1 SBC Retail Vertical Solutions Index

1 SBC Retail Vertical Solutions

Index • About the Industry 8 -23 • Positioning w/ the Retail Customer 24 -41 – Retail Pain Points – Qualifying Questions fro Retailers 41 25 -30 31 - 2

3 About the Retail Industry Section 2

Strategic Analysis Summary § “The retail sector has a long- § “Retailers are increasingly concerned about the standing reputation of being capabilities of “big-box” conservative in technology retailers led by Wal-Mart ” adoption. ” § “One area retailers have been more aggressive is in adopting technology to improve business processes. ” § “Retailers of all sizes are now realizing that operational efficiency is not enough to compete. ” Effective IT solutions, or the lack of them, can now be a survival issue in the fast-paced but low-margin retail sector. ” Gartner’s Strategic Analysis Report, June 2003 4

Retail at a “Technology Tipping” Point § Consumers Have alternative channels available Are more comfortable with technology Have higher expectations § Competition The connected retailer has the advantage Enhance the customers experience Productive empowered employees § Legacy equipment expiring No “future scale” w/ existing infrastructure 5

Technology Addresses Retail Concerns Self checkout Decisions made at the store level Informational kiosks for pricing & product info Supply chain— real time Customer information that links to merchandising & promotions Wirelessinstant help at all points in the store Forecasting— data mining, scheduling in sync w/ busy time Real-Time inventory visibility store to store and store to consumer 6

What Concerns the Consumer Findings: § Top 3 services requested – Having in stock items 79% – Products easy to find 57% – Fast check-out 45% § Helpful staff valued in – – Hardware Sporting goods Appliance/electronics Furniture and drugs Recommendations: § § § Link technology solution w/ the specific value prop for each retail sub-vertical Run an efficient store Increase headquarters responsibility 7

Defining Consumer Experience “In store technologies can provide the tools retailers need to improve their store operations and deliver the kind of shopping experience the consumer is looking for. ” --Gartner Sept 2003 § Self service technology is a way to enhance customer experience § Build communication and training plans to support customer & associates in the use of in-store technology 8

POS Connectivity “As retailers upgrade their POS systems many also try to boost connectivity from HQ to stores to take advantage of new POS functionality. ” ---Forrester, March 2004 9

POS Transformation § To remain competitive – Increase in-store sales – Decrease operating costs – Boost productivity – Enhance customer experience § Move from basic to advanced POS § Upgrade POS system based on your unique needs 10

POS Blueprint by Sub Vertical 11

Retailers POS Capabilities “As retailers push forward they are grappling with inadequate POS systems” ---Forrester “More than 1/3 of retailers use kiosks, POS touch-screens, mobile POS devices & signature capture devices. Many more are considering these tools. ” ---Forrester 12

Retailers and RFID costs are high. Many retailers are considering RFID but may not implement it right away. 13

More About RFID Soon RFID will flow to existing applications over existing networks. 14

The Successful Retailer is…. Moving Forward The “Connected” retailer –Resilient “future-ready” network –The “secure store” –Operational integration The “Converged” retailer -Addresses competitive threats -Responds to the demanding consumer -Simpler manageable platforms The “Successful” retailer -Better visibility to businesscritical data -Enhanced customer experience -Lower total cost of ownership 15

Retail Segmentation § Retailers w/ T 1 & above Alternative channels available More comfortable with technology Higher expectations § Retailers w/ sub-T 1 Connect to compete –the Wal-Mart effect Need to differentiate Need to enhance customer experience § Other criteria Number of check-out lanes in each store Legacy equip--SNA, DOS, PBXs 16

Retail—Drivers to Solutions Retail Drivers Customer Wants Solutions Large Competitors & Reduced Margins Lower Operational Costs The “Connected” Retailer Customers Demanding More Enhance Customer Experience The “Converged” Retailer More Channel Options Increase Same Store Sales Legacy Equipment Limits Functions Improve Functionality & Productivity Real time access to information Speed of POS transaction Store level productivity Supply chain visibility Lower communication costs Dynamic content to stores The “Efficient” Retailer Operational efficiency Inventory visibility Speed of information The “Expanded” Retailer WIFI & Kiosk Self service for customers E-learning for employees 17

Retail in Action Remote Access to In -Store Inventory Frame/ATM IP Network Sync up w/ Platforms Headquarters Portals Connected to Suppliers Data Mining: Patterns Frame/ATM IP Network On-line IP Phones, Schedules, Inventory & Pricing Stores Authorization/ Settlement (Merchant Bank) WIFI Hotspot Wireless Mobility In-Store Advertising Kiosk 18

