1. “ THE LAST FRONTIER ” W. FRANK DELL II,CMC DELLMART & Company RETAIL PRICING

2. DELLMART & Company AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS

3. DELLMART & Company OBJECTIVES Review current retail pricing process Explore consumer perception & issues Develop proposed retail pricing –Process –Approach

4. DELLMART & Company STAPLE / BASIC ITEM FOCUS STAPLESEASONAL/FASHION Normal Promotion Normal Promotion Mark Down Close Out $425.1 Billion Retail Food Industry Over-stored Mature Consolidating

5. DELLMART & Company MANY NEW COMPETITORS Membership Club Convenience Supercenter Drug/Chemist Fast Food Home Shopping

6. DELLMART & Company MASTER PRICING STRATEGIES EDLP Advantages Low cost maintenance First market entry advantage Disadvantages Boring Requires discipline HI-LO Advantages Merchandising excitement Provides flexibility Disadvantages High cost maintenance Difficult execution Fact - No retailer truly practices EDLP

7. DELLMART & Company STORE SELECTION FACTORS Source: Progressive Grocer

8. DELLMART & Company STORE SELECTION FACTORS Source: Progressive Grocer

9. DELLMART & Company RETAILER GOALS Low High Price Image Gross Margin Quality Ratio

10. DELLMART & Company CONSUMERS Recall up to 200 item prices Frequently purchased items High consumables Translates to 500 - 1,000 items creating the price image

11. DELLMART & Company PRICE COMPONENTS

12. DELLMART & Company AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS

13. DELLMART & Company TYPICAL PRICING PROCESS

14. DELLMART & Company COLLECT COMPETITIVE DATA

15. DELLMART & Company DETERMINE PRICE

16. DELLMART & Company IMPLEMENT PRICE Minimum cost is $1.00 per item per store

17. DELLMART & Company PRICE CHECK Shelf POS

18. DELLMART & Company RESULT

19. AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS

20. DELLMART & Company RETAIL STRATEGY

21. DELLMART & Company ESTABLISH DEPT. STRATEGY

22. DELLMART & Company UNDERSTAND COMPETITORS

23. DELLMART & Company DEFINE CATEGORY ROLE Traffic Builder Transaction Builder Profit Contributor Cash Generator Excitement Creator Image Creator Turf Defender Destination Routine Occasional/Seasonal Convenience

24. DELLMART & Company DEFINE IMAGE PRICE

25. DELLMART & Company PRICE FOR PROFIT Gross Margin –Relationship between cost and selling price –Not a predictor of profit –Percentage ineffective during deflation times Profit Contribution Sales - Cost of Goods Sold = Gross Margin + Direct Revenue - Inbound Costs - Outbound Costs = Profit Contribution

26. DELLMART & Company VELOCITY PHILOSOPHY Faster sellers priced lower than slower sellers Reinforces low price image Basis for power curve

27. DELLMART & Company SIZE PHILOPSOHY Larger sizes priced lower than smaller sizes Promotes selling larger sizes –Increase volume –Lower transaction cost Supported by vendor pricing –Lower package cost –Lower transaction cost

28. DELLMART & Company FLAVOR/PATTERN PHILOSOPHY Create sub-group Price all items the same –Even if cost differs Consumers perceive all items as equal Cherry Orange Grape Raspberry

29. DELLMART & Company MAGIC 9’s PHILOSOPHY Food is a pennies business Price with a last digit of 9 Consumer perceive lower cost

30. DELLMART & Company AGENDA INTRODUCTION TYPICAL PROCESS PHILOSOPHY & STRATEGY PROPOSED PROCESS

31. DELLMART & Company PROPOSED PRICING PROCESS

32. DELLMART & Company COLLECT COMPETITIVE DATA

33. DELLMART & Company TRIGGER PRICING

34. DELLMART & Company PRICING CANDIDATES

35. DELLMART & Company DETERMINE PRICE

36. DELLMART & Company PRICE TABLE Department Category Sub Category Sub Category Sub Category Sub Category Image Item

37. DELLMART & Company PRICE CONTROLS

38. DELLMART & Company INTERATIVE PROCESS 1. Competition 2. GM Limit 3. Profit Objective

39. DELLMART & Company IMPLEMENT PRICE

40. DELLMART & Company PRICING FILTERS

41. DELLMART & Company PRICE VERIFICATION Shelf POS Pricing System

42. DELLMART & Company KEY TO SUCCESS Understand competition Price for profit Consider all factors –Competition –Movement –Cost Justify implementation Test item sensitivity