Sally Beauty Supply 2007 Annual Report Download - page 11

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Sally Beauty Supply stores are segmented into distinctive areas arranged by product type with signs allowing its customers to easily navigate through its stores.
Sally Beauty Supply seeks to stimulate cross-selling and impulse buying through strategic product placement and use of the front of the store to highlight new
products and key promotional items.
Merchandise
Sally Beauty Supply stores carry a broad selection of branded and exclusive label beauty supplies. Sally Beauty Supply manages each category by product and
by SKU and uses centrally developed planoguides to maintain a consistent merchandise presentation across its store base. Through its information systems, Sally
Beauty Supply actively monitors each store's category performance, allowing maintenance of consistently high levels of in-stock merchandise. We believe Sally
Beauty Supply's tailored merchandise strategy enables it to meet local demands and helps drive traffic in its stores. Additionally, its information systems track
and automatically replenish inventory levels, generally on a weekly basis.
Sally Beauty Supply offers a comprehensive ethnic product selection with specific appeal to the African-American marketplace. Its ethnic product offerings are
tailored by store based on market demographics and category performance. For example, sales to the African-American marketplace represent approximately
10% of net sales in Sally Beauty Supply's U.S. stores for fiscal year 2007. We believe the breadth of selection of ethnic products available in Sally Beauty Supply
Stores is unique and differentiates its stores from its competition. Sally Beauty Supply also aims to position itself to be competitive in price, but not a discount
leader.
Sally Beauty Supply's pricing strategy is differentiated by customer segment. Professional salon customers are generally entitled to a price lower than that
received by retail customers. However, Sally Beauty Supply does offer discounts to retail customers through its customer loyalty program.
Leading Third-Party Branded Products
Sally Beauty Supply offers an extensive selection of hair care products, nail care products, beauty sundries and appliances from leading third-party brands such
as Clairol, Revlon and Conair, as well as an extensive selection of exclusive label merchandise. We believe that carrying a broad selection of the latest premier
branded merchandise is critical to maintaining long-term relationships with our customers. The merchandise Sally Beauty Supply carries includes products from
one or more of the leading manufacturers in each category. Sally Beauty Supply's objective is not only to carry leading brands, but also to carry a full range of
branded and exclusive label products within each category. As hair trends continue to evolve, we expect to offer the changing professional beauty product
assortment necessary to meet the needs of retail consumers and salon professionals.
Exclusive Label Products
Sally Beauty Supply offers a broad range of private label and controlled label products, which we generally refer to collectively as exclusive label products,
unless the context requires otherwise. Private label products are brands manufactured under trademarks we own or license and in some instances we also own the
formula. Controlled label products involve brands that are owned by the manufacturer, but for which we have been granted sole distribution rights. We believe
exclusive label products, including controlled label products, provide customers with an attractive alternative to higher-priced leading third-party brands.
Exclusive label products accounted for approximately 40% of Sally Beauty Supply's product sales in the U.S. during fiscal year 2007. Generally, the exclusive
label brands have higher gross margins than the leading third-party branded products and we believe this area offers continued potential growth. Sally Beauty
Supply maintains exclusive label products in a number of categories including hair care, appliances and salon products. Sally Beauty Supply actively promotes
its exclusive label brands through in-store
4
Source: Sally Beauty Holding, 10-K, November 29, 2007