1. HOW SMALL & MEDIUM RETAILERS CAN BENEFIT FROM RFID MARTY JOHNSON

2. RFID ITEM-LEVEL IN RETAIL WILL BE AS PERVASIVE AS BARCODE Started with largest retailers, Many more piloting Moving to Specialty Retailers pilots and rollouts Smaller Retailers are piloting Brand Owners who are tagging for big retailers are piloting in company stores

3. RETURN ON INVESTMENT The Age-Old Question –How can I use RFID and get a return on my investment? The Age-Old Answer: –Eliminate Inventory ‘Touches’ – Automate Manual Processes –Eliminate Errors in Data –Improve Visibility – Make better, faster Business Decisions –Reduce Inventory Levels and Out of Stocks –Reduce Expedited Shipments

4. VISIBILITY IS THE KEY 4 Visibility drives better business decisions Where do I need to see the asset? Where do I not need to see the asset? How often do I need to see the asset? How often do I need this info updated?

5. RFID EXTENDS BARCODE’S VALUE PROPOSITION BarcodeRFID Confined by line-of-sight scanningWireless/no line-of-sight dependency 1:1 Scan Ratio1:100s Read Ratio Approaching information storage limitsSignificantly more storage capacity Limited information can be encoded / leveraged Ability to add/edit data from new and existing sources Less automatedEnables automation Deeply entrenchedIncreasingly easy to integrate with limited invasiveness

6. Before 2008 Does it work? 2008-2010 Does it work reliably? 2010 - Present How do I make it work for my business? THE RFID CONVERSATION HAS CHANGED

7. THE FUNDAMENTALS REMAIN The right product in the right place at the right time. Inventory/Asset visibility and control result in: –Efficiencies and cost control –Lower Safety Stock –Higher Asset Utilization

8. INVENTORY ACCURACY OVER TIME THE COST OF POOR INVENTORY ACCURACY Decaying inventory accuracy is responsible for: High out-of-stocks (8%+) Safety stock as high as 50% High shrink (2%+) Poor forecasting and decision making The above contribute to as much as 4- 15% in lost sales every year True costs of visibility are even higher due to markdowns, poor planning, etc. Item-level RFID can help… and is raising on the priority list

9. ITEM-LEVEL RFID SOLVES THE INVENTORY ACCURACY PROBLEM Increase sales Reduction in out-of-stocks and greater selection afforded by item-level RFID can lead to a 2-10% increase in sales +2-10% lift Reduce inventory Increased accuracy levels approaching 100% can lead to reduction in inventory across the system of greater than 5% Enable & enhance omnichannel Utilize near-perfect inventory visibility to offer fast in-store pickup of online orders and same-day shipping of online orders from nearby stores >5% reduction Same-day fulfillment Managing inventory at an item-level provides accuracy that can:

10. COMMON RETAIL USE CASES Cycle Counting / Inventory Handheld RFID Reader used to take frequent inventory of RFID-tagged categories Display Compliance Quickly verify displays and matchesbackroom inventory Item Location Quickly find a particular item

11. BENEFITS IN RETAIL STORES More accurate inventory –Move from an industry average of 63% to 95% Inventory labor savings –Inventory taking productivity increased by 96% –200 items per hour compared to 12,000 items/hour with RFID –18% reduction in the time it takes associates to locate product Out-of-stock reductions –Reductions by as much as 50% Sales increases –Examples from 2%-20% *Source - University of Arkansas RFID Research Center

12. AMERICAN APPAREL CASE STUDY – THE CHALLENGE ~12,000 SKUs on floor, 1 item/SKU Manual Replenishment Process Requiring 2 Barcode Physical Counts / Week Physical Counts Require 240 man hours per month 100 – 300 Missing Items per count

13. AMERICAN APPAREL CASE STUDY – THE SOLUTION First Stores went live Fall of 2008 Driven by need to reduce of out of stocks 250 stores live in 20 countries 1 billion RFID transactions during 2013 holiday season RFID Tagging in Distribution Center 30 tagging stations using Zebra RFID printers 15 Million Tags/year In Store Solution Includes: Handhelds, RFID enabled POS and Backstock workstations for replenishment, receiving, transfers and encoding Solution being used to implement Omnichannel strategy “click and ship”

14. AMERICAN APPAREL CASE STUDY – THE BENEFITS Sales per Store Up 14% Average 188 Labor Hours / Month Saved Per-store ROI in 4.5 Months Shrink Reduction

15. AMERICAN APPAREL 2012 SEC FILING “..RFID (deployments)..have allowed us to reduce our unit inventory levels..” “..RFID (solution).. Increase sales, reduce costs and increase liquidity..” “..RFID (deployments)..have allowed us to reduce our unit inventory levels..” “..RFID (solution).. Increase sales, reduce costs and increase liquidity..”

16. AREAS TO FOCUS ON PRIOR TO IMPLEMENTATION Where and how is best approach to RFID tag product? What processes to enhance in the store and supply Chain? What measurements do I want to concentrate on during pilot to quantify value creation and ROI?

17. QUESTIONS 17