Lumber Liquidators 2013 Annual Report Download - page 18

Download and view the complete annual report

Please find page 18 of the 2013 Lumber Liquidators annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 80

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80

phone. We have also developed several new responsive mobile, tablet and website functions to assist
consumers with their flooring choice. For example, our Designer Toolbox brings together several functions
such as a virtual room designer and Color Match, which allows customers to match their floor to a specific
color, cabinet, furniture or competitive option.
Flooring samples of all the products we offer are available in our stores, and can be ordered through our
call center and website. In addition, our iPhone and iPad app, The Floor Finder, gives consumers access to
approximately 200 digital samples as well as a variety of tools designed to facilitate flooring purchase
decisions, including visualizing any floor in their own home. The app also gives consumers flooring
specifications, such as hardness and installation information. We engage and interact in social media in order
to connect to our consumers in the most convenient manner possible as well as build relationships with our
satisfied customers. We have an active presence on Facebook, Pinterest, YouTube and three unique Twitter
accounts.
We strive to use our various sales channels to make our customers’ transactions easy and efficient.
Customers can purchase our complete assortment of products in our stores, or through our call center, website,
a smartphone or a tablet. 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. Our average sale was approximately $1,705 in 2013, and generally represents one or
two rooms of flooring. 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 goal is to
provide our customers with everything needed to complete their flooring project — to remove the existing
floor, install the new floor with complementary moldings and accessories, and finally, maintain the floor for its
lifetime.
We are committed to responding timely to all of our potential and existing customers. Our call center is
staffed by flooring experts cross-trained in sales, customer service and product support. In addition to
receiving telephone calls, our call center associates chat online with visitors to our website, responds to emails
from our customers and engages in telemarketing activities. Customers can contact our call center to place an
order, to make an inquiry or to order a catalog.
Store to Customer Delivery. Once an order is placed, a customer chooses to pick up at a nearby store
location or have their purchases delivered. We engage third parties to deliver our products from the store to an
address designated by the customer. The cost of the delivery varies based on weight and distance, and we pass
our actual cost onto the customer with a small markup to cover administration. In 2013, actual third party
delivery charges included in cost of sales were 91% of the delivery revenue included in net sales. As our
value propositions has resonated with a more casual customer, we have seen greater use of delivery, to
approximately 14% of our customers in 2013 compared to approximately 11% in 2012. We believe our
attachment of delivery services will continue to increase as we attract more casual consumers.
Installation. In each of our stores, we provide fully-insured and licensed professional installation
services to measure and install flooring at competitive prices. Through 2012, these services were managed
through a national arrangement with a third party. In 2013, we began testing structural alternatives to the
current installation arrangement. These alternatives focus on our own associates performing certain
customer-facing services and managing the actual installation services provided by third party, fully-insured
and licensed professionals in each market. Customer-facing services are consultative in nature, providing the
customer with a primary contact from initial in-home measurement to final approval of the installed floor.
Under the arrangement with the third party, we receive certain reimbursements based upon our
customers’ use of their services, with which we offset certain other expenses. Service revenue for installation
transactions we control are included in net sales, with the corresponding costs in cost of sales. The gross
margin on these transactions was less than the company average. In both 2013 and 2012, less than 8% of our
customers chose installation services. We believe our greater interaction with the customer and greater control
over the third party services provided will ultimately result in higher utilization by the customer.
8