Retail Industry Vertical February 2011 Creating A Smarter Cross-Channel Experience Integrating Industry Solutions Across Channels Please note the speaker notes provided for each slide. In particular, notice the instructions (for Slide 20) for ensuring that the demo video will play from the hyperlink in this presentation.

© 2011 IBM Corporation 22 Retail Industry Vertical February 2011 AGENDA Industry drivers and execution gaps The solution Customer benefits Demonstration

© 2011 IBM Corporation 33 Retail Industry Vertical February 2011 AGENDA Industry drivers and execution gaps The solution Customer benefits Demonstration

© 2011 IBM Corporation Today’s ‘Smarter Consumer’ Sees One Brand, Not Multiple Channels 44 Retail Industry Vertical February 2011

© 2011 IBM Corporation 55 Store Create Order Check Status Cancel Order Initiate/Track Return Schedule Delivery Change Order Pickup Research Product Create Order Check Status Cancel Order Initiate/Track Return Schedule Delivery or Pickup Change Order Schedule Store Pickup Research Product Mobile Create Order Check Status Cancel Order Schedule Delivery or Pickup Change Order Schedule Store Pickup Research Product Web Initiate/Track Return Call Center Create Order Check Status Cancel Order Initiate/Track Return Schedule Delivery or Pickup Change Order Schedule Store Pickup Research Product Consumers’ Brand Interaction Is Ever Changing And Constantly Evolving

© 2011 IBM Corporation They’ve Come To Expect Seamless Cross-Channel Retail Execution 1 Source: “Cross-Channel Brand Interaction: 2010 Consumer Preferences,” Sterling Commerce, DemandWare 85% of respondents “expect a seamless experience across all channels for a retailer” Retail Industry Vertical February 2011

© 2011 IBM Corporation And, Their Expectations Keep Rising Comparisons 1 Cross-Channel Consumer Expectations Complete an order anywhere55%61% Modify an order anywhere65%74% Track an order anywhere56%87% Shipping Notice (via any combination of channels)94%88% Shipping Delays (via any combination of channels)91% Delivery Notice (via any combination of channels)78%79% Cross-channel return to store90%84% 1 Source: “Cross-Channel Brand Interaction: 2010 Consumer Preferences,” Sterling Commerce, DemandWare 77 Retail Industry Vertical February 2011

© 2011 IBM Corporation And, Retailers Are Responding To Their Customers’ Cross-Channel Expectations 88 69% In-store pickup of cross-channel orders Currently support (46%); plan to support in 12 months (23%) 1 Source: Edge Research Retailer Survey; 2010 Retail Industry Vertical February % In-store returns of on-line purchases Currently support (57%); plan to support in 12 months (20%) 1

© 2011 IBM Corporation They’re Taking Action To Address Their Customers’ Cross-Channel Expectations 99 Source: Edge Research Retailer Survey; 2010 Retail Industry Vertical February % Single cross-channel view of customer purchases Currently support (40%); plan to support in 12 months (36%) 1 76% Cross-channel order/shipment status tracking Currently support (47%); plan to support in 12 months (29%) 1

© 2011 IBM Corporation Nearly All Are Focused On Improving Their Cross-Channel Capabilities 10 Source: Edge Research Retailer Survey; % Deliver improved cross-channel capabilities High priority (32%); medium priority (52%) 1 Retail Industry Vertical February 2011

© 2011 IBM Corporation 11 Retail Industry Vertical February 2011 AGENDA Industry drivers and execution gaps The solution Customer benefits Demonstration

© 2011 IBM Corporation Store Web Mobile Consumer The Need: Seamless Cross-Channel Retailing 12

© 2011 IBM Corporation Smarter Checkout WebSphere Commerce IBM Sterling Order Management Store Associate Mobile The Solution: Integrated Cross-Channel Execution 13