19 Positioning with the Retail Customer Section 3

Software/Applications Providers… Technology is the differentiator & applications are the change agents § IPcelerate: Timecard management and scheduling § Aptigen: Supply chain management § Tomax: Workforce management § Vytek: Supply chain, mobile POS, Mobile inventory, retail distribution 20

Workforce Management—Pain Points Retail Driver The Customers Pain Points The Benefits of the Application* The Value Proposition The Solution* Workforce Management High Employee Churn Increasing employee training costs Increasing HR expenses Automate administrative tasks such as scheduling, training, HR forms, benefits, etc. Reduces operational costs for training and HR Increases employee productivity-more efficient & consistent training DSL, Frame Relay, ATM, IP-VPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV Workforce Management Difficulty coordinating employee schedules w/ in -store peak times. Sometimes understaffed, sometimes overstaffed. Can forecast peak store times and schedule employees accordingly. There is adequate coverage for check-out as well as assisting customers on the floor. Enhances the customers experience because employees are there to assist them. Increases in-store revenues Reduces costs because staffing is coordinated w/ instore peak times. DSL, Frame Relay, ATM, IP-VPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV Workforce Management Employees don’t regularly fill out their time sheets, paper work etc. This creates more work for the management team, preventing them from doing other things. A lot of administrative time is spent on creating employee work schedules. Distribution of work schedules to employees is manual & sometimes causes confusion. Reduces employee turnover— employee’s daily routines and schedules are easier to coordinate, change and manage. Automated scheduling based on in-store trends and workforce options. Schedules are distributed consistently. Schedule changes are tracked real—time. Reduces administrative costs-scheduling management is automated. Increases employee satisfaction—more satisfied employees Enhances the customer’s experience which is directly linked to increased revenues. DSL, Frame Relay, ATM, IP-VPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. More detail located in the solutions section. 21

Workforce Management Pain Points (Cont. ) Retail Driver Workforce Management The Customers Pain Points The Benefits of the Application* The Value Proposition In-store management spends too much time administrating employee benefits programs such as FMLA and disability. Employees. want to manage their own benefits Additionally management is not getting comprehensive reports that provide an accurate picture of the stores daily, weekly, monthly, yearly trends. So they don’t know the true impact to their bottom line. Employees can access their benefits forms and information vie the extranet. Gives on-line automation of HR info, payroll, vacation balances, general benefit information, FMLA info, On-line benefit forms Manages annual open enrollment for benefits. Reduces operational costs, improves employee turnover Enhances the customers experience which is directly linked to increased revenues The Solution* DSL, Frame Relay, ATM, IPVPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. More detail located in the solutions section. Improve retail decisions with better processes and better data. 22

Workforce Management Pain Points (Cont. ) Retail Driver Workforce Management The Customers Pain Points The Benefits of the Application* The Value Proposition In-store management spends too much time administrating employee benefits programs such as FMLA and disability. Employees. want to manage their own benefits Additionally management is not getting comprehensive reports that provide an accurate picture of the stores daily, weekly, monthly, yearly trends. So they don’t know the true impact to their bottom line. Employees can access their benefits forms and information vie the extranet. Gives on-line automation of HR info, payroll, vacation balances, general benefit information, FMLA info, On-line benefit forms Manages annual open enrollment for benefits. Reduces operational costs, improves employee turnover Enhances the customers experience which is directly linked to increased revenues The Solution* DSL, Frame Relay, ATM, IPVPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. More detail located in the solutions section. “To achieve sustainable competitive advantage going forward retailers need to align IT investments with their unique value proposition. They must look beyond legacy system and point of sale (POS) upgrades to invest in the following: Workforce Management, CRM, in-store technology. ” ---Gartner Sept 2003 23

