W. Frank Dell II, CMC September, 2004 EXPANDING RETAIL

DELLMART & COMPANY2 AGENDA INTRODUCTION READY CHANGE GO

DELLMART & COMPANY3 Questions  How to recognize the store is ready to replicate?  What should be replicated?  When to stop changing the store?  What is the best approach to expansion?  What is different with multi-formats?

DELLMART & COMPANY4 Growth Is Good  Shows progress  Measured –Per Square Meter –Comp. Stores –Percentage increase  Benchmarks –Inflation –Market growth

DELLMART & COMPANY5 Profits Are Better Sales -Cost of Goods = Gross Margin -Store (Labor, Occupancy & Inventory) -Transportation (Labor & Equipment) - Warehouse (Labor, Occupancy & Inventory) = Direct Profit

DELLMART & COMPANY6 Caution  Uncontrolled growth  Over-leveraged growth  Management ability  Growth for growth – Forgetting the customer

DELLMART & COMPANY7 AGENDA INTRODUCTION READY CHANGE GO

DELLMART & COMPANY8 Honest Evaluation  Use an independent approach  Set pride aside  Focus on reality not – Wishes – Hopes – Dreams

DELLMART & COMPANY9 Reasons For Success  Lucky location  Lack of competition  Unique merchandise  Exceptional service

DELLMART & COMPANY10 Are Customers Ready ?  Increasing customer count – Repeat customers – New customers  Increasing transaction size – Excluding inflation  Increasing category participation – Shop the store not the aisle

DELLMART & COMPANY11 Is Financing Ready ?  Increasing profits  Sufficient ROI –Greater than interest rate  Sufficient cash flow  How financed – Internal cash – Borrow

DELLMART & COMPANY12 New Store Models

DELLMART & COMPANY13 Are Associates Ready ?  Adequate operational controls  Discipline in process execution  Training ability  Available management time and talent

DELLMART & COMPANY14 Are Suppliers Ready ?  Sufficient merchandise range  Sufficient merchandise supply  Consistent supply  Delivery capability  Ability to supply – Fixtures – Displays

DELLMART & COMPANY15 Is Your Plan Ready ?  Defined target customer  Site selection criteria  Location strategy  Pro-type store format  Rational financial estimates – Sales – Profits – Capital

DELLMART & COMPANY16 AGENDA INTRODUCTION READY CHANGE GO

DELLMART & COMPANY17 Important Question Question When do you stop making changes to the store?

DELLMART & COMPANY18 Important Question Answer NEVER

DELLMART & COMPANY19 Resistance To Change  Change is difficult to effect  Associates resist change – To varying degrees – Unless conditioned  Customers only accept some change

DELLMART & COMPANY20 Change Is Good  Keeps the store fresh  Entices consumers  Creates merchandise excitement  Creates reason for store visit

DELLMART & COMPANY21 Change Can Be Bad  Increased costs  Confuses the customer  Difficult to – Manage – Execute

DELLMART & COMPANY22 Degree Of Change  Seasonal  Items  Categories  Pricing & Promotions  Departments  Layout  Store Name

DELLMART & COMPANY23 Implementing Change TEST  Set Goals  Implement in select stores  Evaluate ROLLOUT  Develop plan  Communicate –Stores –Logistics –Supplier  Execute

DELLMART & COMPANY24 Prototypes  Don’t exist  Everyone has one or more  Cannot expand without one

DELLMART & COMPANY25 AGENDA INTRODUCTION READY CHANGE GO

DELLMART & COMPANY26 Overall Process Plan BuildEvaluate Revise

DELLMART & COMPANY27 How Many Stores ?  Too aggressive –Likely failure –Poor execution

DELLMART & COMPANY28 Build Vs Lease BUILD  Advantage –Maximum control –Builds asset base  Disadvantage –Longer time LEASE  Advantage –Smaller capital –Faster time  Disadvantage –Landlord control

DELLMART & COMPANY29 Store Plan  Site requirements  Size  Layout  Merchandise & services  Labor requirements  Forecast – Capital – Profit & Loss

DELLMART & COMPANY30 Headquarters Resources

DELLMART & COMPANY31 Organization Structure A Managing Director Operations Store Operations DistributionMerchandising Accounting & Finance Human Resources Expansion Real Estate Construction Buying Government Relation Engineering Design

DELLMART & COMPANY32 Organization Structure B Managing Director Store Operations Accounting & Finance Human Resources MerchandisingDistribution Expansion Task Force

DELLMART & COMPANY33 Information Technology  Transaction projections  Processing capacity – Hardware – Software  Communication – Capacity – Backup – Dependability

DELLMART & COMPANY34 Merchandising  Workload – Suppliers – Items – Transactions  Inventory Pipeline  Opening coordination

DELLMART & COMPANY35 Logistics  Processing – Storage space – Warehouse Equipment – Transportation  New store – Fixtures – Equipment – Merchandise

DELLMART & COMPANY36 Finance & Accounting  Expansion financing  Banking relationship  Monetary Control – Construction – Operations

DELLMART & COMPANY37 Human Resources  Personnel policy  Hiring new associates  Training associates  Phase-in staffing

DELLMART & COMPANY38 Store Operations  Standard Operating Procedures  Succession planning  Promote from within – Improves morale – Provides consistent service – Builds company cultural

DELLMART & COMPANY39 Construction Foundation Frame Outside Utilities Walls Flooring Equipment Finishing Fixtures Signage

DELLMART & COMPANY40 Hard Vs Soft Opening Hard  Advantages –Greatest impact –Focus spending  Disadvantages – Exposes weakness – Risk of failure Soft  Advantages –Easiest to execute –Controlled recovery  Disadvantages –Limited impact

DELLMART & COMPANY41 Multi-Format  Annual plan determines number stores – Adjust for opportunities  Site evaluation – Size – Target customer

DELLMART & COMPANY42 Summary  How to recognize the store is ready to replicate?  What should be replicated?  When to stop changing the store?  What is the best approach to expansion?

DELLMART & COMPANY43

DELLMART & COMPANY44 W. Frank Dell II, CMC President DELLMART & Company 125 Hardesty Road Stamford, CT USA Tel: Fax: Web Site: