Lumber Liquidators 2013 Annual Report Download - page 12

•Availability. Our commitment to in-stock inventory levels and our focused supply chain allow our
entire assortment to be available to meet our customers’ expectations in a manner which we believe
is more timely than our competitors. We maintain our best selling products as in-stock inventory at
our retail store locations and our distribution facilities maintain inventory levels of our entire
assortment for delivery to a store to fulfill a customer order. Each store receives a delivery from one
of our distribution centers at least once per week.
•People. We position ourselves as hardwood flooring experts and believe our high level of customer
service reflects this positioning. Residential customers are generally less familiar with the range of
products available and with the purchase process itself. We focus on educating our store associates
on product knowledge and engaging the customer in the questions leading to the species and
construction of flooring which is best aligned with the type of room, expected wear, climate and site
conditions, all while satisfying customer budgetary requirements. Our associates, supported by a call
center staff, are trained to understand the unique characteristics and preferred installation method
across the broad range of hardwood flooring alternatives.
Our Direct Sourcing Model
Supplier Relationships. We believe sourcing directly from mills enables us to offer a broad assortment
of high-quality, proprietary products to our customers at a consistently lower cost than our competitors. We
seek to establish strong relationships with mills around the world where the significance of our scale, breadth
of assortment and liquidity allow for both higher quality and lower cost. We believe our collaborative
relationship enhances the mills’ productivity, yield and financial flexibility, such that we access lower net costs
than our competitors. We are able to set demanding specifications for product quality and our own quality
control and assurance teams are on-site at the mills, coordinating inspection and assurance procedures. We
believe the advantages a mill gains by working with us attracts interest from around the world. As a result, we
have diversified our purchases across approximately 150 domestic and international mills. We seek long-term,
core relationships with mills committed to our demanding product specifications, sustainable supply and
regulatory compliance. Therefore, our top 20 suppliers accounted for approximately 64% of our supply
purchases in 2013. We are well diversified, however, with our largest mill partner representing approximately
10% of our supply purchases in 2013 and our largest hardwood provider representing approximately 6%.
In 2011, we began a process to continually challenge, and ultimately strengthen, the structure of our
sourcing relationships with the best international and domestic mills. Our sourcing initiatives play a key role
in maintaining the best combination of quality and value in our product assortment, while reducing product
costs. These initiatives, now a continuous and integral part of our sourcing strategy and process, can be
segregated into three primary areas:
䡩Volume-based discounts and cost sharing for a range of continuing programs, including marketing,
product samples and new store openings.
䡩Current and potential mill partners’ participation in competitive line reviews of specific merchandise
categories to evaluate breadth of assortment, quality, logistics and product cost.
䡩Direct sourcing with international and domestic mills to control product cost and quality, enhance
forecasting and broaden our product assortment.
We are committed to uncompromising integrity across our operations, and quality is a key component of
our value proposition. The scale of our purchasing and diversity of products require sustainable forestry. We
invest significant time and resources to safeguard quality and comply with regulatory requirements. We
discontinue sourcing from suppliers not adhering to our standards. We seek long-term relationships with mills
that can provide sustainable and growing supplies of high-quality product.
Our Products and Brands. We offer an extensive assortment of wood flooring under 18 proprietary
brand names, led by our flagship, Bellawood. We have invested significant resources developing these national
brand names, as well as the Lumber Liquidators name. We expect to continue to invest resources in our
advertising and marketing at a percentage of net sales that we believe is greater than our competitors. We
believe Lumber Liquidators is now recognized across the U.S. as a destination for high-quality hardwood
flooring at low prices, while our Bellawood brand is known as a premium flooring brand within the industry.
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