Understanding & Reaching the Consumer Consumer motivations: –Is the product available? –Can I get it when I want it? –Is the selection suitable? –Is the buying experience memorable? –Is the transaction price competitive? 1

Shipping 3/4 ths of consumers abandon their electronic retail shopping if shipping is not free! “Membership” to a lower cost shipping “club” increases orders and decreases abandonment. Offer value to repeat customers to electronic sites –Upgrades for faster services. –Free shipping on minimum purchases. –Bundle eligible products and limit purchase timeframes. 2

Other Commodities are Rapidly Growing in the U.S. E-Commerce market, including: Auto parts, Hardware, Home Improvement and Toys/Hobbies 3

Logistics Matters 68 - Amazon FCs 4 - Walmart FCs 1 – Macy’s FC 4

U.S. Locations 5

Lehigh Valley, PA 6

Haslet, TX 7

Lehigh Valley, PA Haslet, TX Atlanta, GA 8

Lehigh Valley, PA Haslet, TX Atlanta, GA Phoenix, AZ 9

Source: Establish, Herbert W. Davis and Company Logistics Cost Breakdown 50% 22% 10% 8% 4% 3% 2% 1% Transportation Inventory Labor Customer Service Admin Supplies Other Transportation is generally the greatest cost in the supply chain and often not considered in the site selection or elimination process Rent 10

Packaging and Shipping Dimensional weights are based on the dimensions of the package, not the actual weight, reconfiguring packages to ship so that the actual weight is “charged” by the carrier can save substantial shipping costs FedEx and UPS changed their dimensional/size package configuration requirements New trucking regulations may impact distances between warehouse and retail and fulfillment capability (and driver availability) –Hours of Service –Compliance, Safety and Accountability 11

The Accelerated Growth of the Global Internet Population and E-commerce Outside the U.S. will Drive U.S. Retailers to Engage in Cross-border Internet Trade 12

Global Users and Shoppers Internet Users In Millions Source: Credit Suisse 13

Going Global Need to define and deliver “total landed cost” during the course of the transaction with the customer Need to manage pricing, payment terms, taxes, fees and intermediary fees as well as manage tariff/classification of goods shipped to global customers As countries “sold to” increases, so do the number of custodians in the supply chain increase and the number of variables in the transaction that must be accommodated 14

E-Commerce Impact on Industrial One-third of all demand for big-box space in the US in 2012 was tied to multi-channel retail or E-Commerce. (Area Development Magazine, 2013) The E-Commerce generation of industrial is up to 5 times more labor intensive than traditional retail/distribution: more parking, mezzanine build-outs and increased automation are some of the features difficult to retrofit to older buildings, but many can be converted. (Area Development Magazine, 2013) 15

What’s Ahead? Facebook, Apple, Google and Amazon lead this century’s information technology and entertainment industry. In the next decade, they will compete in the market for mobile phones, tablets, applications, social networking, advertising and transaction management. “These companies do not recognize any borders and are marching into retailing, advertising, movies, television, commercials and finance” (Manjoo, Fast Company). 16

Questions? Thank You! Mac Forehand Director, Performance Team