Lumber Liquidators 2012 Annual Report Download - page 24

Additionally, privacy and information security laws and regulations change, and compliance with them may result in
cost increases due to necessary systems changes and the development of new administrative processes. If we fail to comply
with these laws and regulations or experience a data security breach, our reputation could be damaged, possibly resulting in
lost future business, and we could be subjected to additional legal risk as a result of non-compliance.
Risks Related to Our Personnel
Our success depends substantially upon the continued retention of certain key personnel.
We believe that our success has depended and continues to depend to a significant extent on the efforts and abilities of
our senior management team. The loss, for any reason, of the services of any of these key individuals and any negative
market or industry perception arising from such loss, could damage our business and harm our reputation.
Our success depends upon our ability to meet our labor needs.
Our success depends in part on our ability to attract, hire, train and retain qualified managers and staff. Buying
hardwood flooring is an infrequent event, and typical consumers have very little knowledge of the range, characteristics and
suitability of the products available to them before starting the purchasing process. Therefore, consumers in the hardwood
flooring market expect to have sales associates serving them who are knowledgeable about the entire assortment of products
offered by the retailer and the process of choosing and installing hardwood flooring. As a result, competition for qualified
store managers and sales associates among flooring retailers is intense. We may not succeed in attracting and retaining the
personnel we require to conduct our current operations and support our potential future growth. In addition, as we expand
into new markets, we may find it more difficult to hire, motivate and retain qualified employees.
Although none of our employees are currently covered under collective bargaining agreements, we cannot guarantee
that our employees will not elect to be represented by labor unions in the future. If some or all of our workforce were to
become unionized and collective bargaining agreement terms were significantly different from our current compensation
arrangements or work practices, it could have a material adverse effect on our business and operating results.
Risks Relating to Our Marketing and Advertising
Our success depends on the effectiveness of our advertising strategy.
We believe that our growth was achieved in part through our successful investment in local and national advertising.
Historically, we have used extensive advertising to encourage customers to drive to our stores, which were typically located
some distance from population centers in areas that have lower rents than traditional retail locations. Further, a significant
portion of our advertising was directed at the DIY consumer. While our marketing strategy continues to support our real
estate strategy and remains focused on the DIY customer, we have broadened the reach and frequency of our advertising to
increase the recognition our value proposition and the number of customers served. We may need to further increase our
advertising expense to support our business strategy in the future. If our advertisements fail to draw customers in the future,
or if the cost of advertising or other marketing materials increases significantly, we could experience declines in our net sales
and operating results.
Failure to maintain relevant product endorsement agreements and product placement arrangements could harm our
reputation and cause our net sales to deteriorate.
We have established relationships with well-known and respected home improvement celebrities to evaluate, promote
and help establish with consumers the high-quality nature of our products. If these individuals were to stop promoting our
products, if we were unable to renew our endorsement contracts with them or if we could not find other endorsers of a similar
caliber, our net sales and reputation could be harmed. Similarly, any actions that persons endorsing our products may take,
whether or not associated with our products, which harm their or our reputations could also harm our brand image with
consumers and our reputation, and cause our net sales to deteriorate. We also have a number of product placement
arrangements with home improvement-related television shows. We rely on these arrangements to increase awareness of our
brands, and to enable potential customers to see both what our flooring will look like after installation and the relative ease
with which it can be installed. Any failure to continue these arrangements could cause our brands to become less well-known
and cause our net sales to deteriorate.
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