Lumber Liquidators 2007 Annual Report Download - page 12

credibility primarily through the strength of our product and the attractiveness of our pricing. We believe that we
have achieved a reputation for quality and low prices, and that our proprietary brands are recognized for
excellence by our customers. Our objective is to sell high-quality products at an attractive value, and we offer a
large selection of hardwood flooring year-round at everyday low prices, ranging in quality from our premium
Bellawood brand to our more economical brands. We try to avoid being perceived as a volume-driven discounter,
so while our promotional cycle focuses on particular buying cycles, we generally try to hold our sales around
events where we can create some excitement among customers. For example, we hold sales when we acquire
bulk amounts of inexpensive inventory where we can pass along the savings, during three-day weekends when a
customer has more time to consider (and possibly even install) a new flooring purchase, and during our annual
“odd lot” sidewalk sale in April.
Our product credibility also benefits from celebrity endorsements and product placement opportunities. We
have long-term relationships with respected, well-known home improvement celebrities Bob Vila and Ty
Pennington. Bob Vila in particular has been associated specifically with our Bellawood proprietary brand for
several years. Ty Pennington has a long-term endorsement arrangement and his own hardwood flooring
collection, the Ty Pennington Collection.
To increase brand awareness, we conduct ad campaigns on both a national and local level using both
traditional and new media. We co-sponsor various television shows such as “Extreme Makeover: Home Edition”
and HGTV’s “Dream Home,” which use our products and enable potential customers to see both what our
flooring will look like after installation and the relative ease with which it can be installed. In addition, we use
targeted television advertising on cable networks such as Discovery Channel, HGTV, TLC, DIY Network and
A&E Network. We engage in sports marketing by participating in opportunities with, among others, Major
League Baseball and the National Basketball Association and sponsoring a truck in the NASCAR Craftsmen
Truck Series.
We believe our national advertising campaigns have been successful, and we expect to see greater returns on
our investment in national advertising as more stores open near people who have already been introduced to our
brands. We expect to place a greater focus on local advertising to support targeted store growth while
maintaining appropriate levels of national advertising.
We also engage in marketing and advertising using the Internet and our catalogs. On the Internet, our
advertising efforts include the use of banner advertising, sponsoring links on well-known search engines, having
storefronts with large e-tailers and having a large network of online affiliate partners. Our direct mail strategy
focuses on regular contact with our customers and the targeting of prospective purchasers. We distribute our
catalog, as well as other direct mailings, to key consumer and commercial segments around specific store
locations.
Our Stores and Store Model
Our stores are designed to emphasize our products in a visually appealing showroom format, yet reflect our
low-cost approach to doing business. The average size of our stores is approximately 6,400 square feet, of which
approximately 800 square feet is dedicated to the showroom selling area. Our stores are typically located in
industrial or commercial areas that have lower rents than traditional retail locations, are accessible from major
roadways and have significant visibility to passing traffic. We can adapt to a range of existing buildings, whether
free-standing or in shopping centers. We enter into short leases, generally for base terms of five years, with
renewal options to maximize our real estate flexibility. Most of our store showrooms have wall racks holding
one-foot by two-foot display boards of our flooring products and larger sample squares serving as the showroom
floor. We believe that our store design and location reinforce our customers’ belief that they get a good deal
when they buy from us.
We have engaged a national broker to assist us with identifying locations for new stores and negotiating
with landlords. Our first priority is to expand into markets in which we currently do not have a store, or where
6