Point of Sale—POS Pain Points Retail Driver Point of Sales In Store Technology The Customers Pain Points The Benefits of the Application* The Value Proposition The Solution* Difficulty recognizing traffic patterns, & consumer trends. Can’t respond quickly to trends. Want to be ably to quickly adapt merchandising to address the traffic patterns, such as seasonal changes, customer trends & time of day differences. Provides real-time inventory information. Instant price checks & product information for employees & customers. Can quickly respond, at the individual store level, to consumer trends & changes. Reduces operational costs of inventory management and merchandising Enhances the customer experience because items address local trends, traffic patters etc. Increased revenues— customers have access to products that they want when they want them. . . DSL, Frame Relay, ATM, IP-VPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV Long customer lines: Employees are spending too much time doing price & inventory checks instead of assisting the customer & sharing their product knowledge. Faster customer processing - check-out requires less staffing so more employees can be on the floor assisting customers. Reduces time spent on credit card approvals. Can expand to pre-pay gift cards. Reduces operational costs—can forecast and plan for better employee to customer time. Enhances the customers experience by providing more payment options faster and w/ more accuracy. Increased revenues DSL, Frame Relay, ATM, IP-VPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. More detail located in the solutions section. 24

Inventory Management & CRM Pain Points Retail Driver The Customers Pain Points The Benefits of the Application* The Value Proposition Retail CRM & Inventory Management Have high inventory storage costs. There is less in-store space to stock inventory. Increasing leasing costs impact the bottom line , want to use as floor space for merchandising. More effective inventory management, reduced out of stock items, lower cost of managing & carrying inventory Reduces operational costs, less inventory is stored at each retail location. Enhances the customers experience because they can locate the items they are looking for which increases revenue. DSL, Frame Relay, ATM, IPVPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV Retail CRM & Inventory Management Takes too long to locate inventory at other stores. Loss of revenue because customers cannot locate or order the items they want. Customers have faster, more efficient access to product ordering, pricing and information. Can locate items in other stores instantly. Reduces costs by providing more efficient real-time inventory management. Increases revenues & enhances the customer experience because customers can locate & order items faster. Provides more accurate pricing & tracking of promotional offers DSL, Frame Relay, ATM, IPVPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV Retail CRM & Inventory Management When items are out of stock the only way to verify an in-stock item at another store is to call. Need visibility to other stores inventory. Employees spend too much time calling other stores. Employees and customers are frustrated because of the time it takes to call other stores. Customers are forced to wait in long lines because check-out employees calling other stores Can stock the right products in the store at the right time. Link the stores inventory to the products the customer wants to buy. Can locate in-stock items at other stores faster and with more accuracy. Faster store-to-store and store-tocustomer stock transfer. Faster check-out lines. Less waiting time for customers who are looking for out-of-stock items. More efficient use of employee time. Enhanced customer experience— customers get what they need when they need it. Increased revenues— reduces employee “Off-Floor” time & augments “On-Floor” time w/ customers, allows more sales to complete. Check out is faster, employees can help more customers per hour. DSL, Frame Relay, ATM, IPVPN, NVPN DIA, HIPCS, IPTA SBC Premier. SERV *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. The Solution* 25

Starting Point Questions § Where do you see your business in the future? – What are your plans to get it there? § What is your biggest threat & opportunity? – How are you addressing the threats and leveraging the opportunities? § What applications are you planning on implementing? – Capability of existing networks ability to help? – What is driving need for a WAN or additional bandwidth? § What are your key business drivers? – – – Lowering operational costs Increasing employee productivity & experience Enhancing the customer experience Increase same store sales Expansion § What is the challenge in getting this decision made? – ROI on applications – Service provider performance – “need a resilient secure network” – Other 26

Qualifying Questions—General Information § Who are you working w/ internally? externally? § What are your plans for maintaining a secure resilient network? § What are the applications you feel you need now and in the future and why? – – – – – IT, operations, marketing, sales Software company Store operations VP, director HR for workforce management Workforce management Data mining, forecasting, gift cards, customer experience, sales Supply Chain, Inventory Management In store technologies e. g. self check-out, & kiosks WIFI / Wireless § How are you ensuring you have right infrastructure for future applications/upgrades? § What are your biggest concerns? 27

Qualifying Questions—Inventory Management § How do you track your shipments from the supplier to the store? § What kind of visibility do you have when shipments are in transit? § Do you use your own trucks or do you utilize a shipping service? How do you integrate to the shipping company's system? § What is the receiving process at the stores? How do you track purchase orders sent directly from the warehouse to the store? How is this process working? What improvements would you like to make? § How do you prioritize special orders or allocate inventory when an order arrives? Do you send or receive any ASN’s or EDI transactions? Do you barcode incoming product or is it already bar-coded? Are all your products bar-coded? 28

