.
The shift of business from direct to partner (or vice versa) is an economic decision based on the economics of each particular product offering at the
time and we generally do not have particular goals for an “appropriate” mix or percentage for the size of either. We believe that the mix of the business
between direct and partner is consistent with our strategic objectives for our business model in the current economic environment and we do not currently
foresee any material shifts in mix.
The product lines we offer, and their respective percentages of our revenue, are based on many factors including customer demand, our marketing
efforts, promotional pricing and joint-marketing offered by our suppliers, and the types of liquidated inventory we are able to obtain. These factors change
frequently and affect the mix of the product lines we sell. While we have experienced a trend toward our home and garden category in recent years, our
business model is to deal primarily in price-competitive, replenishable and closeout merchandise, which includes a wide variety of product offerings. While
we do not currently expect any material shifts in our product line mix, the amount of the product lines we sell is an economic decision based on the factors
described above which may change.
We continue to seek increased participation in our Club O loyalty program. We also intend to increase Club O Rewards to our Club O members in
lieu of coupons we offer to all customers. This may adversely impact our revenues if the incremental sales from our Club O members as a result of this change
are less than any decrease in the sales from our current coupon program. For additional information regarding our Club O loyalty program see Item 15 of
Part IV, "Financial Statements"—Note 2. Accounting Policies, .

Our overall gross margins fluctuate based on our sales volume mix between our direct business and partner business; changes in supplier cost and /
or sales price, including competitive pricing; inventory management decisions within the direct business; sales coupons and promotions; product mix of
sales; and operational and fulfillment costs.
The following table reflects our net revenues, cost of goods sold and gross profit for the years ended December 31, 2014 and 2013 (in thousands):





Revenue, net
Direct
$ 147,460
$ 156,032
$ (8,572)
(5.5)%
Partner
1,349,643
1,148,185
201,458
17.5 %
Total net revenue
1,497,103 1,304,217
192,886
14.8 %
Cost of goods sold
Direct
129,253
136,282
(7,029)
(5.2)%
Partner
1,088,791
920,275
168,516
18.3 %
Total cost of goods sold
1,218,044
1,056,557
161,487
15.3 %
Gross Profit
Direct
18,207
19,750
(1,543)
(7.8)%
Partner
260,852
227,910
32,942
14.5 %
Total gross profit
$ 279,059
$ 247,660
$ 31,399
12.7 %
Gross margins for the past eight quarterly periods and years ending December 31, 2014 and 2013 were:





Direct
13.0%
11.3%
12.5%
12.5%
12.3%
Partner
19.5%
19.7%
19.7%
18.7%
19.3%
Combined
18.8%
18.8%
19.0%
18.2%
18.6%
44