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customer, generate repeat purchases or maintain high levels of customer engagement, our growth prospects, operating results and financial |
condition could be materially adversely affected. 48 Our business depends on our ability |
to build and maintain strong brands. We may not be able to maintain and enhance our brands if we receive unfavorable customer complaints, |
negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, |
results of operations and growth prospects. Maintaining and enhancing our brands is critical |
to expanding our base of customers and suppliers. Our ability to maintain and enhance our brand depends largely on our ability to maintain |
customer confidence in our product and service offerings, including by delivering products on time and without damage. If customers do |
not have a satisfactory shopping experience, they may seek out alternative offerings from our competitors and may not return to our stores |
and sites as often in the future, or at all. In addition, unfavorable publicity regarding, for example, our practices relating to privacy |
and data protection, product quality, delivery problems, competitive pressures, litigation or regulatory activity, could seriously harm |
our reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of our customer base and |
result in decreased revenue, which could adversely affect our business and financial results. In addition, maintaining and enhancing these |
brands may require us to make substantial investments, and these investments may not be successful. If we fail to promote and maintain |
our brands, or if we incur excessive expenses in this effort, our business, operating results and financial condition may be materially |
adversely affected. We anticipate that, as our market becomes increasingly competitive, maintaining and enhancing our brands may become |
increasingly difficult and expensive. Maintaining and enhancing our brands will depend largely on our ability to provide high quality |
products to our customers and a reliable, trustworthy and profitable sales channel to our suppliers, which we may not be able to do successfully. Customer complaints or negative publicity about |
our sites, products, delivery times, customer data handling and security practices or customer support, especially on blogs, social media |
websites and our sites, could rapidly and severely diminish consumer use of our sites and consumer and supplier confidence in us and |
result in harm to our brands. Our efforts to expand our business into |
new brands, products, services, technologies, and geographic regions will subject us to additional business, legal, financial, and competitive |
risks and may not be successful. Our business success depends to some extent on |
our ability to expand our customer offerings by launching new brands and services and by expanding our existing offerings into new geographies. |
Launching new brands and services or expanding geographically requires significant upfront investments, including investments in marketing, |
information technology, and additional personnel. We may not be able to generate satisfactory revenue from these efforts to offset these |
costs. Any lack of market acceptance of our efforts to launch new brands and services or to expand our existing offerings could have |
a material adverse effect on our business, prospects, financial condition and results of operations. Further, as we continue to expand |
our fulfillment capability or add new businesses with different requirements, our logistics networks become increasingly complex and |
operating them becomes more challenging. There can be no assurance that we will be able to operate our networks effectively. We have also entered and may continue to enter |
into new markets in which we have limited or no experience, which may not be successful or appealing to our customers. These activities |
may present new and difficult technological and logistical challenges, and resulting service disruptions, failures or other quality issues |
may cause customer dissatisfaction and harm our reputation and brand. Further, our current and potential competitors in new market segments |
may have greater brand recognition, financial resources, longer operating histories and larger customer bases than we do in these areas. |
As a result, we may not be successful enough in these newer areas to recoup our investments in them. If this occurs, our business, financial |
condition and operating results may be materially adversely affected. If we fail to manage our growth effectively, |
our business, financial condition and operating results could be harmed. To manage our growth effectively, we must continue |
to implement our operational plans and strategies, improve and expand our infrastructure of people and information systems and expand, |
train and manage our employee base. We have rapidly increased employee headcount since our inception to support the growth in our business. |
To support continued growth, we must effectively integrate, develop and motivate a large number of new employees. We face significant |
competition for personnel. Failure to manage our hiring needs effectively or successfully integrate our new hires may have a material |
adverse effect on our business, financial condition and operating results. 49 Additionally, the growth of our business places |
significant demands on our operations, as well as our management and other employees. For example, we typically launch hundreds of promotional |
events across thousands of products each month on our sites via emails and personalized displays. These events require us to produce |
updates of our sites and emails to our customers on a daily basis with different products, photos and text. Any surge in online traffic |
and orders associated with such promotional activities places increased strain on our operations, including our logistics network, and |
may cause or exacerbate slowdowns or interruptions. The growth of our business may require significant additional resources to meet these |
daily requirements, which may not scale in a cost-effective manner or may negatively affect the quality of our sites and customer experience. |
We are also required to manage relationships with a growing number of suppliers, customers and other third parties. Our information technology |
systems and our internal controls and procedures may not be adequate to support future growth of our supplier and employee base. If we |
are unable to manage the growth of our organization effectively, our business, financial condition and operating results may be materially |
