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vendor mandated restocking fee. We may pass any supplier assessed restocking fee on to the customer in the event a special ordered appliance |
is returned or exchanged without defect. Competition We compete with big box retailers, independent |
appliance retailers, hybrid retail and direct-to-consumer companies and web only companies. As a hybrid retail and direct-to-consumer |
company, we have the ability to successfully rival the offerings of each competitor, utilizing impressions from both online and traditional |
marketing, our consultative selling practice and customer service expertise, and a curated assortment of premier brands to attract and |
retain new customers. The U.S. appliance market in general is highly |
fragmented with thousands of local and regional retailers competing for share. Our primary competitors in the appliance market include |
big box retailers, such as Home Depot, Lowe’s and Costco; specialty retailers, such as TeeVax, Ferguson and Premier Bath and Kitchen; |
and online marketplaces, such as Amazon. The shifting landscape to online sales in the |
segment is providing a significant market share capture and positioning opportunity for companies. We are rapidly evolving our business |
processes to capitalize on this market shift. While premium brands continue to place restrictions on the pure ecommerce distribution models, |
we are adapting the concierge selling available on our showroom floor for the web customer at home. The COVID-19 pandemic has accelerated |
this shift and is rewarding the entrepreneurial innovation necessary for this transition. This ongoing adaptation and continual process |
improvement will allow us to continue to enjoy a preferred reseller status with the premium brands that differentiate our offerings. Competitive Strengths Based on management’s belief and experience |
in the industry, we believe that the following competitive strengths enable us to compete effectively. ● Name and reputation . We believe that we enjoy a long-standing (more than 70 years) reputation |
with vendors and customers for our focus on offering a full line of appliances, including premium brands unavailable from the competition, |
with consultative selling, competitive pricing and superior customer service. ● Highly experienced management and personnel . We believe that our personnel are its most |
important asset. We have an experienced management team with decades of industry knowledge and a team of experienced, knowledgeable and |
skilled field personnel. ● Diverse product and service offerings . We offer a full line of top brands from U.S. and |
international manufacturers. We also offer delivery, installation and repair |
and maintenance services provided by our highly knowledgeable personnel. ● Inventory discipline . Resellers in the appliance industry are experiencing unprecedented |
supply chain issues with backorder on many appliance categories. Increasingly, the most success in appliance sales is found for those |
with available inventory on hand. We react quickly to the expression of customer demand by confirming availability for products and placing |
orders to reserve potential stock needs. Our curated assortment allows us to react to micro-trends and adjust assortment and buying decisions |
quickly. On the showroom floor, our experienced team has quickly pivoted to first sell what is available and then over-communicate with |
the customer when an item is on backorder. As a result, we are maintaining a low cancelation rate. Customer service processes and resources |
to allow more efficient ongoing customer communication and coordination will allow us to earn loyalty within our market by exceeding the |
service levels customers receive from other specialty retailers. 27 ● Extended repair, delivery, and loaner services . Many of our sales are “duress” |
sales to replace broken or antiquated equipment. It is not uncommon for service to provide a gateway sales. A customer looking to replace |
their appliance still wants a quality product and they need it quickly. This is where the value of our full-service approach wins customer |
loyalty. ● Online sales expertise . We believe that our ability to transact online, big ticket, home |
delivery sales give us strategic positioning and capability to sell more products to our current customer base, as well as to add new |
big ticket product categories. ● Membership in BrandSource . As discussed in more detail above, we believe that our membership |
in BrandSource provides us with a number of competitive advantages. Growth Strategies We will strive to grow our business by pursuing |
the following growth strategi ● Digital strategy . We plan to implement best-in-class solutions from parallel industries |
focused on a click-to-brick digital strategy. This includes enhancing our web presence and digital advertising while providing tools to |
facilitate consultation, guided customer support and service. We also plan to enhance the full-cycle customer relationship including loyalty, |
incentives for referral, and long-tail satisfaction surveys. We also plan to enhance our geographic reach through installation partnerships. ● Increase local marketing spend . We plan to increase our local marketing spending. Outreach |
messaging will increase the emphasis on us as a trusted community resource and other local first values. We plan to build incrementally |
on ad spending where a return is measurable. This involves first optimizing local market internet search and digital advertising campaigns, |
while at the same time innovating a COVID-19 appropriate approach to what was traditionally outside sales by more regularly engaging builders, |
designers, and contractors and encouraging regular digital meeting place. We plan to provide local leadership by being efficient and providing |
secure online tools to enable project management and data exchange. ● Store growth . We are actively looking for underserved and growing communities on the west |
coast that echo the attributes that serve our success in the current Sonoma County location. Intellectual Property We do not own any registered intellectual property |
for our retail and appliances business. The agreements with our suppliers generally provide us with a limited, non-exclusive license to |
use the supplier’s trademarks, service marks and trade names for the sole purpose of promoting and selling their products. To protect intellectual property, we rely on a |
combination of laws and regulations, as well as contractual restrictions. We rely on the protection of laws regarding unregistered copyrights |
for certain content we create. We also rely on trade secret laws to protect our proprietary technology and other intellectual property. |
To further protect our intellectual property, we enter into confidentiality agreements with our executive officers and directors. Employees As of December 31, 2022, we employed 22 |
