Sponsorships Help Insulate Lumber Liquidators From Housing Crisis

Retailer Has Partnered With Scripps' HGTV and DIY and ABC's 'Extreme Makeover: Home Edition'

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NEW YORK (AdAge.com) -- If you thought the current housing crisis would take its toll on specialty retailers such as Lumber Liquidators, you'd be wrong. One way to beat a recession is to hammer away with a steady supply of branded entertainment.

Lumber Liquidators is one of the lead sponsors on HGTV's 'Dream Home,' which is in its 13th year on air.
Lumber Liquidators is one of the lead sponsors on HGTV's 'Dream Home,' which is in its 13th year on air. Credit: HGTV
When the 15-year-old hardwood-floor retailer releases its fourth-quarter results March 11, it expects to report annual revenue between $482 million and $486 million for 2008. It is the largest retailer of its kind, with year-over-year net sales up 22%, according to the company's latest filing with the Securities and Exchange Commission in November, one year after it went public. It also opened 34 stores in 2008 alone and shows no signs of slowing down.

So what has driven this rapid growth?

"A well-thought-out national advertising strategy," President-CEO Jeffrey Griffiths said -- one that includes TV, online, celebrity endorsements with home-improvement gurus such as Bob Vila and, perhaps most important, partnerships with Scripps Networks Interactive's Home and Garden Television and DIY networks, as well as ABC's "Extreme Makeover: Home Edition."

Venture into branded content
Lumber Liquidators, headquartered in Toano, Va., has roots as a direct-response marketer, and most of its advertising is done in-house. But its decision to venture into branded content on home-improvement shows was "simple," Mr. Griffiths said.

"It's a very targeted audience," he said. "Someone who is interested in homes or remodeling is likely to be interested in our product."

"Certainly Lumber Liquidators is a success story for Scripps," said Jon Steinlauf, senior VP-ad sales at Scripps Networks, which has a relationship with Lumber Liquidators that dates back eight years, when the retailer was looking to expand. Lumber Liquidators conducted a direct-response test on HGTV and decided to break through on a national front, Mr. Steinlauf said. And that initial trial has led to a long-term relationship between the two.

"When they started, they were very small," he said. "Now they've become a specialty retailer that has grown up."

'Dream Home' giveaway
Lumber Liquidators, along with General Motors' GMC, is the lead sponsor on HGTV's "Dream Home," a two-special home giveaway that is in its 13th year on air. Messrs. Griffiths and Steinlauf declined to share exact numbers, but Mr. Steinlauf called the sponsorship a seven-figure deal. The 2009 premiere episode, which aired New Year's Day, averaged 1.6 million viewers, according to Nielsen, with reruns of the episode bringing in an additional 4.8 million.

A large component of "Dream Home" is online, and Mr. Steinlauf said he expects HGTV to receive 40 million e-mailed entries to the home-giveaway sweepstakes. He called Lumber Liquidators a "sophisticated e-marketer" that creates short-form pieces for online properties and supplements that content with online advertising.

"They've been ahead digitally for a long time," Mr. Steinlauf said. "They've been able to target and use their money on an efficient basis, and there aren't a number of companies who can do that."

In addition to "Dream Home," Lumber Liquidators is a significant sponsor on DIY's "Blog Cabin," which features a house built interactively by web users. Lumber Liquidators is one of the top 10 advertisers on DIY.

'Strong value proposition'
"We feel that the strong value proposition that we offer is very compelling," Mr. Griffiths said, adding that his company stands out in a highly fragmented market. "There are 13,000-plus independent flooring retailers, and the vast majority are carpenters." One of the company's largest competitors, iFloor, sought Chapter 11 bankruptcy protection at the end of last year.

Neither Mr. Griffiths nor Mr. Steinlauf revealed details about how the partnership was brokered or what plans lay ahead. But Lumber Liquidators' Mr. Griffiths said, "We feel we have a very strong strategy, and I don't see any significant changes to that as we move forward."

Even in the recession, Lumber Liquidators has continued to invest in promoting its business. It is set to surpass last year's $19 million advertising outlay, spending $14 million in the first nine months of 2008, according to TNS Media Intelligence, with heavy ad buys in Sunday magazines and on cable TV.

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