Company: NEGG
Filing Date: 2025-04-28
Form Type: 20-F
Source: 0001213900-25-036055
Chunk: 24

Company: Newegg Commerce, Inc.
Filing Date: 2025-04-28
Form: 20-F
Item: Item 3
Chunk 24
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 pressure on our warehousing system.

We purchase most of the merchandise that we sell
directly to customers on our online platforms from manufacturers or distributors. We assume inventory damage, theft, obsolescence, and
price erosion risks for our inventory. These risks are especially significant as most of the merchandise sold on our online platforms
is characterized by rapid technological change, obsolescence and price erosion. For the year ended December 31, 2024, we recorded inventory
write-offs or write-downs totaling $4.2 million, or 0.4% of our cost of goods sold. We may sell obsolete or dated merchandise at a discount
or loss. If there were unforeseen product developments or if vendors were to change their terms and conditions, our inventory risks could
increase. We also periodically take advantage of cost savings associated with certain opportunistic bulk inventory purchases offered by
our vendors. These bulk purchases increase our exposure to inventory obsolescence. Our success depends on our ability to sell our inventory
rapidly, purchase inventory at attractive prices relative to our resale value and manage customer returns and the shrinkage resulting
from theft, loss, and misrecording of inventory. If we are unsuccessful in any of these areas, we may be forced to write down or write
off substantial amounts of inventory, or sell it at a discount or loss, which could materially and adversely impact our business, financial
condition and results of operations.

We depend on our demand forecasts for various
kinds of products to make purchase decisions and to manage our inventory. We are exposed to inventory risks as a result of seasonality,
new product launches, rapid changes in product cycles and pricing, defective merchandise, changes in consumer demand, tastes and spending
patterns, and other factors. While we endeavor to accurately predict these trends and avoid overstocking or understocking products we
sell, the demand for products can change significantly between the time inventory is ordered and the date of sale, and we may be unable
to sell products in sufficient quantities as we expect. Furthermore, we may in the future open additional warehouses and duplicate part
of the inventory for our direct sales business that is stored at our current warehouses to increase our overall fulfillment efficiency
as we grow our business, which will also increase the inventory risks our direct sales business faces. Failure to effectively manage our
inventory risk could have a material adverse effect on our business, financial condition and results of operations.

We have incurred net losses in the past
and may experience losses in the future