Lumber Liquidators 2013 Annual Report Download - page 29

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
associates. 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 retaining
the DIY customer, we have broadened the reach and frequency of our advertising to increase the recognition
of our value proposition and the number of customers served. We may need to further increase our advertising
expense to support our business strategies 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.
We may not be able to adequately protect our intellectual property, which could harm the value of our
brands and impact our business.
Our intellectual property is material to the conduct of our business. The successful implementation of our
business plan successfully depends in part on our ability to further build brand recognition using our
trademarks, service marks and other proprietary intellectual property, including our name and logo and the
names and logos of our brands. We may incur significant costs and expenses relating to our efforts to enforce
our intellectual property rights. If our efforts to protect our intellectual property are inadequate, or if any third
party infringes on or misappropriates our intellectual property, the value of our brands may be harmed, which
could adversely affect our business and might prevent our brands from achieving or maintaining market
acceptance.
19