BUSINESS SEGMENTS

9 Months Ended

Sep. 30, 2012

BUSINESS SEGMENTS

BUSINESS SEGMENTS

8. BUSINESS SEGMENTS

Segment information has been prepared in accordance with ASC Topic 280 Segment Reporting. Segments were determined based on products and services provided by each segment. There were no inter-segment sales or transfers during the three and nine months ended September 30, 2012 and 2011. We evaluate the performance of our segments and allocate resources to them based primarily on gross profit. The table below summarizes information about reportable segments for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three months ended September 30,							Nine months ended September 30,
	Direct		Fulfillment partner		Total			Direct		Fulfillment partner		Total
2012
Revenue, net	$	34,215	$	221,137	$	255,352		$	109,048	$	648,207	$	757,255
Cost of goods sold	30,684		178,126		208,810			99,422		520,614		620,036
Gross profit	$	3,531	$	43,011	$	46,542		$	9,626	$	127,593	$	137,219
Operating expenses					(44,767		)					(132,950		)
Other income (expense), net					1,049							1,795
Provision for income taxes					131							182
Net income					$	2,693						$	5,882
2011
Revenue, net	$	34,749	$	204,989	$	239,738		$	116,353	$	623,847	$	740,200
Cost of goods sold	32,472		168,893		201,365			105,733		506,240		611,973
Gross profit	$	2,277	$	36,096	$	38,373		$	10,620	$	117,607	$	128,227
Operating expenses					(46,314		)					(143,573		)
Other income (expense), net					(86		)					(885		)
Benefit for income taxes					(240		)					(202		)
Net loss					$	(7,787	)					$	(16,029	)

The direct segment includes revenues, direct costs, and cost allocations associated with sales fulfilled from our leased warehouses. Costs for this segment include product costs, freight, warehousing and fulfillment costs, credit card fees and customer service costs.

The fulfillment partner segment includes revenues, direct costs and cost allocations associated with sales of merchandise of third parties over our Website, fulfilled from warehouses maintained by our fulfillment partners. Costs for this segment include product costs, outbound freight and fulfillment costs, credit card fees and customer service costs.

Assets have not been allocated between the segments for our internal management purposes and, as such, they are not presented here.

For the three and nine months ended September 30, 2012 and 2011, over 99% of sales were made to customers in the United States. At September 30, 2012 and December 31, 2011, all of our fixed assets were located in the United States.