Lumber Liquidators 2011 Annual Report Download - page 18

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Increased competition could cause price declines, decrease demand for our products and decrease our market share.
We operate in the wood flooring industry, which is highly fragmented and competitive. We face significant competition
from national and regional home improvement chains, national and regional specialty flooring chains, Internet-based
companies and privately-owned single-site enterprises. We compete on the basis of price, customer service, store location
and range, quality and availability of hardwood flooring we offer our customers. 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. As we expand into new and unfamiliar markets, we may experience
different competitive conditions than in the past.
Some of our competitors are larger organizations, have existed longer, are more diversified in the products they offer
and have a more established market presence with substantially greater financial, marketing, personnel and other resources
than we have. In addition, our competitors may forecast market developments more accurately than we do, develop products
that are superior to ours or produce similar products at a lower cost, or adapt more quickly to new technologies or evolving
customer requirements than we do. Intense competitive pressures from one or more of our competitors could cause price
declines, decrease demand for our products and decrease our market share.
Hardwood flooring may become less popular as compared to other types of floor coverings in the future. For example,
our products are made using various hardwood species, including rare exotic hardwood species, and concern over the
environmental impact of tree harvesting could shift consumer preference towards synthetic or inorganic flooring. In addition,
hardwood flooring competes against carpet, vinyl sheet, vinyl tile, ceramic tile, natural stone and other types of floor
coverings. If consumer preferences shift toward types of floor coverings other than hardwood flooring, we may experience
decreased demand for our products.
All of these competitive factors may harm us and reduce our net sales and operating results.
Risks Related to Our Suppliers and Product Sourcing
Our ability to obtain products from abroad and the operations of many of our international suppliers are subject to risks
that are beyond our control and that could harm our operations.
We rely on a select group of international suppliers to provide us with flooring products that meet our specifications. In
2011, approximately 42% of our product was sourced from Asia, approximately 7% was sourced from South America and
approximately 1% was sourced from other locations outside of North America. As a result, we are subject to risks associated
with obtaining products from abroad, including:
• political unrest, terrorism and economic instability resulting in the disruption of trade from foreign countries where
our products originate;
• currency exchange fluctuations;
• the imposition of new laws and regulations, including those relating to environmental matters and climate change
issues; labor conditions; quality and safety standards; trade restrictions; and restrictions on funds transfers;
• the imposition of new or different duties (including antidumping and countervailing duties), taxes and/or other
charges on exports or imports;
• disruptions or delays in production or shipments; and
• changes in local economic conditions in countries where our suppliers are located.
These and other factors beyond our control could disrupt the ability of our suppliers to ship certain products to us cost-
effectively or at all, which could harm our operations.
Our ability to offer hardwood flooring, particularly products made of more exotic species, depends on the continued
availability of sufficient suitable hardwood.
Our business strategy depends on offering a wide assortment of hardwood flooring to our customers. We sell flooring
made from species ranging from domestic maple, oak and pine to imported cherry, koa, mahogany and teak. Some of these
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