adversely affected. Our ability to obtain continued financing |
is critical to the growth of our business. We will need additional financing to fund operations, which additional financing may not be |
available on reasonable terms or at all. Our future growth, including the potential for |
future market expansion will require additional capital. We will consider raising additional funds through various financing sources, |
including the procurement of additional commercial debt financing. However, there can be no assurance that such funds will be available |
on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to execute our |
growth strategy, and operating results may be adversely affected. Any additional debt financing will increase expenses and must be repaid |
regardless of operating results and may involve restrictions limiting our operating flexibility. Our ability to obtain financing may be impaired |
by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability or cost |
of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, |
are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings |
and market expansion opportunities and potentially curtail operations. Our business is highly competitive. Competition |
presents an ongoing threat to the success of our business. Our business is rapidly evolving and intensely |
competitive, and we have many competitors in different industries. Our competition includes big box retailers, such as Home Depot, Lowe’s |
and Costco, specialty retailers, such as TeeVax, Ferguson and Premier Bath and Kitchen, and online marketplaces, such as Amazon. We expect competition to continue to increase. |
We believe that our ability to compete successfully depends upon many factors both within and beyond our control, includin ● the size and composition of our customer base; ● the number of suppliers and products we feature; ● our selling and marketing efforts; ● the quality, price and reliability of products we offer; ● the quality and convenience of the shopping experience that |
we provide; ● our ability to distribute our products and manage our operations; |
and ● our reputation and brand strength. Many of our current competitors have, and potential |
competitors may have, longer operating histories, greater brand recognition, larger fulfillment infrastructures, greater technical capabilities, |
faster and less costly shipping, significantly greater financial, marketing and other resources and larger customer bases than we do. |
These factors may allow our competitors to derive greater net revenue and profits from their existing customer base, acquire customers |
at lower costs or respond more quickly than we can to new or emerging technologies and changes in consumer habits. These competitors |
may engage in more extensive research and development efforts, undertake more far-reaching marketing campaigns and adopt more aggressive |
pricing policies, which may allow them to build larger customer bases or generate net revenue from their customer bases more effectively |
than we do. Our success depends, in substantial part, |
on our continued ability to market our products through search engines and social media platforms. The marketing of our products depends on our |
ability to cultivate and maintain cost-effective and otherwise satisfactory relationships with search engines and social media platforms, |
including those operated by Google, Facebook, Bing and Yahoo!. These platforms could decide to change their terms and conditions of use |
at any time (and without notice) and/or significantly increase their fees. No assurances can be provided that we will be able to maintain |
cost-effective and otherwise satisfactory relationships with these platforms and our inability to do so in the case of one or more of |
these platforms could have a material adverse effect on our business, financial condition and results of operations. 50 We obtain a significant number of visits via |
search engines such as Google, Bing and Yahoo! Search engines frequently change the algorithms that determine the ranking and display |
of results of a user’s search and may make other changes to the way results are displayed, which can negatively affect the placement |
of links and, therefore, reduce the number of visits to our website. The growing use of online ad-blocking software may also impact the |
success of our marketing efforts because we may reach a smaller audience and fail to bring more customers to our website, which could |
have a material adverse effect on our business, financial condition and results of operations. System interruptions that impair customer |
access to our sites or other performance failures or incidents involving our logistics network, our technology infrastructure or our |
critical technology partners could damage our business, reputation and brand and substantially harm our business and results of operations. The satisfactory performance, reliability and |
availability of our sites, transaction processing systems, logistics network, and technology infrastructure are critical to our reputation |
and our ability to acquire and retain customers, as well as maintain adequate customer service levels. For example, if one of our data centers fails |
or suffers an interruption or degradation of services, we could lose customer data and miss order fulfillment deadlines, which could |
harm our business. Our systems and operations, including our ability to fulfill customer orders through our logistics network, are also |
vulnerable to damage or interruption from inclement weather, fire, flood, power loss, telecommunications failure, terrorist attacks, |
labor disputes, cyber-attacks, data loss, acts of war, break-ins, earthquake and similar events. In the event of a data center failure, |
the move to a back-up could take substantial time, during which time our sites could be completely shut down. Further, our back-up services |
may not effectively process spikes in demand, may process transactions more slowly and may not support all of our site’s functionality. We use complex proprietary software in our technology |
infrastructure, which we seek to continually update and improve. We may not always be successful in executing these upgrades and improvements, |
and the operation of our systems may be subject to failure. In particular, we have in the past and may in the future experience slowdowns |
or interruptions on some or all of our sites when we are updating them, and new technologies or infrastructures may not be fully integrated |
with existing systems on a timely basis, or at all. Additionally, if we expand our use of third-party services, including cloud-based |
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