Dillard's 2010 Annual Report Download - page 6

price, quality, service and credit availability. We believe that our stores are in a strong competitive
position with regard to each of these factors. Other retailers may compete for customers on some or all
of these factors, or on other factors, and may be perceived by some potential customers as being better
aligned with their particular preferences.
Our merchandise selections include, but are not limited to, Dillard’s lines of exclusive brand
merchandise such as Antonio Melani, Gianni Bini, Roundtree & Yorke and Daniel Cremieux. Dillard’s
exclusive brands/private label merchandise program provides benefits for Dillard’s and our customers.
Our customers receive fashionable, higher quality product often at a savings compared to national
brands. Dillard’s private label merchandise program allows us to ensure Dillard’s high standards are
achieved, while minimizing costs and differentiating our merchandise offerings from other retailers.
We have made a significant investment in our trademark and license portfolio, in terms of design
function, advertising, quality control, manufacturing process and quick response to market trends in a
quality manufacturing environment. Dillard’s trademark registrations are maintained for as long as
Dillard’s holds the exclusive right to use the trademarks on the listed products.
Our merchandising, sales promotion and store operating support functions are conducted primarily
at our corporate headquarters. Our back office sales support functions for the Company, such as
accounting, product development, store planning and information technology, are also centralized.
We have developed a knowledge of each of our trade areas and customer bases for our stores.
This knowledge is enhanced through regular store visits by senior management and merchandising
personnel and through the use of on-line merchandise information and is supported by our regional
merchandising offices. We will continue to use existing technology and research to edit assortments by
store to meet the specific preference, taste and size requirements of each local operating area.
Certain departments in our stores are licensed to independent companies in order to provide high
quality service and merchandise where specialization, focus and expertise are critical. The licensed
departments vary by store to complement our own merchandising departments. The principal licensed
department is an upscale women’s apparel vendor in certain stores. The terms of the license
agreements typically range between three and five years with one year renewals and require the
licensee to pay for fixtures and to provide their own employees. We regularly evaluate the performance
of the licensed departments and require compliance with established customer service guidelines. The
licensee for the fine jewelry department ceased operation of all licensed outlets during fiscal 2009.
GE Consumer Finance (‘‘GE’’) owns and manages Dillard’s proprietary credit cards (‘‘proprietary
cards’’) under a long-term marketing and servicing alliance (‘‘Alliance’’) that expires in fiscal 2014. GE
establishes and owns proprietary card accounts for our customers, retains the benefits and risks
associated with the ownership of the accounts, provides key customer service functions, including new
account openings, transaction authorization, billing adjustments and customer inquiries, receives the
finance charge income and incurs the bad debts associated with those accounts. Pursuant to the
Alliance, we receive on-going cash compensation from GE based upon the portfolio’s earnings. The
compensation earned on the portfolio is determined monthly and has no recourse provisions. Further
pursuant to this agreement, we have no continuing involvement other than to honor the proprietary
cards in our stores. Although not obligated to a specific level of marketing commitment, we participate
in the marketing of the proprietary cards and accept payments on the proprietary cards in our stores as
a convenience to customers who prefer to pay in person rather than by paying online or mailing their
payments to GE.
We seek to expand the number and use of the proprietary cards by, among other things, providing
incentives to sales associates to open new credit accounts, which generally can be opened while a
customer is visiting one of our stores. Customers who open accounts are rewarded with discounts on
future purchases. Proprietary card customers are sometimes offered private shopping nights, direct mail
2