Optimize Your Opportunity In Retail With The Cisco Intelligent Retail .

Optimize your Opportunity in Retail With the Cisco Intelligent Retail Network Paul McDevitt CBSW Global TF 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Agenda Importance of Verticals Retail Market Overview Retail Careabouts Retail Structure Cisco Intelligent Retail Network Programs for Retail Partner Marketing Tools Case Studies Q&A Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Importance of Verticals CBSW Global TF 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Verticals BDM Relevance Talk with purpose to an industry BDM Be aware of industry trends and use to position our technology in a relevant manner to a BDM Provide material to ask intelligent questions Position case studies and testimonials with confidence Analyse prospective customers better Bring added value to our Partners Increase their revenue and margins Reduce pressure for bigger discounts Knowledge Confidence Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Retail in Canada CBSW Global TF 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

IT Spending by Private Sector: 2005 - 2010 Vertical %IT Total C CAGR Financial Services 18% 7.0B Banks 5.7%, Ins 2.9%, Other 5.7% Manufacturers 12% 4.5B Process 1.6%, Discrete -0.2% Business Services 13% 4.9B 4.7% Retail 4% 1.6B 4.2% Wholesale & Dist. 3% 1.1B 2.6% Primary (incl. Mining, etc) 3% 1.1B 2.3% Transportation 3% 1.3B 2.8% Utilities 2% 0.9B 3.6% Construction 1% 0.5B 4.5% 39.1B 3.9% Canada Total Packaged Appl S/W C 6.9B 17.6% Hardware Sales C 14.8B 37.9% 2006 2007 2008 2009 2010 C 39.1B C 40.8B C 42.4B C 43.8B C 45.3B Note: Retail spend on technology is significantly higher than IT spend Presentation ID Services C 17.4B 45.5% 2006 Cisco Systems, Inc. All rights reserved. Cisco Public Source: IDC Canada, 2006

Retail – Quick Facts Total retail sales in 2005 were 368 billion, up 6.1% from 2004. Approx. 10,853 per man, woman and child in Ontario and Quebec contributed the largest share of retail sales. Alberta experienced the largest increase with an annual increase of 12.1%. The retail sector contributes 60 billion in value-added to the Canadian economy Retail accounted for 5.7% of the country’s real GDP Retail represents 9.54% of all businesses in Canada @ 227,222. The second-largest employer with two million or 11.9% of the total labour force Source: Statistics Canada, Annual Retail Trade Numbers Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Small Stores Dominate 1% 3% 1% 23% 10 '11-49 '50-99 '100-199 '200 72% Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

What Constitutes Retail? Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Investment in Retail In 2003, retail sector invested 7.7 billion across the country. Spending on fixed structures, such as stores, totaled a little over 3.3 billion 400 million was for repairs 2.9 billion went to new structures or expansions. Capital spending on machinery and equipment reached 4.4 billion 85% was for new equipment. The retail industry accounted for 4.7% of total investment in the Canadian economy in 2003. CAGR is 4.2% The enormous value of capital spending by the retail industry makes it, in every sense, an annual mega-project. Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Retail CareAbouts CBSW Global TF 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Retail Profit Model Food Presentation ID Non Food 100 Sales 100 80 Cost of goods sold 50 20 Gross margin 50 17 Operating expenses 41 3 Operating profit 0 Interest 3 Net profit before tax 9 2 7 2006 Cisco Systems, Inc. All rights reserved. Cisco Public Gross Margins Supermarkets Specialty stores Department stores Mass merchants 1.4% to 3% 5% to 10% 5% to 8% 2% to 4%

Operating Expenses Rank Presentation ID Cost Low High (Discount Food) (High end dept store) 8% Sales 14% Sales 1 Store labor 2 Occupancy cost 8% 10% 3 Distribution 4% 4% 4 Marketing (advertising) 3% 6% 12 IT 0.5% 1.8% 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Shrinkage by Retail Sector Shrinkage 2003 Shrinkage 2004 Change Food 1.04% 1.02% -1.7% Supermarkets &Hypermarkets 0.91% 0.86% -5.5% - Food Specialists 1.53% 1.51% -1.3% General/discount Stores 0.75% 0.77% 2.7% Department Stores 1.53% 1.49% -2.6% Clothing & Textiles 1.72% 1.70% -1.2% Electrical/video/music 1.10% 1.08% -1.8% Hardware/DIY/furniture 1.56% 1.53% -1.9% Shoes & leather 0.60% 0.59% -1.7% Other non-food 1.99% 2.20% 10.6% Overall 1.37% 1.34% -2.2% Source: European Retail Theft Barometer, Centre for Retail Research Shrinkage is expressed as a % of sales. Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

