Lumber Liquidators 2010 Annual Report Download - page 11

education tools for our customers to learn about our products and the installation process. Our website contains a broad range
of information regarding our floors and accessories. We hire store associates who often have relevant industry experience
and our call center is staffed by more than 60 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 our 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 $1,520 in 2010. 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. As of December 31, 2010, we operated 223 stores in 46 states, and we plan to open
approximately 40 to 50 stores during each of the next several years in an approximately equal mix of new and existing
markets. We have opened approximately 50% of our total store base in the past three years, including 37 stores in 2010.
We look for new store locations that are approximately 6,000 to 7,000 square feet, with approximately 1,000 to 1,200
square feet dedicated to the showroom selling area. With our significant brand marketing, we believe our store locations are a
“must visit” destination for customers shopping for wood flooring. 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 locations reinforce
our customers’ belief that they get a good deal when they buy from us.
A typical store staff consists of a manager and two to three associates, with a compensation structure generally
weighting sales-driven bonuses over a relatively low base salary. The store manager is responsible both for store operations
and for overseeing our customers’ shopping experience. A store’s warehouse is stocked with a combination of that store’s
most popular products and high-volume items, as well as customer-specific merchandise inventory waiting to be picked up or
delivered. By generally requiring a 50% deposit when an order is placed for product not taken home that day, we reduce
store-level working capital requirements.
Across our markets, our average new store has historically become profitable within months of beginning operations
and generally returned its initial cash investment within the first year.
Installation
Although we do not provide flooring installation, we have a national installation arrangement with The Home Service
Store, Inc. (“HSS”), allowing us to make consistent installation services available in virtually every store in our chain. HSS
manages fully insured and licensed providers of professional installation services that measure, deliver, and install flooring at
competitive prices. This arrangement allows us to increase service offerings to our customers, and we benefit from cross-
promotional opportunities. Furthermore, we minimize risk associated with installation services and reduce time spent by
store managers on installation service issues.
Financing
We offer our residential customers a financing alternative through a proprietary credit card, the Lumber Liquidators
credit card, underwritten by GE Money Bank at no recourse to us. We generally utilize the credit program for promotional
opportunities, including programs for up to 18 months of deferred interest with payments. Our customers may also use their
Lumber Liquidators credit card to tender installation services provided by HSS.
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