Rosetta Stone 2012 Annual Report Download - page 7

Table of Contents
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Our global consumer distribution model comprises a mix of our call centers, websites, network of kiosks, select retail resellers, such as
Amazon.com, Barnes & Noble, Best Buy, Books-a-Million, Costco, Groupon and Staples, home shopping networks such as GS Home Shopping in
Korea and consignment distributors such as Navarre. We believe these channels complement each other, as consumers who have seen our direct-to-
consumer advertising may purchase at our kiosks or retailers, and those who have seen our solutions demonstrated at our kiosks may purchase
solutions through our retailers, websites or call centers.
 Sales generated through either our websites or call centers.
 Our retailers enable us to provide additional points of contact to educate consumers about our solutions, expand our presence beyond
our own kiosks and websites, and further strengthen and enhance our brand image. Our retail relationships include Amazon.com, Barnes & Noble, Best
Buy, Books-a-Million, Costco, Groupon, Staples, and others outside of the U.S.
 We promote interest in this market through advertising in publications focused on home schooling, attending local trade shows,
seminars and direct mailings.
 As of December 31, 2012, we operated 87 retail kiosks, including 57 full service retail outlets, in airports, malls and other
strategic high-traffic locations in 19 states. As of December 31, 2012, we operated one kiosk in the United Kingdom, three in Japan, and 26 in South
Korea.
Our institutional distribution model is focused on targeted sales activity primarily through a direct sales force in four markets: schools, colleges and
universities; federal government agencies; corporations; and not-for-profit organizations. Regional sales managers are responsible for sales of our
solutions in their territories and supervise account managers who are responsible for maintaining our customer base.
 These customers include primary and secondary schools.
 These customers include government agencies and organizations developing workforces to
serve non-native speaking populations, offering literacy programs and preparing members for overseas missions.
 We promote interest in this market with onsite visits, trade show and seminar attendance, speaking engagements and direct
mailings.
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Our strategy is to maintain a flexible, diversified and low-cost manufacturing base for our prepackaged products. We use third-party contract
manufacturers and suppliers to obtain substantially all our product and packaging components and to manufacture finished products. We believe that we
have good relationships with our manufacturers and suppliers and that there are alternative sources in the event that one or more of these manufacturers
or suppliers is not available. We continually review our manufacturing and supply needs against the capacity of our contract manufacturers and
suppliers with a view to ensuring that we are able to meet our production goals, reduce costs and operate more efficiently.
We package and distribute our products primarily from our fulfillment facility in Harrisonburg, Virginia. We also contract with third-party
fulfillment vendors in Munich, Germany, and Tokyo, Japan.
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