KPI Summary Table Key Performance Indicators W idely Used Through the Business Buying & Merchandising Store Oper ations Finance Marketing Sales Sales Sales Market Share Sales vs Last Year Sell Through % Average Sale (Money) Return on Capit al Employed Sales vs Plan/Budget Comparabl e St ore Sales (Same Store Sal es) Average Sale (I tems) Inventory Conversion Rat e GMROI Transacti on Count Sales per Square Foot Fresh Stoc k % Sales per Linear Foot Average Stoc k Inventory Inventory Weeks of Suppl y Shrinkage Inventor y T urn Margin s Margin s Availabilit y/I n-stoc k % Markup % Loc al markdown % Margin s GMROF Gross Margin % Markdown % Labor Labor % Sales Sales per FTE Profit Sales per Labor Hour Pre-Tax Profit % GMROL Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public Return on Net Assets Shar e of the Purse/Wallet Int erest Cover Expense Lines % Sales Corporate & Sharehold ers Human Resources Shar e Price Employee/ Associate T urnover Earnings per Share Training Cost per Associate Absent ee %

Retail Structure CBSW Global TF 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Retail Organization Structure Chairman Board of Directors CEO/President/MD Buying & Warehouse Store Merchandise & Distribution Operations 1 Presentation ID 4 2006 Cisco Systems, Inc. All rights reserved. 2 Cisco Public Finance Marketing & Control 3 4 IT HR 5 5/6

CXO Pains CEO/President Buying & Merchandise Store Operations Finance & Control Marketing Not achieving sales and margin Missing sales plan Declining profitability Losing market share Store expenses too high Costs increasing Inventory investment too high Staff turnover too high Increased shrinkage Shrinkage is too high Poor quality management information Increased advertising expenses Declining advertising response rates Poor in-stock performance Customer service deteriorating Reduced basket size Slow reaction to comp Declining return on assets Housekeeping standards poor Asset productivity too low (inventory, space, labour) Losing touch with the customer Competitive positioning declining Poor vendor performance Stock turn worse Inefficient supply chain Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public Cash flow worse than plan or declining

CXO Pains Continued CEO/President Warehousing & Distribution Human Resources Labour hours and transport costs over budget Staff turnover too high (range from 80150%) Can’t receive merchandise receipts when required Recruiting expensive, labor intensive, time consuming Receiving problems incur demurrage cost Compensation for store positions is low Can’t pick and assemble everything to meet the dispatch schedule Damage rates and error rates too high Shrink too high Incur excessive costs to cope with seasonal peaks IT costs escalating Projects taking longer than plan/exceeding budget Poor return on IT investments Competing for quality employees HR is a cost center, not a profit center, hence understaffed to handle the # of employees Architecture/Infrastructure inhibits progress Users don’t understand what they need Training budgets inadequate Implementations fail Time stressed store management short cut HR practices resulting in operating weaknesses and poor service Short delivery claims from stores too high Stores can’t take the goods when required Escalating healthcare costs (in the US) Warehouses get overfull and impede operating efficiency Coping with minimum wage increases Presentation ID 2006 Cisco Systems, Inc. All rights reserved. IT Cisco Public

Retail Trends CBSW Global TF 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Pricing and Commoditization Lead List of Retailers’ Concerns Issues identified as high or very high risks by retail executives: % of respondents 1 Pricing Pressures 72% 2 Decreased customer loyalty 64% 3 Low-price competition 55% 4 Recession/economic downturn 51% 5 Commoditization 50% Source: Foresight 2020, Economist Intelligence Unit, March 2006, taken from a survey of CPG and retail respondents Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Companies Rarely Offer Compelling Customer Experiences There is a wide gap between what companies think they are delivering and what customers think they are getting 100% 80% 60% 72% Gap 40% 20% 0% Companies that believe they are providing superior customer experience Source: James Allen, Bain & Company, October 2005 Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public Companies whose customers agree

Market Trends Multiple Proprietary Networks managed in isolation 90% of retailers will implement a new POS systemATMs by &2008 Third party devices ATMs & Third party devices connecting to private networks Mobile of Customer 65% Devices retailers will invest in store wireless in next 18 months Building Satellite Dish Automation PCI Standard Mandatory Compliance Call Center Video Advertising 22% of retailers POS deploying wireless POS 60% of top 100 retailers are piloting RFID Security Security Move towards Broadband to support new store technologies 23% of retailers installing kiosks in next 2 years Back office Servers & LAN Back office Servers & LAN Mobile LAN Voice PBX Back Office controller Information islands within each function and application Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public Kiosks 11% investing in biometrics in next Mobile 2 years Employee Devices

Cisco Intelligent Retail Network Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

The Money is in the Store Connected Store Instore Media Store Mobility Unified Communications for Retail Secure Store PCI Video Surveillance Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Store Connectivity Broadband connectivity enhancing business process and maximizing access to information Examples: Costco: Customers can download images over the internet for in-store development CompUSA: Software-To-Go Kiosks enable local pressing of large product library Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

In-Store Media Delivering media in store to educate, reinforce the brand and generate revenue Examples: Wal-Mart: Audio clips and Instore ads Bloomingdales: Target marketing of product (sales up 48% first day) Eddie Bauer: Time of day specific ads on flat panels Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public

Mission-critical Mobility Wireless Infrastructure with the flexibility and security to manage multiple Applications: RFID, Voice, PSA, Mobile POS, Location based technologies Examples: Food Lion: Wireless personal scanners accelerate checkout Metro: Performs wireless inventory management on VoIP enabled multifunction phones Location technologies built on Wi-Fi for tracking pallets and work in process Presentation ID 2006 Cisco Systems, Inc. All rights reserved. Cisco Public