E-Commerce Sales Trends and Challenges: Insights and Strategies

1. 22 ONLINE SALES HAVE BEEN GROWING QUICKLY BOTH IN ABSOLUTE AND RELATIVE TERMS • Quarterly U.S. e-commerce retail sales* • $ Trillions • 17.2 • 13.8 • 13.3 • 12.5 • 11.9 • 10.8 • 10.5 • 9.8 • 9.5 • 9.2 • 8.0 • 7.9 • 7.9 • 7.1 • 6.3 • 5.8 • 5.4 • 4Q • 1Q • 2Q • 3Q • 4Q • 1Q • 2Q • 3Q • 4Q • 1Q • 2Q • 3Q • 4Q • 1Q • 2Q • 3Q • 4Q • 2000 • 2001 • 2002 • 2003 • Fraction of total retail sales • Percent • 0.7 • 0.8 • 0.8 • 0.9 • 1.1 • 1.1 • 1.0 • 1.0 • 1.3 • 1.3 • 1.2 • 1.3 • 1.6 • 1.5 • 1.5 • 1.5 • 1.9 * Not adjusted for holiday or trading-day differences or for price changes; estimates exclude food service Source: U.S. Department of commerce

2. 3 CUSTOMERS MAY PREFER TO BUY ONLINE TO SAVE TIME, SHOP WHEN STORES ARE CLOSED OR AVOID HOLIDAY CROWDS AMONG OTHER REASONS • Reasons shoppers cite for buying online • Percent • Save time by not going to store • 70 • Can shop when stores are closed • 69 • Avoid the holiday crowds • 68 • Might be able to find better prices • 59 • Can find products online more easily • 52 • Find products not available in stores • 50 • Easier to compare prices • 47 • Have gifts sent directly to recipient • 36 • Can avoid wrapping gifts • 13 • Can earn loyalty points • 13 • Purchase from wish list • 10 Source: Jupiter Research / IPSOS

3. 22 ONE OF THE PRIMARY CHALLENGES COMPANIES HAVE IS CONVERTING TRAFFIC TO SALES • Distribution of website conversion rates • Percent • 22 19% of e-businesses surveyed didn’t know what their conversion rate was • 12 • 11 • 11 • 8 • 4 • 4 • 3 • 3 • 2 • 0-1% • 1-2% • 2-3% • 3-4% • 4-6% • 6-8% • 8-10% • 11-15% • 16-20% • 20%+

4. 22 MAJORITY OF E-COMMERCE SITES OBSERVE ABANDONMENT RATE FAR ABOVE THE XYZ COMPANY BENCHMARK OF 40% THAT SPANS MULTIPLE CATEGORIES • Shopping cart abandonment rate • Percent • 8 • 8 • 8 • 7 47% of e-businesses surveyed didn’t know what their abandonment rate was. • 6 • 6 • 5 • 4 • 1 • 0 to 10 • 11 to 20 • 21 to 30 • 31 to 40 • 41 to 50 • 51 to 60 • 61 to 70 • 71 to 80 • 80+

5. XYZ COMPANY’S CHECKOUT CONVERSION IS X% BETTER THAN THE INDUSTRY NORM AND CONTINUES TO IMPROVE • Checkout conversion • Percent • Industry • Over the last Y quarters, XYZ rate has improved by Z percentage points and continues to decline • Every year, XYZ invests on the order of $A M in research and development to improve conversion • XYZ Company • 2003 • 2004 • 2005