Qualifying Questions—Inventory Management cont. § How many square feet are in your warehouse? § What is the total number of SKU’s (stock keeping units) in your warehouse? § Which of the following exist within the facility? Manufacturing, distribution, work in progress, kitting, cross-docking, direct store delivery? § Do you handle pallets, cases or a combination? § What portion of your business is full pallet? What portion is case level? § How many receivers and shippers do you have? § What are your product security procedures– i. e. theft control? § Do you use any reusable bins or containers in your production processes? 29

Qualifying Questions –Customer Service Applications § How do you prepare for the peak seasons? § How often does your store inventory change? § How do you train your seasonal employees? How do you update or familiarize your employees of seasonal inventory changes? § Do you ever have sidewalk sales or exhibitions outside of your store where you sell products? (Mobile & portable POS. Note: Wiring POS registers is costly. Many retailers choose to make the leap to wireless to cut down on these costs in the future. ) § Do you have a large queue of customers typically standing in the check-out line or at customer service? § Do you have a large customer base that typically has “dead time” while waiting for orders? 30

Qualifying Questions - Communications Communication Enhancements § How do you communicate in-store, with other stores, from store to HQ and with your manufactures / suppliers? § Are a large number of your employees mobile—either within the store, HQ or outside? § How do you communicate between stores, suppliers and HQ? i. e. intra-0 company calls, faxes, 800 number etc. § How do your customers communicate with your call-center, help -desk and/or service department? What changes to this would you like to make? § Do you have shelf tag labels at the store level? (Note: This alone can justify a wireless LAN. Grocery stores must have correct price on shelves. This is very difficult if the store is not producing the labels at the point of scanning the item on the shelf to confirm price and print new labels. ) 31

Qualifying Questions – Operational Questions § Briefly describe your current operational process, from receiving, stocking, replenishment and shipping? § What are your operational “pain points”? § How do you prioritize special orders or allocate inventory when an order arrives? Do you send or receive any ASN’s or EDI transactions? Do you barcode incoming product or is it already bar-coded? Are all your products bar-coded? § How many square feet are in your warehouse? Where are your warehouses located? § What is the total number of SKU’s (stock keeping units) in your warehouse? § Which of the following exist within the facility? Manufacturing, distribution, work in progress, kitting, cross-docking, direct store delivery? 32

Additional Qualifying Questions Operational Questions § Do you have pallets, cases or a combination? What portion of your business is full pallet? What portion is case level? § How many receivers, stockers and shippers do you have? § How do you prioritize special orders or allocate inventory when an order arrives? Do you send or receive any ASN’s or EDI transactions? Do you barcode incoming product or is it already bar-coded? Are all your products bar-coded? § What type of product do you sell in your stores? Are any of your products regulated by the government? Are there any safety risks with the products? Are they high-value items? Is there a high volume for certain items? Does the product have a short shelf life (because of expiration dates or seasonal changes)? 33

Additional Qualifying Questions Operational Questions § Do you have a receiving process at the stores, or do you accept what is on the purchase order as having been sent to the stores (there an amazing number of retail stores who do NO receiving at stores - just assume what was sent from the warehouse arrived at the store in tact)? § What is your shrink at the stores? (Note: If this is high, there is definite potential for good ROI for wireless and improved inventory tracking. ) § How do you track your shipments from the supplier to the stores? What is your visibility of shipments when in transit? Do you use your own trucks or do you utilize shipping service? How do you integrate to the shipping company's system? 34

Additional Qualifying Questions - (cont’d) RFID Questions § What items are you interested in tagging? Are all of the items made up of entirely metal, or is their packaging made of plastic or cardboard or other materials? § Are these products to be shipped to customers, or are they internal assets? Are they shipped on pallets, in cartons or loose? § What are your receiving, picking, and shipping processes? Do you currently use barcode technology to track items or shipments? Do you have any manual processes or data accuracy issues with your shipping and receiving paperwork? § Is there a need for real-time inventory on the items or just tracking their movements via logical choke points (i. e. last known location)? § Do you use any reusable bins or containers in your production processes? 35

Additional Qualifying Questions - (cont’d) RFID Questions § Are any of your vendors putting RFID tags on raw materials or products sent to you? § Do you need coverage of the entire campus, or certain buildings or locations? § What wireless equipment do you currently use at your locations? What frequencies are used? § Do you have any security issues with your products – theft control? § Are there any government regulations or transportation security regulations for crossing borders that you must comply with? § Do you have to report any safety information to government agencies on the products you produce and sell? Is this a manual process today? § Have you put together a business case, or do you have an idea of the benefits you will gain by using RFID technology? 36

37 SBC Retail Vertical Solutions