Overstock.com 2015 Annual Report Download - page 20
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can be no assurance that we will be able to do so. If we are unable to generate sales from Club O members at rates equal to or better than the rates we were
generating through our coupon marketing to non-Club O members, our revenue growth could be adversely affected or reversed, and our business, financial
condition and operating results could be materially adversely affected.
We routinely receive orders placed with fraudulent credit card data. If we fail to adequately control fraudulent credit card transactions it could
reduce our net revenues and our gross profit or cause credit card or payment system companies to disallow their cards’ use for customer payments on our
website. We may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial institution approved payment of the
orders. Under current credit card practices, we may be liable for fraudulent credit card transactions because we do not obtain a cardholder’s signature. If we are
unable to detect or control credit card fraud, claims against us for these transactions could harm our business, prospects, financial condition and results of
operation. Further, to the extent that our efforts to prevent fraudulent orders result in our inadvertent refusal to fill legitimate orders, we would lose the benefit
of legitimate potential sales and risk the alienation of legitimate customers. The occurrence of any of the foregoing could have a material adverse effect on
our business.
Credit card issuers in the United States began replacing traditional credit cards with credit cards meeting the EMV (Europay, MasterCard and Visa)
standards during 2015. Cards meeting the EMV standards contain a chip which makes the cards more difficult to counterfeit than the traditional magnetic
stripe-only cards widely used in the U.S. However, to the extent that the EMV standards make card-duplication fraud more difficult, the new standards may
drive more fraud efforts against online retailers, including us. Consequently, as an online retailer, we may be subject to increasing levels of fraudulent orders
and other types of criminal activities. Increased levels of fraud and other criminal activities could have a material adverse effect on our business.
We have a history of losses, and we may incur operating and net losses in the foreseeable future. At December 31, 2015, our accumulated deficit was
$166.4 million. We need to generate significant revenues to maintain profitability, and we may not be able to do so. Although we have generated positive net
income in recent years, we incurred a net loss of $19.4 million in 2011, and we incurred a net loss of $2.1 million during Q3 2015. We may be unable to
maintain profitability in the future. If our revenues grow more slowly than we anticipate or decline, or if our expenses exceed our expectations, our financial
results would be harmed and our business, prospects, financial condition and results of operations could fall below the expectations of public market analysts
and investors. The occurrence of any of the foregoing could have a material adverse effect on our business.
The rapidly evolving nature of our industry and the constantly evolving nature of our business make forecasting operating results difficult. We
periodically implement large, complex and expensive infrastructure upgrades in order to increase our ability to handle larger volumes of sales and to develop
or increase our ability to perform a variety of analytical procedures relating to our business. We are continuing to upgrade and further expand these and other
components of our infrastructure, and are in the process of integrating infrastructure relating to the fintech company and broker-dealers we recently acquired.
We are also in the process of constructing a facility to serve as our corporate headquarters. In the past, we have experienced difficulties with upgrades of our
infrastructure, and have incurred increased expenses as a result of these difficulties. As a result of expenditures on our infrastructure and headquarters, our
ability to reduce our expenditures is and will be limited. Therefore, any significant shortfall in the revenues for which we have built and are continuing to
build our business could have a material adverse effect on our business.
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