|3 Months Ended|
Mar. 31, 2020
Note 3 - Revenue
The Company has two categories of revenue channels: retail-partner based (“Retail”), which includes the sale of product to e-commerce retailers, pet specialty chains, grocery, mass and distributors, and direct to consumer, (“DTC”), which is focused on driving consumers to directly purchase product through our online web platform.
Retail-partner based channel
The Company’s Retail channel includes the sale of goods to customers for resale. The Company records revenue net of discounts. Discounts primarily consist of early pay discounts, general percentage allowances and contractual trade promotions such as auto-ship subscriptions, and cooperative agreements with third party distributors. Retail-partner based customers are not subject to sales tax. The Retail channel represents 75% and 9% of consolidated revenue for the three months ended March 31, 2020 and 2019, respectively.
Shipping costs associated with moving finished products to customers through third party carriers were less than $0.1 million for the three months ended March 31, 2020 and 2019. Such shipping costs are recorded as part of general and administrative expenses.
Direct to consumer channel
The Company’s DTC products are offered through online stores where customers place orders directly for delivery across the United States. The DTC channel represents 25% and 91% of consolidated revenue of the Company for the three months ended March 31, 2020 and 2019, respectively.
The Company excludes sales taxes collected from revenues. Revenue is deferred for orders that have been paid for, but not shipped. Based on historical experience, the Company records an estimated liability for returns. Product returns were less than $0.2 million and less than $0.1 million for the three months ended March 31, 2020 and 2019, respectively
The Company’s DTC loyalty program enables customers to accumulate points based on spending. A portion of revenue is deferred at the time of the sale when points are earned and recognized when the loyalty points are redeemed. As of March 31, 2020 and December 31, 2019, customers held unredeemed loyalty program awards of $0.2 million. The Company recognized revenue of less than $0.2 million and $0.1 million from the loyalty program for the three months ended March 31, 2020 and 2019, respectively.
The amount included in net sales related to recoveries of shipping costs from customers for direct to consumer sales was $0.1 million and $0.2 million for the three months ended March 31, 2020 and 2019, respectively.
The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef