1. W. FRANK DELL II, CMC DELLMART & COMPANY THE GOLD MINE IN RETAIL PRICING

2. DELLMART & COMPANY2 AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT

3. DELLMART & COMPANY3 Objectives Identify pricing improvement opportunities Describe approach to achieve results Present new research

4. DELLMART & COMPANY4 Scope Retail Food –Excluding perishable commodities Mass Merchant - Basics –Excludes fashion & seasonal

5. DELLMART & COMPANY5 Observation Much of retail pricing seems to be follow the leader Not unlike a dog chasing its tail

6. DELLMART & COMPANY6 Theme Price for the consumer –Consider competition Price for Net Profit –Not Gross Margin

7. DELLMART & COMPANY7 AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT

8. DELLMART & COMPANY8 #1 Slow Seller Why is an item a slow seller? –Small consumer market –Inadequate retail space –Priced wrong

9. DELLMART & COMPANY9 25,000 SKU’s In Typical Store 1,000 sell more than 1 case/week 4,000 sell between.5 and 1 case/week 20,000 sell less than.5 case/week Slow Seller

10. DELLMART & COMPANY10 SKU Universe Estimate 4 to 5 million Average store stocks.0056% Many unique items and opportunities Slow Seller

11. DELLMART & COMPANY11 Slow Seller Approach

12. DELLMART & COMPANY12 Case Study - Grey Poupon Selling 4 units/week Prices $1.79 Increased price to $2.79 –Sold 4 units/week –Increased sales $4.00 per store –Increased profit $4.00 per store Slow Seller

13. DELLMART & COMPANY13 #2 Private Label If product quality is equal to National Brand Why is the price 25% plus lower?

14. DELLMART & COMPANY14 Low Retail Not The Answer Private Label

15. DELLMART & COMPANY15 Approach Private Label Note: Quality must be equal or superior

16. DELLMART & COMPANY16 Value Concept Private Label PRICE QUALITY VALUE =

17. DELLMART & COMPANY17 AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT

18. DELLMART & COMPANY18 Why Promote? Create merchandising excitement Attract customers Present savings Show value Reward loyal customers

19. DELLMART & COMPANY19 Promotions Are Difficult

20. DELLMART & COMPANY20 Promotion Factors

21. DELLMART & COMPANY21 Breakeven on 11% Deal

22. DELLMART & COMPANY22 Low Private Label Share

23. DELLMART & COMPANY23 Moderate Private Label Share

24. DELLMART & COMPANY24 Promotional Index

25. DELLMART & COMPANY25 Promotion Conclusion Low Private Label share Moderate Private Label share Private Label Natl. Brand

26. DELLMART & COMPANY26 AGENDA INTRODUCTION MINING OPPORTUNTIES PROMOTIONAL PRICING PRICING FOR PROFIT

27. DELLMART & COMPANY27 Activity Based Costing ABC is a cost allocation or assignment methodology Cost assigned based on the activities and drivers –Activities are tasks within a process –Drivers are factors creating costs

28. DELLMART & COMPANY28 GM Vs ABC 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

29. DELLMART & COMPANY29 Primary Processes

30. DELLMART & COMPANY30 Costs Follow Product Flow

31. DELLMART & COMPANY31 Greatest Cost Is DSF

32. DELLMART & COMPANY32 Proposed Pricing Process

33. DELLMART & COMPANY33 Collect Competitive Data

34. DELLMART & COMPANY34 Trigger Pricing

35. DELLMART & COMPANY35 Pricing Candidates

36. DELLMART & COMPANY36 Determine Price

37. DELLMART & COMPANY37 Price Table Department Category Sub Category Sub Category Sub Category Sub Category Image Item

38. DELLMART & COMPANY38 VELOCITY PHILOSOPHY Faster sellers priced lower than slower sellers Reinforces low price image Basis for power curve

39. DELLMART & COMPANY39 SIZE PHILOSOPHY Larger sizes priced lower than smaller sizes Promotes selling larger sizes –Increase volume –Lower transaction cost Supported by vendor pricing –Lower bracket cost –Lower transaction cost

40. DELLMART & COMPANY40 FLAVOR/PATTERN PHILOSOPHY Create sub-group Price all items the same –Even if cost differs Consumers perceive all items as equal Cherry Raspberry Orange Grape

41. DELLMART & COMPANY41 Price Controls

42. DELLMART & COMPANY42 Iterative Process

43. DELLMART & COMPANY43 Implement Price

44. DELLMART & COMPANY44 Pricing Filters

45. DELLMART & COMPANY45 Unlock The Gold Understand your competition Price for net profit Consider all factors –Competition –Movement –Cost Justify implementation Test item sensitivity

46. DELLMART & COMPANY46

47. DELLMART & COMPANY47 W. Frank Dell II, CMC President DELLMART & Company 125 Hardesty Road Stamford, CT 06903 USA Tel: 203-968-8609 Fax: 203-968-8613 e-mail Wfdell2@msn.com