Lumber Liquidators 2012 Annual Report Download - page 11

Supply Chain. We are committed to our complete product assortment being available to meet our customers’
expectations more timely than our competitors. We operate distribution centers in Hampton Roads and Toano, Virginia, a
facility in Toronto, Canada, with both a store front and a small warehouse, and we lease the services of a third party
consolidation center in China. On average, each store location has approximately 4,400 to 6,000 square feet of warehouse
space stocked with a combination of customer-specific inventory waiting to be picked up or delivered and inventory levels of
certain products we believe the customer expects to be immediately available. We generally expect each store to receive a
truckload of product at least once per week. Further, we work with our mills to ship certain products directly to our stores or
to our customers.
Our supply chain costs include:
• international and domestic inbound transportation to either our distribution centers or stores;
• transportation charges from our distribution centers to our stores;
• transportation charges between stores; and
• third-party delivery services from our stores to our customers.
Our product is generally transported boxed and palletized, and the weight of our product generally increases our supply
chain costs. International container rates, customs and duty charges, and domestic fuel costs can significantly impact our
transportation costs, which in total represented 8.8% of net sales in 2012. Our supply chain initiatives seek the lowest rates,
reductions in the number of miles traveled and the most efficient means to minimize the total cost per mile.
Our Value Proposition
Important components of our value proposition include:
•Price.A fundamental part of our business model is to provide quality hardwood flooring at prices lower than our
competitors. We are able to maintain these prices across our product range as a result of our direct sourcing, supply
chain and unique store model.
•Selection.We offer a broad product assortment of solid and engineered hardwoods, laminates, resilient, bamboo
and cork flooring products, moldings and flooring accessories sold under proprietary brands that help us to
differentiate our products from those of our competitors. We offer products across a range of price points and
quality levels that allow us both to target discrete market segments and to appeal to diverse groups of customers.
•Quality.We believe that we have achieved a reputation for quality, and that our proprietary brands are recognized
for excellence by our customers. We work directly with the mills to source and produce flooring that will meet our
high quality standards. We utilize quality control and assurance resources at mills in China and South America, and
inspect domestic shipments upon receipt in our facilities. We also finish the majority of our Bellawood products
ourselves.
•Availability.We are committed to our complete product assortment being available to meet our customers’
expectations more timely than our competitors.
•People. We position ourselves as hardwood flooring experts and believe our high level of customer service reflects
this positioning. Key elements of our service include product education on species and construction so that our
customers can select flooring that is best aligned with the intended use including the type of room where the
flooring will be installed, site conditions at the house and local climate factors. Our regional and store managers,
supported by a call center staff, are trained to understand the characteristics and installation method for the broad
range of hardwood flooring and accessories that we offer. Residential customers are generally less familiar with the
range of products available and with the purchase process itself. As a result, we believe our attention to service
provides a competitive advantage.
Our Stores
Our stores are approximately 6,000 to 7,000 square feet, which includes a showroom format designed to emphasize our
products, yet reflect our low-cost approach to doing business, and a warehouse. We believe our customers consider us a
destination location. Therefore, we seek locations for our stores that have significant visibility to passing traffic and easy
access from major highways, as well as certain retail synergies including home improvement, but are typically in areas with
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