| 2.7. | Revenue Recognition |
Net sales primarily consists of revenue from product sales (both business to consumer direct sales and business to business transactions) and other revenues.
Revenue from Product Sales
Revenue from product sales arises from (i) online purchases on the Company’s sites (i.e. Netshoes, Zattini and Shoestock) and third-party sites that the Company manages and (ii) offline purchases with the Company. Revenue from product sales is recognized when persuasive evidence exists that the significant risks and rewards of product ownership have been transferred to the customer, generally on delivery and acceptance at the customers’ premises, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.
Revenue from product sales is measured at fair value of the consideration received or receivable, net of promotional discounts, returns and value added tax and sales taxes. The Company recognizes revenue from product sales on a gross basis since the Company acts as principal and as such, it has primary responsibility for fulfilling the orders, it bears inventory risk, and it has discretion in establishing prices and bears the customer’s credit risk.
Other Revenues
Other revenues mainly consist of the following:
| • | Freight-related services: Revenue from the freight-related services is recognized once the service is rendered. |
| • | Marketplace platform: The Company generates revenue from the marketplace platform in the form of a commission, when the third-party vendors sell the products on this platform. The Company recognizes revenue from the marketplace platform on a net basis because the Company acts as an agent and does not have primary responsibility for fulfilling the orders, bear inventory risk or have discretion in establishing prices. The Company’s marketplace platform was launched in February 2016. |
| • | NCard: The Company generates commission revenue from the customers’ activation of NCards. The revenue is recognized when the NCards are activated by the customers. |