Aarons 2012 Annual Report Download - page 22

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Each division is subdivided into geographic groupings of stores overseen by 125 Aaron’s Sales & Lease Ownership
regional managers, 11 HomeSmart regional managers and three RIMCO regional managers. At the individual store
level, the store manager is primarily responsible for managing and supervising all aspects of the store operations,
including but not limited to:
• customer relations and account management;
• deliveries and pickups;
• warehouse and inventory management;
• merchandise selection;
• employment decisions, including hiring, training and terminating store employees; and
• certain marketing efforts.
Store managers are also responsible for ensuring that lease return merchandise is properly inspected and determining
whether it should be sold as is, leased again as is, repaired and sold, or reconditioned and leased again. The store
manager’s total compensation is determined based upon the revenue and profits of his/her store.
Our business philosophy has always emphasized safeguarding of Company assets, strict cost containment and fiscal
controls. Store managers, as well as other levels of management, monitor expenses to contain costs. We pay all
material invoices from Company headquarters in order to enhance fiscal accountability. We believe that careful
attention to the safeguarding of lease merchandise, our most significant asset, as well as the expense side of our
operations, has enabled us to maintain financial stability and profitability.
Management Information Systems. We use computer-based management information systems to facilitate cash
collections, merchandise returns and inventory monitoring. Through the use of proprietary software developed in-
house, each of our stores is linked by computer directly to corporate headquarters, which enables us to monitor the
performance of each store on a daily basis. At the store level, the store manager is better able to track merchandise on
the showroom floor and in the warehouse to minimize delivery times, assist with product purchasing, and match
customer needs with available inventory.
Lease Agreement Approval, Renewal and Collection. One of the keys to the success of our sales and lease ownership
operation is timely cash collections. Individual store managers oversee the monitoring of cash collections and
customers are contacted within a few days of their lease payment due dates in order to encourage customers to keep
their agreement current and in force, rather than having to return the merchandise for non-payment, and to renew their
agreements for an additional period. Careful attention to cash collections is particularly important in sales and lease
ownership operations, where the customer typically has the option to cancel the agreement at any time and each
payment is considered a renewal of the agreement rather than a collection of a receivable.
We generally perform no formal credit check with respect to sales and lease ownership customers, other than to verify
employment or other reliable sources of income and personal references supplied by the customer. All of our
agreements for merchandise require payments in advance, and the merchandise normally is repossessed if a payment is
significantly in arrears. We do not extend credit to sales and lease ownership customers.
Net Company-wide merchandise shrinkage as a percentage of combined lease revenues was 3.3% in 2012, 3.0% in
2011 and 3.3% in 2010. We believe that our collection and repossession policies materially comply with applicable
legal requirements, and we discipline any employee that we discover deviating from such policies.
Customer Service. We believe that customer service is one of the most important elements in the success of our
business. Customer satisfaction is critical because the customer typically has the option of returning the leased
merchandise at any time. Our goal is to make our customers feel positive about Aaron’s and our products from the
moment they enter our showrooms. Through Aaron’s Service Plus, customers receive benefits including the 120 days
same-as-cash option, repair service at no charge to the customer, lifetime reinstatement and other discounts and benefits.
In order to increase leasing at existing stores, we foster relationships with existing customers to attract recurring
business, and many new agreements are attributable to repeat customers.
Because of the importance of customer service, we believe that a prerequisite for successful operations and growth is
skilled, effective employees who value our customers and project a genuine desire to serve customers’ needs. We have