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existing suppliers or develop relationships with new suppliers on acceptable commercial terms, we may not be able to continue to offer |
a broad selection of merchandise at competitive prices and, as a result, we could lose customers and our sales could decline. We also have limited |
control over the products that our suppliers purchase or keep in stock. Our suppliers may not accurately forecast the products that will |
be in high demand or they may allocate popular products to other resellers, resulting in the unavailability of certain products for delivery |
to our customers. Any inability to offer a broad array of products at competitive prices and any failure to deliver those products to |
our customers in a timely and accurate manner may damage our reputation and brand and could cause us to lose customers and our sales could |
decline. In addition, the increasing |
consolidation among auto parts suppliers may disrupt or end our relationship with some suppliers, result in product shortages and/or lead |
to less competition and, consequently, higher prices. Furthermore, as part of our routine business, suppliers extend credit to us in connection |
with our purchase of their products. In the future, our suppliers may limit the amount of credit they are willing to extend to us in connection |
with our purchase of their products. If this were to occur, it could impair our ability to acquire the types and quantities of products |
that we desire from the applicable suppliers on acceptable terms, severely impact our liquidity and capital resources, limit our ability |
to operate our business and could have a material adverse effect on our financial condition and results of operations. We are dependent |
upon relationships with manufacturers in Taiwan and China, which exposes us to complex regulatory regimes and logistical challenges. Approximately 95% of |
our manufacturing is outsourced to contract manufacturers in China and Taiwan, resulting in additional factors could interrupt our relationships |
or affect our ability to acquire the necessary products on acceptable terms, includin ● political, social and economic instability and the risk of war or other international incidents in Asia |
or abroad; ● fluctuations in foreign currency exchange rates that may increase our cost of products; ● imposition of duties, taxes, tariffs or other charges on imports; ● difficulties in complying with import and export laws, regulatory requirements and restrictions; ● natural disasters and public health emergencies, such as the recent COVID-19 pandemic; ● import shipping delays resulting from foreign or domestic labor shortages, slow-downs, or stoppage; and ● the failure of local laws to provide a sufficient degree of protection against infringement of our intellectual |
property; ● imposition of new legislation relating to import quotas or other restrictions that may limit the quantity |
of our products that may be imported into the U.S. from countries or regions where we do business; ● financial or political instability in any of the countries in which our products are manufactured; ● potential recalls or cancellations of orders for any products that do not meet our quality standards; ● disruption of imports by labor disputes or strikes and local business practices; 58 ● political or military conflict involving the U.S. or any country in which our suppliers are located, which |
could cause a delay in the transportation of our products, an increase in transportation costs and additional risk to products being damaged |
and delivered on time; ● heightened terrorism security concerns, which could subject imported goods to additional, more frequent |
or more thorough inspections, leading to delays in deliveries or impoundment of goods for extended periods; ● inability of our non-U.S. suppliers to obtain adequate credit or access liquidity to finance their operations; |
and ● our ability to enforce any agreements with our foreign suppliers. If we were unable to |
import products from China and Taiwan or were unable to import products from China and Taiwan in a cost-effective manner, we could suffer |
irreparable harm to our business and be required to significantly curtail our operations, file for bankruptcy or cease operations. From time to time, we |
may also have to resort to administrative and court proceedings to enforce our legal rights with foreign suppliers. However, it may be |
more difficult to evaluate the level of legal protection we enjoy in Taiwan and China and the corresponding outcome of any administrative |
or court proceedings than in comparison to our suppliers in the United States. We depend on third-party |
delivery services, for both inbound and outbound shipping, to deliver our products to our distribution centers and subsequently to our |
customers on a timely and consistent basis, and any deterioration in our relationship with any one of these third parties or increases |
in the fees that they charge could harm our reputation and adversely affect our business and financial condition. We rely on third parties |
for the shipment of our products, both inbound and outbound shipping logistics, and we cannot be sure that these relationships will continue |
on terms favorable to us, or at all. Shipping costs have increased from time to time, and may continue to increase, and we may not be |
able to pass these costs directly to our customers. Any increased shipping costs could harm our business, prospects, financial condition |
and results of operations by increasing our costs of doing business and reducing gross margins which could negatively affect our operating |
results. In addition, we utilize a variety of shipping methods for both inbound and outbound logistics. For inbound logistics, we rely |
on trucking and ocean carriers and any increases in fees that they charge could adversely affect our business and financial condition. |
For outbound logistics, we rely on “Less-than-Truckload” and parcel freight based upon the product and quantities |
being shipped and customer delivery requirements. These outbound freight costs have increased on a year-over-year basis and may continue |
to increase in the future. We also ship a number of oversized auto parts which may trigger additional shipping costs by third-party delivery |
services. Any increases in fees or any increased use of “Less-than-Truckload” shipping would increase our shipping |
costs which could negatively affect our operating results. In addition, if our relationships |
with these third parties are terminated or impaired, or if these third parties are unable to deliver products for us, whether due to labor |
shortage, slow down or stoppage, deteriorating financial or business condition, responses to terrorist attacks or for any other reason, |
we would be required to use alternative carriers for the shipment of products to our customers. Changing carriers could have a negative |
effect on our business and operating results due to reduced visibility of order status and package tracking and delays in order processing |
and product delivery, and we may be unable to engage alternative carriers on a timely basis, upon terms favorable to us, or at all. If commodity prices |