© 2011 IBM Corporation Buy Online Pick Up In Store – Demo Overview Seamless Cross-Channel Retail Execution (Web, Mobile, Store) WebSphere Commerce IBMSterling Distributed Order Mgmt iPod Touch 3 rd Generation Linea-Pro Sleeve (swiping/scanning) IBMSterling Store Associate Mobile Scenario / SurePOS 700 ACE/SI + Lotus Expeditor + Sterling RCP Scenario 2 Scenario 1 Purchase on the Web Request in-store pickup OMgt signals store to pick & hold the item Associate accesses pick list via mobile device Associate uses mobile device to locate an out-of- stock item and complete the transaction Scenario 2 Purchase on the Web Request in-store pickup OMgt signals store to pick & hold the item Associate (using POS): Sees pick alert Notifies a runner to bring the item to the customer Locates out-of-stock item & adds it to transaction Rings up a grab-and-go item

© 2011 IBM Corporation 15 Smarter Retail Retail Industry Vertical February items 3 channels 3 fulfillment methods 1 transaction Seamless End-To-End Cross-Channel Retailing

© 2011 IBM Corporation 16 Retail Industry Vertical February 2011 AGENDA Industry drivers and execution gaps The solution Customer benefits Demonstration

© 2011 IBM Corporation 17 Cross-Channel Retailing Directly Impacts The Following Areas  In-Store Pickup  Additional in-store purchases (cross-sell/up-sell)  In-Store Returns  In-store purchases (converting the return back into a sale)  Recovering From Out Of Stocks (OOSs)  OOS item sale (66% of consumers would purchase an OOS item if the retailer could find it at an in-stock location and ship it to the customer)  Companion items (42% of consumers faced with an OOS leave the store without purchasing anything)  Future shopping trips (40% of consumers who experience an OOS shop less often at the offending retailer)  Cross-Channel Sourcing  Avoiding duplicate safety stock  Available-To-Promise Sourcing  Inventory reductions by sourcing from in-transit inventory (before it arrives at the DC)  Sourcing From End-Of-Life (EOL) Inventory  Reduced markdowns by sourcing from inventory pools with excess inventory Retail Industry Vertical February 2011

© 2011 IBM Corporation Ongoing Annual Projected ROIConservativeReasonable In-Store Pickup Revenue Increase $7,333,333$55,733,333 In-Store Returns Revenue Increase $12,787,500$32,395,000 Recovering From Stock-outs Revenue Increase $4,047,974$12,731,951 Cross-Channel Sourcing Liberated Capital $298,529$585,350 ATP Sourcing Liberated Capital $2,055,342$3,083,014 Sourcing From EOL Inventory Revenue (Avoided Markdowns) $12,425,640$17,542,080 TOTALS: Revenue Increases $36,594,447$118,402,365 Liberated Capital $2,353,871$3,668,364 Cross-Channel Retailing Results Can Be Estimated 18 Cross-Channel Retailing – The Foundation Of Retailing Going Forward Example: $2.9Bn Retailer

© 2011 IBM Corporation 19 Retail Industry Vertical February 2011 AGENDA Industry drivers and execution gaps The solution Customer benefits Demonstration

© 2011 IBM Corporation Smarter Checkout WebSphere Commerce IBM Sterling Order Management Store Associate Mobile The Solution: Integrated Cross-Channel Execution 20

© 2011 IBM Corporation Buy Online Pick Up In Store – Demo Configuration Overview Smarter Commerce: Cross-Channel Inventory Visibility (Web, Mobile, Store) Internet Global Solution Center Dallas, Texas WebSphere Commerce + WebSphere ESB + Sterling SSFS / AIX / IBM System p Internet Explorer / Windows / Laptop iPad Touch 3 rd Generation WebSphere Commerce IBMSterling Distributed Order Mgmt IBMSterling Store Associate Mobile

© 2011 IBM Corporation “Click and Collect” Buy Online Pick Up In Store – Demo Overview Seamless Cross-Channel Retail Execution (Web, Mobile, Store) WebSphere Commerce IBMSterling Distributed Order Mgmt iPod Touch 3 rd Generation IBMSterling Store Associate Mobile Consumer makes purchase on the Web Requests in-store pickup Order Management signals store to pick & hold the item Store Associate accesses pick list via mobile device and confirms Customer sees an additional item they want but only display model available Associate uses mobile device to locate the out-of-stock item “Saving the Sale” and completes the financial transaction Retailer: Madisons Consumer: Tom Watson from Toronto, Canada

© 2011 IBM Corporation 23