6. XYZ HAS FINE TUNED ITS CUSTOMER SERVICE TO ENSURE HIGHEST CUSTOMER LOYALTY • Top 10 B2C sites for customer service • Hours/minutes to answer e-mail • Business days to receive item • Time to shop (in minutes) • Clicks to check out • Merchant • ashford.com • 1.4 hrs • 2 • 4 • 4 • CDNOW • 2.4 hrs • 4 • 5 • 3 • CDW • 15 mins • 1 • 3 • 6 • Cooking.com • 20.4 hrs • 4 • 4 • 5 • HSN • 9.7 hrs • 5 • 4 • 5 • hpshopping.com • 19.8 hrs • 3 • 4 • 6 • Lands’ End • 5.2 hrs • 2 • 3 • 3 • Musician’s Friend • 12 mins • 5 • 5 • 6 • Office Depot • 3.5 hrs • 1 • 4 • 5 • Wal-Mart • 20.3 hrs • 4 • 3 • 6 • Average of 100 sites shopped • 18.7 hrs • 4.4 days • 4.08 mins • 4.93 clicks

7. Finalize numbers • Complete preparations for specific organizational changes • Develop internal and external communications plan • Create and implement talent retention strategy • WORK IN PROGRESS GETTING TO JUNE 1…VERSION 1 • FOR DISCUSSION • April • May • June • July • Major areas of work • Key activities • Week of • 16 • 23 • 30 • 7 • 14 • 21 • 28 • 4 • 11 • 18 • 25 • 2 • Finalize overall savings number (FY07-09) & timing drivers • Finalize restructuring charge & cash flow impact • Incorporate into 5/25 Board of Directors Meeting Presentation • Schedule and conduct pre-Board meeting calls with key Directors • 5/25/06 Board Meeting • HR • EVPs to provide 1st pass at specific names • Complete HR formalities (including legal requirements) - assumes no notice period needed under WARN • Complete discussions with individual employees • IT • Implement ‘interim solutions’ for system-fixes that could impact proposed changes (by project w/timing, resources, cost) • 6/01/06 Proposed changes in place • 6/01/06 Interim fixes in place • 5/19/06 Distribute memo • Internal • Develop and distribute communication to entire company regarding the restructuring • Develop communication to affected employees • External • Develop and distribute communication for external media • Develop and distribute communication for investor call ready • 6/12/06 Press release • 6/16/06 Investor call • Identify high potentials that are ‘at risk’ • Finalize plans for specific individuals • Begin outreach • 5/31//06 High potentials outreach complete

8. LIMITED GROWTH IN PRESCRIPTIONS, APPROVAL AND FULFILLMENT RATES • Overall approval rate • Fulfillment rate • Number of SMNs • New patient starts • % ratio • Number of SMNs or patients • Factors limiting new patient starts and SMNs include: • Physicians understanding of prescription approval process drives selection of XXX patients • Patient lack of education about disease and benefits of XXX

9. 100 • (100%) • 105 • 102 • (102%) • 93 • (93%) • 95 • (93.5%) • 99 • 88 • (92%) • 92 • 85 • (91%) • 70 • (80%) • 66 • (78%) • 77 • 62 • 56 • (80%) • 52 • (79%) • 44 • (62.5%) • 40 • (60%) • 50 SERVICES IN NEW MODEL INCREASES THE NUMBER OF PATIENTS AT EVERY POINT IN THE PRESCRIPTION FUNNEL • 1. Patient origination • 2. Clinical acceptnce • 3. Patient ID • 4. Patient education • 5. Patient consent • 6. Ins. verification • 7. Rx approval • 8. Rx fulfillment • 9. Recon/ admin. • 10. Coding/ billing • 11. Trial period • 12. Comp/ Persist • Value lever • Patients • Number SMNs submitted • Percent SMN pursued • Approval rate • Compliance rate • Fulfillment rate • Persistency rate at 12m • Feb 2005 • 86 • N/A • 70 • 53 • N/A • 34 • Feb 2006 • Service component • PPOE/SCH • PPOE/SCH • PPOE/SCH • PPOE/SCH/C&P • C&P • C&P • Increase in number of patients achieved 2 years post launch for cases serviced by new model • Patients • Estimated base • Estimated high • For every 100 of today’s patients, new model will add 4 – 10 more annually by the end of 2 years