SBC Retail Vertical Solutions

1. SBC RetailVertical Solutions

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

3. About the Retail IndustrySection 2

4. Strategic Analysis Summary • “Retailers are increasingly concerned about the capabilities of “big-box” retailers led by Wal-Mart ” • “Retailers of all sizes are now realizing that operational efficiency is not enough to compete.” • “The retail sector has a long-standing reputation of being conservative in technology adoption.” • “One area retailers have been more aggressive is in adopting technology to improve business processes.” 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

5. 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

6. Technology Addresses Retail Concerns Informational kiosks for pricing & product info Customer information that links to merchandising & promotions Self checkout Supply chain—real time Decisions made at the store level Wireless-instant 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

7. 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

8. 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

9. 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

10. 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

11. POS Blueprint by Sub Vertical

12. 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

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

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

15. The Successful Retailer is….

16. Retail Segmentation • Retailers w/ T1 & above Alternative channels available More comfortable with technology Higher expectations • Retailers w/ sub-T1 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

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

18. CERTIFICATE OF STOCK 500 Frame/ATM IP Network Frame/ATM IP Network Retail in Action Access to In-Store Inventory Remote Access Sync up w/ Platforms Headquarters Portals Data Mining: Patterns Connected to Suppliers Authorization/ Settlement (Merchant Bank) On-line IP Phones, Schedules, Inventory & Pricing WIFI Hotspot Wireless Mobility In-Store Advertising Stores Kiosk

19. Positioning with the Retail Customer Section 3

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

21. Workforce Management—Pain Points *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. More detail located in the solutions section.

22. Workforce Management Pain Points (Cont.) *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.

23. Workforce Management Pain Points (Cont.) *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

24. Point of Sale—POS Pain Points *The SBC solution can include additional products offered by SBC Telco, affiliates and partners. More detail located in the solutions section.

25. Inventory Management & CRM Pain Points *The SBC solution can include additional products offered by SBC Telco, affiliates and partners.

26. 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

27. Qualifying Questions—General General Information • Who are you working w/ internally? externally? • IT, operations, marketing, sales • Software company • Store operations VP, director • HR for workforce management • 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? • 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?

28. Qualifying Questions—Inventory Management 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? Are all your products bar-coded?

29. Qualifying Questions—Inventory Management 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?

30. Qualifying Questions –Customer Service 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?

31. 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-0company 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.) Qualifying Questions - Communications

32. Qualifying Questions – Operational 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? 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?

33. 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? 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)?

34. 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 are 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?

35. 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?

36. 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?

37. SBC RetailVertical Solutions