Lumber Liquidators 2007 Annual Report Download - page 19

•Greater Attractiveness of Hardwood Flooring. Hardwood flooring sales have grown historically, and
we expect that they will continue to grow as consumer preferences shift to hardwood flooring and as
industry innovations drive growth, such as through a greater range of product offerings that appeal to
varied consumer preferences and hardwood flooring that has been designed for easier and less costly
installation. We believe that consumers increasingly prefer hardwood flooring for its perceived
cosmetic and durability advantages, as well as its ability to contribute to a healthy home because it is
relatively easy to clean and traps less dust, dirt and bacteria than some other types of flooring.
Our Competition
We are the largest specialty retailer of hardwood flooring in the United States, and compete in a hardwood
flooring market that is highly fragmented. We compete on the basis of price, quality, selection and availability of
the hardwood flooring that we offer our customers, as well as the level of customer service we can provide. Our
competitive position is also influenced by the availability, quality and cost of merchandise, labor costs, finishing,
distribution and sales efficiencies and our productivity compared to that of our competitors. The market includes
both national and regional home improvement chains which specialize in the lower-end, higher-volume flooring
market and offer a wide range of home improvement products other than flooring. We also compete against
smaller national specialty flooring chains, some of which have an Internet presence, and a large number of local
and regional independent flooring retailers, including a large number of privately-owned single-site enterprises.
We estimate, based on internal market research that our share of the hardwood flooring retail market was
approximately 7% in 2007, up from approximately 6% in 2006. We believe that we compete effectively against
the large national chains by offering competitive prices, higher-quality hardwood flooring products, a broader
product assortment, a shorter delivery time, and better customer service by virtue of our more knowledgeable
sales staff. In addition, we believe that our largest competitors with Internet operations focus to a greater extent
on the lower-priced segment of the hardwood flooring market, particularly engineered, bamboo and laminate
flooring. The remainder of the hardwood flooring market is dominated by small local independent retailers that
usually sell carpet and tile in addition to hardwood flooring. Most of these retailers purchase their hardwood
flooring from domestic manufacturers or distributors, and typically do not stock hardwood flooring, but order it
only when the customer makes a purchase. As a result, we believe it takes these retailers longer than us to deliver
their product to customers, and their prices tend to be higher than ours. We also compete against companies that
sell other types of floor coverings, such as carpet, vinyl sheet and tile, ceramic tile, natural stone and others.
Our Employees
As of December 31, 2007, we had 670 employees, 96% of whom were full-time and none of whom were
represented by a union. Of these employees, 65% work in our stores, 16% work in corporate store support
infrastructure or similar functions (including our call center employees) and 19% work either on our finishing
line or in our distribution center. We believe that we have good relations with our employees.
Intellectual Property and Trademarks
We have a number of marks registered in the United States, including Lumber Liquidators®, Bellawood®,
1-800-FLOORING®, Dura-Wood®, Blutec®, Quickclic®, Virginia Mill Works Co. Hand Scraped and Distressed
Floors®, Morning Star Bamboo Flooring®, Dream Home Laminate Floors®, Builder’s Pride®, Schön Engineered
Floors®, Casa de Colour Collection®and other product line names. We have also registered certain marks in
jurisdictions outside the United States, including the European Union, Canada, Australia and Japan, and have
registration applications pending in several other jurisdictions. We regard our intellectual property as having
significant value and these names are an important factor in the marketing of our brands. We are not aware of
any facts that could be expected to have a material adverse effect on our intellectual property.
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