Aarons 2014 Annual Report Download - page 18

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8
Manufacturing
Woodhaven Furniture Industries, our manufacturing division, was established in 1982, and we believe it makes us the only
major furniture lease company in the United States that manufactures its own furniture. Integrated manufacturing enables us to
control critical features such as quality, cost, delivery, styling, durability and quantity of our furniture products, and we believe
this provides an integration advantage over our competitors. Substantially all produced items are leased or sold through
Company-operated or franchised stores.
Our Woodhaven Furniture Industries division produces upholstered living-room furniture (including contemporary sofas, chairs
and modular sofa and ottoman collections in a variety of natural and synthetic fabrics) and bedding (including standard sizes of
mattresses and box springs). The furniture designed and produced by this division incorporates features that we believe result in
reduced production costs, enhanced durability and improved shipping processes all relative to furniture we would otherwise
purchase from third parties. These features include (i) standardized components, (ii) reduced number of parts and features
susceptible to wear or damage, (iii) more resilient foam, (iv) durable and soil-resistant fabrics and sturdy frames which translate
to longer life and higher residual value and (v) devices that allow sofas to stand on end for easier and more efficient transport.
The division also provides replacement covers for all styles and fabrics of its upholstered furniture, as well as other parts, for
use in reconditioning leased furniture that has been returned.
The division consists of five furniture manufacturing plants and nine bedding manufacturing facilities aggregating
approximately 818,000 square feet of manufacturing capacity.
Aaron's Office Furniture
Prior to 2010, we operated Aaron’s Office Furniture stores which rented and sold new and rental return merchandise to
individuals and businesses. Its focus was leasing office furniture to business customers. In June 2010, we made the strategic
decision to wind down the operations of the remaining Aaron’s Office Furniture stores, and the last remaining store was sold in
August 2012. We did not incur significant charges in 2014, 2013 or 2012 related to winding down this division.
Operations
Operating Strategy
Our operating strategy is based on distinguishing our brand from those of our competitors along with maximizing our
operational efficiencies. We implement this strategy for our store-based operations by (i) emphasizing the uniqueness of our
sales and lease ownership concept from those in our industry generally, (ii) offering high levels of customer service, (iii)
promoting our vendors and Aaron’s brand names, (iv) managing merchandise through our manufacturing and distribution
capabilities and (v) utilizing proprietary management information systems.
We believe that the success of our store-based operations is attributable to our distinctive approach to the business that
distinguishes us from both our rent-to-own and credit retail competitors. We have pioneered innovative approaches to meeting
changing customer needs that we believe differ from our competitors. These include (i) offering lease ownership agreements
that result in a lower “all-in” price, (ii) maintaining larger and more attractive store showrooms, (iii) offering a wider selection
of higher-quality merchandise and (iv) providing an up-front cash and carry purchase option on select merchandise at prices
competitive with traditional retailers. Many of our sales and lease ownership customers make their payments in person and we
use these frequent visits to strengthen the customer relationship.
Furthermore, our Progressive operating strategy is based on providing excellent service to both our retail partners and
customers along with the continued development of technology-based solutions. This allows us to increase our retail partner’s
sales, drive demand for our service, and scale in an efficient manner. We believe our ability to service a retailer with limited
labor costs allows us to maintain a cost of ownership lower than that of other options available to our customers.
Store-Based Operations
Our Aaron’s Sales & Lease Ownership division has 12 divisional vice presidents who are responsible for the overall
performance of their respective divisions. HomeSmart has one senior vice president and two directors responsible for that
division’s performance. Each division is subdivided into geographic groupings of stores overseen by a total of 156 Aaron’s
Sales & Lease Ownership regional managers and 14 HomeSmart regional managers.