full-time employees. None of our employees are represented by labor unions, and we believe that we have an excellent relationship |
with our employees. 28 Regulation Our business is subject a variety of laws and |
regulations applicable to companies that are conducting business on the Internet. Jurisdictions vary as to how, or whether, existing laws |
governing areas such as personal privacy and data security, consumer protection or sales and other taxes, among other areas, apply to |
the Internet and e-commerce, and these laws are continually evolving. For example, certain applicable privacy laws and regulations require |
us to provide customers with our policies on sharing information with third parties, and advance notice of any changes to these policies. |
Related laws may govern the manner in which we transfer sensitive information or impose obligations on us in the event of a security breach |
or inadvertent disclosure of such information. Additionally, tax regulations in jurisdictions where we do not currently collect state |
or local taxes may subject us to the obligation to collect and remit such taxes, or to additional taxes, or to requirements intended to |
assist jurisdictions with their tax collection efforts. New legislation or regulation, the application of laws from jurisdictions whose |
laws do not currently apply to our business, or the application of existing laws and regulations to the Internet and e-commerce generally |
could result in significant additional taxes on our business. Further, we could be subject to fines or other payments for any past failures |
to comply with these requirements. The continued growth and demand for e-commerce is likely to result in more laws and regulations that |
impose additional compliance burdens on companies doing business on the Internet. CUSTOM CARPENTRY BUSINESS Our custom carpentry business is operated |
through our subsidiaries Kyle’s, High Mountain and Innovative Cabinets. Kyle’s was acquired in the third quarter of 2020 and |
High Mountain and Innovative Cabinets were acquired in the fourth quarter of 2021. This business segment accounted for approximately 64.9% |
and 39.8% of our total revenues for the years ended December 31, 2022 and 2021, respectively. Overview We specialize in all aspects of finished carpentry |
products and services, including doors, door frames, base boards, crown molding, cabinetry, bathroom sinks and cabinets, bookcases, built-in |
closets, and fireplace mantles, among others. We also install windows and kitchen countertops. We primarily service large homebuilders |
and homeowners of single-family homes and commercial and multi-family developers in the greater Reno-Sparks-Fernley metro area in Nevada |
and in the Boise, Idaho area. Products and Services We provide a wide variety of finished carpentry |
products and services to single-family homeowners and builders, builders of multi-family homes, as well as commercial clients in the greater |
Reno-Sparks-Fernley metro area in Nevada, which is one of the fastest growing economic regions in the Western U.S. This includes selling |
and installing doors, door frames, basic trim, base boards, crown molding, kitchen and bathroom cabinets and countertops, walk-in closets, |
bookcases, fireplace mantles, even staircases, staircase handles and spindles. We also install windows in this market. Revenue |
from window installation is projected to grow significantly. Window installation does not require any manufacturing or assembly of windows |
and minimal inventory levels of product is needed. We can simply either install the windows that have already been purchased by the client |
or buy them for a specific job and install them. We also build cabinets for every area of a home |
- kitchen and bath cabinets, fireplace mantels and surrounds, entertainment systems and wall units, bookcases and office cabinets - in |
Boise, Idaho and the surrounding area, for builders, designers and homeowners when they are building a new home or conduct remodeling. |
In this market, most of the focus has been on supplying custom or semi-custom builders of residential properties. Manufacturing Most of our services consist of design, assembly, |
and installation services. As a result, we do not manufacture most of our products, although we do have limited manufacturing operations |
consisting of value-add activities such as drilling pre-manufactured doors for holes and attaching hinges. In the Boise, Idaho market, Kyle’s operates |
a cabinet shop that is equipped with state-of-the-art tools operated by skilled cabinetmakers. It manufactures its cabinets using its |
computer numerical control machinery in order to maximize efficiency. The details of each custom cabinet it makes are created by its own |
employees, from hand sanding to staining and painting to adding a wide array of specialty finishes, coatings, distressing and glazing. 29 Pricing Our strategy has been to deliver quality and performance |
at a value-based price target. Our pricing model is generally offering better features or efficiencies than general market competitors |
in each product category to our builder markets. Supplier Relationships We source products and raw materials from multiple |
regional, national and foreign suppliers. Certain of our products and materials come from Asian-based suppliers. Products and materials |
from Asian-based suppliers may be subjected to import tariffs, depending on various foreign policies of the US government. As such, we |
continue to explore partnership or supplier opportunities to optimize our costs. The primary raw materials used in the manufacture |
of Kyle’s products are melamine and veneered sheet goods, lumber, doors and hardware. Cost of these raw materials is a key factor |
in pricing its products. We have historically purchased certain key products |
and raw materials from a limited number of suppliers. We purchase products and raw materials on the basis of purchase orders. While we |
believe that there is an ample supply of most of the products and raw materials that we need, in the absence of firm and long-term contracts, |
we may not be able to obtain a sufficient supply of these products and raw materials from our existing suppliers or alternates in a timely |
fashion or at a reasonable cost. If we fail to secure a sufficient supply of key products and raw materials in a timely fashion, it would |
result in a significant delay in delivering our products and services, which may cause us to breach our sales contracts with our customers. |
Furthermore, failure to obtain sufficient supply of these products and raw materials at a reasonable cost could also harm our revenue |
and gross profit margins. Please see Item 1A “ Risk Factors—Risks Related to Our Custom Carpentry Business ” for |
a description of the risks related to our supplier relationships. Furthermore, the COVID-19 pandemic has had and |
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