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sales; ● offer suppliers a high quality, cost-effective fulfillment |
process; and ● continue to provide suppliers with a dynamic and real-time |
view of our demand and inventory needs. If we are unable to provide our suppliers with |
a compelling return on investment and an ability to increase their sales, we may be unable to maintain and/or expand our supplier network, |
which would negatively impact our business. We depend on our suppliers to perform certain |
services regarding the products that we offer. As part of offering our suppliers’ products |
for sale on our sites, suppliers are often responsible for conducting a number of traditional retail operations with respect to their |
respective products, including maintaining inventory and preparing merchandise for shipment to our customers. In these instances, we |
may be unable to ensure that suppliers will perform these services to our or our customers’ satisfaction in a manner that provides |
our customer with a unified brand experience or on commercially reasonable terms. If our customers become dissatisfied with the services |
provided by our suppliers, our business, reputation and brands could suffer. 53 We |
depend on our relationships with third parties, and changes in our relationships with these parties could adversely impact our revenue |
and profits. We |
rely on third parties to operate certain elements of our business. For example, we use carriers such as FedEx, UPS, DHL and the U.S. |
Postal Service to deliver products. As a result, we may be subject to shipping delays or disruptions caused by inclement weather, natural |
disasters, system interruptions and technology failures, labor activism, health epidemics or bioterrorism. We are also subject to risks |
of breakage or other damage during delivery by any of these third parties. We also use and rely on other services from third parties, |
such as retail partner services, telecommunications services, customs, consolidation and shipping services, as well as warranty, installation |
and design services. We |
may be unable to maintain these relationships, and these services may also be subject to outages and interruptions that are not within |
our control. For example, failures by our telecommunications providers have in the past and may in the future interrupt our ability to |
provide phone support to our customers. Third parties may in the future determine they no longer wish to do business with us or may decide |
to take other actions or make changes to their practices that could harm our business. We may also determine that we no longer want to |
do business with them. If products are not delivered in a timely fashion or are damaged during the delivery process, or if we are not |
able to provide adequate customer support or other services or offerings, our customers could become dissatisfied and cease buying products |
through our sites, which would adversely affect our operating results. The |
seasonal trends in our business create variability in our financial and operating results and place increased strain on our operations. We |
experience surges in orders associated with promotional activities and seasonal trends. This activity may place additional demands on |
our technology systems and logistics network and could cause or exacerbate slowdowns or interruptions. Any such system, site or service |
interruptions could prevent us from efficiently receiving or fulfilling orders, which may reduce the volume or quality of goods or services |
we sell and may cause customer dissatisfaction and harm our reputation and brand. Our |
business may be adversely affected if we are unable to provide our customers a cost-effective shopping platform that is able to respond |
and adapt to rapid changes in technology. The |
number of people who access the Internet through devices other than personal computers, including mobile phones, smartphones, handheld |
computers such as notebooks and tablets, video game consoles, and television set-top devices, has increased dramatically in the past |
few years. We continually upgrade existing technologies and business applications to keep pace with these rapidly changing and continuously |
evolving technologies, and we may be required to implement new technologies or business applications in the future. The implementation |
of these upgrades and changes requires significant investments and as new devices and platforms are released, it is difficult to predict |
the problems we may encounter in developing applications for these alternative devices and platforms. Additionally, we may need to devote |
significant resources to the support and maintenance of such applications once created. Our results of operations may be affected by |
the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure |
to accommodate such alternative devices and platforms. Further, in the event that it is more difficult or less compelling for our customers |
to buy products from us on their mobile or other devices, or if our customers choose not to buy products from us on such devices or to |
use mobile or other products that do not offer access to our sites, our customer growth could be harmed and our business, financial condition |
and operating results may be materially adversely affected. Significant |
merchandise returns could harm our business. We |
allow our customers to return products, subject to our return policy. If merchandise returns are significant, our business, prospects, |
financial condition and results of operations could be harmed. Further, we modify our policies relating to returns from time to time, |
which may result in customer dissatisfaction or an increase in the number of product returns. Many of our products are large and require |