such as fuel, plastic and steel increase, our margins may be negatively impacted. Our third-party delivery |
services have increased fuel surcharges from time to time, and such increases negatively impact our margins, as we are generally unable |
to pass all of these costs directly to consumers. Increasing prices in the component materials for the parts we sell may impact the availability, |
the quality and the price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. |
We cannot ensure that we can recover all the increased costs through price increases, and our suppliers may not continue to provide the |
consistent quality of product as they may substitute lower cost materials to maintain pricing levels, all of which may have a negative |
impact on our business and results of operations. 59 If we are unable |
to manage the challenges associated with our international operations, the growth of our business could be limited and our business could |
suffer. In addition to our relationships |
with foreign suppliers, we have contracts with sales representatives from thirteen regional sales companies in North America, Mexico, |
Puerto Rico, the U.K., Europe, the Middle East and the industrial aftermarket. We are subject to a number of risks and challenges that |
specifically relate to our international operations. Our international operations may not be successful if we are unable to meet and overcome |
these challenges, which could limit the growth of our business and may have an adverse effect on our business and operating results. These |
risks and challenges inclu ● difficulties and costs of staffing and managing foreign operations; ● restrictions imposed by local labor practices and laws on our business and operations; ● exposure to different business practices and legal standards; ● unexpected changes in regulatory requirements; ● the imposition of government controls and restrictions; ● political, social and economic instability and the risk of war, terrorist activities or other international |
incidents; ● the failure of telecommunications and connectivity infrastructure; ● natural disasters and public health emergencies; ● potentially adverse tax consequences; and ● fluctuations in foreign currency exchange rates and relative weakness in the U.S. dollar. If our fulfillment |
operations are interrupted for any significant period of time or are not sufficient to accommodate increased demand, our sales could decline |
and our reputation could be harmed. Our success depends on |
our ability to successfully receive and fulfill orders and to promptly deliver our products to our customers. Most of the orders for our |
products are filled from our inventory in our distribution centers, where all our inventory management, packaging, labeling and product |
return processes are performed. Increased demand and other considerations may require us to expand our distribution centers or transfer |
our fulfillment operations to larger or other facilities in the future. If we do not successfully expand our fulfillment capabilities |
in response to increases in demand, our sales could decline. In addition, our distribution |
centers are susceptible to damage or interruption from human error, pandemics, fire, flood, power loss, telecommunications failures, terrorist |
attacks, acts of war, break-ins, earthquakes and similar events. We do not currently maintain back-up power systems at our fulfillment |
centers. We do not presently have a formal disaster recovery plan and our business interruption insurance may be insufficient to compensate |
us for losses that may occur in the event operations at our fulfillment center are interrupted. In addition, alternative arrangements |
may not be available, or if they are available, may increase the cost of fulfillment. Any interruptions in our fulfillment operations |
for any significant period of time, including interruptions resulting from the expansion of our existing facilities or the transfer of |
operations to a new facility, could damage our reputation and brand and substantially harm our business and results of operations. We face intense |
competition and operate in an industry with limited barriers to entry, and some of our competitors may have greater resources than us |
and may be better positioned to capitalize on the growing auto parts market. The aftermarket auto |
parts industry is competitive and highly fragmented, with products distributed through multi-tiered and overlapping channels. We compete |
with both online and offline retailers who offer OEMs and aftermarket auto parts. Current or potential competitors include FIAMM, Grote, |
Peterson Manufacturing Company, ECCO, Vixen Horns, HornBlasters and Kleinn. Many of our current and |
potential competitors have longer operating histories, large customer bases, superior brand recognition and significantly greater financial, |
marketing, technical, management and other resources than we do. In addition, some of our competitors have used and may continue to use |
aggressive pricing tactics and devote substantially more financial resources to website and system development than we do. We expect that |
competition will further intensify in the future as Internet use and online commerce continue to grow worldwide. Increased competition |
may result in reduced sales, lower operating margins, reduced profitability, loss of market share and diminished brand recognition. 60 We rely on key |
personnel and may need additional personnel for the success and growth of our business. Our business is largely |
dependent on the personal efforts and abilities of highly skilled executive, technical, managerial, merchandising and marketing personnel. |
Competition for such personnel is intense, and we cannot assure that we will be successful in attracting and retaining such personnel. |
The loss of any key employee or our inability to attract or retain other qualified employees could harm our business and results of operations. If our product |
catalog database is stolen, misappropriated or damaged, or if a competitor is able to create a substantially similar catalog without infringing |
our rights, then we may lose an important competitive advantage. We have invested significant |
resources and time to build and maintain our product catalog, which is maintained in the form of an electronic database. We believe that |
our product catalog provides us with an important competitive advantage. We cannot assure you that we will be able to protect our product |
catalog from unauthorized copying or theft or that our product catalog will continue to operate adequately, without any technological |
challenges. In addition, it is possible that a competitor could develop a catalog or database that is similar to or more comprehensive |
than ours, without infringing our rights. In the event our product catalog is damaged or is stolen, copied or otherwise replicated to |
compete with us, whether lawfully or not, we may lose an important competitive advantage and our business could be harmed. Economic conditions |
have had, and may continue to have, an adverse effect on the demand for aftermarket auto parts and could adversely affect our sales and |
operating results. Demand for our products |
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