CDW 2006 Annual Report Download - page 15

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items that have attained a minimum sales volume and use vendor stock balancing programs to
minimize our investment in inventory.
Our distribution process is highly automated. Once a customer order is received, by phone,
online, or by fax, it is processed for credit approval. After credit approval, orders are automatically
routed to one of our distribution centers for picking and shipping.
We operate two distribution centers: a 450,000 square foot facility in Vernon Hills, Illinois, and a
513,000 square foot facility in North Las Vegas, Nevada. We believe that these distribution centers
are ideally located for purposes of shipping products throughout the United States and provide timely
access to our principal distributors. Our locations enable us to obtain non-stocked items for same-
day shipping. We believe that competitive sources of supply are available in substantially all of the
merchandise categories we carry.
Our distribution center in North Las Vegas, Nevada became operational in late 2005. This facility
handled approximately 30% of our total shipping volume at the end of 2006 and predominantly serves
customers located in the Western United States.
Marketing and Advertising Activities
We market to our current and prospective customers using catalogs, direct mail programs,
advertising, and an outbound calling program. In addition, we promote the CDW brand through a
national branding campaign, which includes print media, television and online advertisements, and
other activities.
Catalogs are one of our main advertising vehicles and our catalog strategy has evolved to include
specialty catalogs for products such as networking communications and software. Many of our
catalogs include articles about noteworthy technology developments and interviews with industry
executives. We also hold a Customer Technology Seminar Series, hosting representatives from
industry manufacturers and influential persons in the technology field who discuss the latest
information technology issues with our customers. We also develop trend advisories, case studies
and white papers addressing various business opportunities or challenges and how CDW can help
customers use technology to advance their business.
As a result of our relationships with our vendors, a substantial portion of our advertising and
marketing expenses are reimbursed through cooperative advertising reimbursement programs.
Participation in these cooperative advertising programs is at the discretion of our vendors and are
typically tied to sales or purchasing volumes or other commitments required to be met by the
Company within a specified period of time. To measure the effectiveness of our various marketing
activities, we track customer responses to our efforts by a variety of means. We use this information
to further refine our marketing strategy and to develop more effective programs.
E-commerce
We utilize our Web sites and extranets to implement our business strategy. Our objective is to
make it easy for our customers to transact business with the Company and ultimately to enhance our
customer relationships. Our Web sites include many advanced features to attract new customers
and produce sales, including more than 100,000 computer products to search and order online,
advanced search capabilities, product specifications, customer reviews, and information on product
availability and pricing. During 2006 and 2005, we generated $1.982 billion and $1.769 billion,
respectively, of direct online sales over our Web sites, representing approximately 29% and 28% of
total sales, respectively.
We continue to enhance our customized Web sites, marketed as CDW@work® and
CDWG@work® extranets. These sites give customers online access to information such as order
and shipping status, payment details, purchase history and details about their dedicated account