special handling and delivery. From time to time our products are damaged in transit, which can increase return rates and harm our brand. 54 Uncertainties |
in economic conditions and their impact on consumer spending patterns, particularly in the home goods segment, could adversely impact |
our operating results. Consumers |
may view a substantial portion of the products we offer as discretionary items rather than necessities. As a result, our results of operations |
are sensitive to changes in macro-economic conditions that impact consumer spending, including discretionary spending. Some of the factors |
adversely affecting consumer spending include levels of unemployment; consumer debt levels; changes in net worth based on market changes |
and uncertainty; home foreclosures and changes in home values or the overall housing, residential construction or home improvement markets; |
fluctuating interest rates; credit availability, including mortgages, home equity loans and consumer credit; government actions; fluctuating |
fuel and other energy costs; fluctuating commodity prices and general uncertainty regarding the overall future economic environment. |
Adverse economic changes in any of the regions in which we sell our products could reduce consumer confidence and could negatively affect |
net revenue and have a material adverse effect on our operating results. Our |
business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability |
to timely deliver such communications could materially adversely affect our net revenue and business. Our |
business is highly dependent upon email and other messaging services for promoting our sites and products. If we are unable to successfully |
deliver emails or other messages to our subscribers, or if subscribers decline to open our emails or other messages, our net revenue |
and profitability would be materially adversely affected. Changes in how webmail applications organize and prioritize email may also |
reduce the number of subscribers opening our emails. For example, in 2013 Google Inc.’s Gmail service began offering a feature |
that organizes incoming emails into categories (for example, primary, social and promotions). Such categorization or similar inbox organizational |
features may result in our emails being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” |
by our subscribers and may reduce the likelihood of that subscriber opening our emails. Actions by third parties to block, impose restrictions |
on or charge for the delivery of emails or other messages could also adversely impact our business. From time to time, Internet service |
providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in our |
inability to successfully deliver emails or other messages to third parties. Changes in the laws or regulations that limit our ability |
to send such communications or impose additional requirements upon us in connection with sending such communications would also materially |
adversely impact our business. Our use of email and other messaging services to send communications about our products or other matters |
may also result in legal claims against us, which may cause us increased expenses, and if successful might result in fines and orders |
with costly reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages. We also rely |
on social networking messaging services to send communications and to encourage customers to send communications. Changes to the terms |
of these social networking services to limit promotional communications, any restrictions that would limit our ability or our customers’ |
ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline |
in the use of or engagement with social networking services by customers and potential customers could materially adversely affect our |
business, financial condition and operating results. We |
are subject to risks related to online payment methods. We |
accept payments using a variety of methods, including credit card, debit card, PayPal, credit accounts and gift cards. As we offer new |
payment options to consumers, we may be subject to additional regulations, compliance requirements and fraud. For certain payment methods, |
including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower |
profitability. We are also subject to payment card association operating rules and certification requirements, including the Payment |
Card Industry Data Security Standard and rules governing electronic funds transfers, which could change or be reinterpreted to make it |
difficult or impossible for us to comply. As our business changes, we may also be subject to different rules under existing standards, |
which may require new assessments that involve costs above what we currently pay for compliance. If we fail to comply with the rules |
or requirements of any provider of a payment method we accept, if the volume of fraud in our transactions limits or terminates our rights |
to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, we may, among other things, be |
subject to fines or higher transaction fees and may lose, or face restrictions placed upon, our ability to accept credit card and debit |
card payments from consumers or to facilitate other types of online payments. If any of these events were to occur, our business, financial |
condition and operating results could be materially adversely affected. We |
occasionally receive orders placed with fraudulent credit card data. 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. If we are unable to detect or control credit card fraud, our liability for these |
transactions could harm our business, financial condition and results of operations. 55 Government |
regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could |
substantially harm our business and results of operations. We |
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