The Favorites Catalog (6 editions in fiscal 2002) features many of the best-selling products from
all Lillian Vernon catalogs.
The Company's Personalized Gifts Catalog (3 editions in fiscal 2002) features gift items, all
offered with personalization.
The Lillian Vernon Gardening Catalog (2 editions in fiscal 2002) features a cross section of
functional garden products, as well as garden and floral-themed decorative accessories.
The Rue de France Catalog (4 editions in fiscal 2002) features upscale room decor and
customized window treatments and draperies with a French country theme.
The number of products offered in each catalog varies from 300 products to 800 products
depending on the time of the year.
The Company first offered its products over the Internet in 1995, and has continually upgraded
its site since that time. In fiscal 2002, the Company launched a completely redesigned and
reengineered e-commerce Internet site, www.lillianvernon.com. This state-of-the-art website
incorporates features that represent industry-wide best practices. These include: sophisticated
cross-sell and promotional-sell merchandising capabilities, real-time inventory availability of
products, the ability to view print catalogs online, and the opportunity for customers to see and
buy all of the products that the Company offers. The Company anticipates that on-line usage by
its existing customer base will continue to grow, and is now marketing the site in ways that will
expand the customer base. In fiscal 2002, orders received through the web site increased 33%
over fiscal 2001, and comprised approximately 13% of total orders.
The Company offers a deferred billing program to its customers, in which it agrees to charge the
customers' credit cards for the full amount of their purchase at a future date specified in each
catalog. The Company does not charge interest to the customers who participate in the deferred
billing program.
All products sold, including personalized products, are unconditionally guaranteed. A customer
may return any product, even if personalized, for any reason. The dollar value of refunds
requested by customers under the guarantee in fiscal 2002 approximated 4.0% of net revenues.
The Company purchases its products from approximately 1,100 suppliers. Approximately 85% of
the merchandise is purchased abroad, predominantly from manufacturers located in Taiwan,
India, Hong Kong and throughout the Peoples' Republic of China, Italy, Thailand and France.
Most purchase orders are denominated in U.S. dollars. Although no manufacturer is individually
material to the Company's operations, the Company buys significant quantities through several
Far East trading companies which utilize multiple manufacturers. The Company buys
approximately 7% of its purchases through one Far Eastern buying agent, which acts as the
Company's representative in its dealings with many different manufacturers in the Peoples'
Republic of China, including Hong Kong. The Company also buys approximately 6% of its
purchases through another Hong Kong vendor. As a result of its use of foreign suppliers, the
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