Lumber Liquidators 2008 Annual Report Download - page 11

We offer a large selection of hardwood flooring year-round at everyday low prices primarily under our
proprietary brands, ranging in quality from our premium Bellawood brand to our more economical brands.
Our Integrated Multi-Channel Sales Model
We have an integrated multi-channel sales model that enables our national store network, call center,
website and catalogs to work together in a coordinated manner. We believe that due to the average size of the
sale and the general infrequency of a hardwood flooring purchase, many of our customers conduct extensive
research using multiple channels before making a purchase decision. Our sales strategy emphasizes customer
service by providing superior convenience and education tools for our customers to learn about our products and
the installation process. We hire store associates who often have relevant industry experience and our call center
is staffed by more than 50 flooring experts. Customers can order samples or catalogs and access product research
and information through any of our sales channels.
Customers can purchase our complete assortment of products in our stores, or through our call center or
website. The prices available on our website and from our call center are the same as the prices in the stores.
Once an order is placed, customers may have their purchases delivered or pick them up at a nearby store location.
We strive to use our various sales channels to make our customers’ transactions easy and efficient. Our average
sale was approximately $1,750 in 2008. We define “average sale” as the average invoiced sale per customer,
measured on a monthly basis and excluding transactions of less than $250 (which are generally sample orders, or
add-ons or fill-ins to previous orders) and of more than $30,000 (which are usually contractor orders).
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. We look for new store locations that are approximately 6,400 square feet,
with approximately 800 square feet 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.
As of December 31, 2008, we operated 150 stores in 44 states, and we plan to open approximately 30 to 40
stores during each of the next several years and we expect an approximately equal mix of stores in existing
markets and stores in new markets. We have opened over 50% of our total store base in the past three years,
including 34 stores in 2008. In 2008, our stores that had been open for more than twelve months had average
per-store net sales of $3.8 million. Across our markets, our average new store has historically become profitable
within three months of beginning operations and generally returned its initial cash investment within eight
months. We estimate that the cost required to open a typical new store is approximately $280,000, of which
inventory, net of trade payables, represents approximately $230,000. A typical store staff consists of a manager
and two to three associates. We hire additional staff to the extent required by a store’s level of business. The store
manager is responsible both for store operations and for overseeing our customers’ shopping experience. Many
of our store managers have previous retail experience with large retailers in the home improvement industry, the
retail flooring industry or the flooring installation industry. Store manager compensation consists of a base salary
and commissions.
A store’s warehouse is stocked with that store’s most popular hardwood products and high-volume items,
but primarily holds customer-specific merchandise inventory waiting to be picked up or to have delivery
arranged. This allows for central inventory management from our Toano facility. Average store inventory for
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