MERCHANDISE INTELLIGENCE DAN MITCHELL, RETAIL INDUSTRY GLOBAL PRACTICE

SAS Retail Localization, Personalization.and Relevance Customer Analytics Merchandise Intelligence Customer Intelligence KNOW PLAN, OPTIMIZE, ACT ENGAGE/ INFLUENCE Copyright 2012, SAS Institute Inc. All rights reserved. Copyright 2012, SAS Institute Inc. All rights reserved.

SAS Retail Merchandise Intelligence PLAN, OPTIMIZE, ACT Plan sales strategy across channels. Determine optimal product mix to achieve targets and customer expectations. Localize product mix. Ensure execution is informed by operational constraints. Merchandise Financial Planning & Store Planning Demand Forecasting Assortment Planning/Category Management Store Segmentation & Intelligent Clustering Revenue - Price Optimization Allocation/Size Optimization Copyright 2012, SAS Institute Inc. All rights reserved. Copyright 2012, SAS Institute Inc. All rights reserved.

Proven Capabilities Merchandise Intelligence PLAN, OPTIMIZE, ACT Copyright 2012, SAS Institute Inc. All rights reserved. Belk Sears Levi s Canadian Tire Macy s JC Penny Lord & Taylor Overstock.com DSW Unimarc Shoppers Drug Mart Wet Seal Aeropostale Copyright 2012, SAS Institute Inc. All rights reserved. Net sales, for the Q1 2010 ended November 28, 2009, increased 3.9% to $1.823B from $1.754 B in the Q1 2009. Comparable store sales for the quarter increased 2.4%. SAS named FDO Strategic Partner of the Year 2009

Consistent Customer Experience SAS Retail Solution Framework Marketing & Merchandising Buying Planning Store Ops Logistics Mkting Replenis -hment Cust. Service Merchandising Direct Mail Online Merchandise Intelligence Integrated Merchandising & Marketing Capabilities Mobile Call Centre Stores Kiosks Social Emails Customer Intelligence Merchandise Financial Planning Assortment Planning / Optimization Advanced Clustering Space Optimization Campaign Management Real-Time Offer Optimization Marketing Optimization Marketing Mix Optimization Demand Planning Size & Pack Optimization Revenue Optimization Inventory Optimization Social Media Analytics Online Customer Behavior Marketing Resource Management Marketing Performance Management Analytical Insights Data Mining & Customer Analytics Demand Forecasting Sentiment & Unstructured Data Analysis Customer Profitability & Forecasting Data Management Data Quality Data Integration Data Model Metadata ERP Copyright 2015, SAS I nst i tute I nc. Al l ri ghts reserv ed. CRM EDW Online POS Supply Chain Social Campaig n Others

SAS SIZE / PACK OPTIMIZATION THE SHOPPING EXPERIENCE I want this dress but they don t have my size. I really wanted to wear it tonight I ll wait; I can always get my size on sale

SAS SIZE / PACK OPTIMIZATION HOW SAS CAN HELP Understand how sizes are truly demanded Lowest intersection product and location Continue to plan at the levels done so today Size Profiling Pack Optimization Optimize Assortments Maximize Omni Strategies Localize by Size Reduce Stock Outs Build Customer Satisfaction Rapid ROI Give Users Time Back

SAS SIZE / PACK OPTIMIZATION THE POWER OF ONE +$3M Average Sales Unit Shift 3 8 units THE VALUE -1 +1 Net Revenue $ Power of One Net Revenue $s Based on $1B Annual Revenue, $25 AUR, 30% MD ppt, 65% ST prior to MD

DSW SIZE OPTIMIZATION

SAS SIZE / PACK OPTIMIZATION INTELLIGENCE GATHERED AND CONSUMED Enables retailers to automatically convert higher-level plans into optimized size- and pack/single recommendations for pre-season orders and in-season allocations Delivers Value Quickly Size Profiling Pack Optimization

SAS SIZE / PACK OPTIMIZATION Pre-Season Planning FITS INTO THE BUSINESS PROCESS Product Planning Assortment Planning Merchants Planners Size Analysts Size Profiling Product Development Merchants Size Analysts Pack Optimization Merchants Planners Size Analysts Supply Chain and Factory Collaboration Decision Making Insights Supply Chain Suppliers Size Analysts Locations Allocation / Replenishment Purchase Order Creation Executives Merchants Planners Size Analysts Allocations Regions Locations Allocations Merchandise Operations Order Entry

SAS SIZE / PACK OPTIMIZATION A QUICK BIG WIN TO PREVENT LOST SALES Size Profiling Pack Optimization Drive Financial Results Improve Size Precision Accuracy Optimize Assortment Management and Omni Strategies Maximize Location Size Precision with Recommended Packs

SAS MARKDOWN OPTIMIZATION OVER INVENTORIED? GOT MARKDOWNS? Source: http://www.westcoasttrading.com/sites/all/themes/theme530/images/slide1.jpg

SAS MARKDOWN OPTIMIZATION RETAILER S MARKDOWN CHALLENGES Markdowns may mean deals to your customers, but what does it mean to your organization?? Increased Shrink? Poor Customer Experience? Loss Margins and Profitability? Space Allocation Concerns? Supply Chain Inefficiency? Broken Merchandising Assortments?

MARKDOWN OPTIMIZATION WHAT IS MARKDOWN OPTIMIZATION? Markdown Optimization is simply defined as a solution that defines the right price, at the right place, at the right time markdown pricing to drive improvements in margin, sales, and customer satisfaction

SAS MARKDOWN OPTIMIZATION EFFICIENT CLEARANCE STRATEGIES Manages markdown recommendations to the store level Maintains budgets and margin protection while eliminating inventory Monitors inventory at risk to identify areas of opportunities

A MARKDOWN STRATEGY THAT LEVERAGES 30% OFF 45% 10% OFF 45% OFF 10% OFF 2% Incremental Margin Gain for Total Chain 1 Coat...AN OPTIMIZED AND LOCALIZED APPROACH CAN PRODUCE A

SAS IS ABLE TO EFFECTIVELY MARKDOWN PRODUCTS THAT FORECAST, LOCALIZE, AND OPTIMIZE DEMAND TO MEET CONSUMERS EVER-CHANGING NEEDS!

SAS ASSORTMENT OPTIMIZATION

WHAT IT IS ASSORTMENT OPTIMIZATION Assortment Optimization recommends the best assortment mix based on available shelf space and your financial objective.

WHAT DOES IT DO ASSORTMENT OPTIMIZATION Recommends an assortment mix that reflects how the customers shop Finds the best products to carry to meet the financial objective Makes the best use of available space to offer variety while avoiding duplication of like products Determines optimal inventory for the space Balances the breadth and depth of an assortment

SAS ASSORTMENT OPTIMIZATION Scale assortment to store specific space Eligible Assortment The eligible assortment is considered the largest possible planogram with forecasted or historical performance as a input. SAS Assortment Optimization then identifies the best mix of product to fit store specific fixture configurations. Store Specific Shelving

SAS ASSORTMENT OPTIMIZATION Customer Loyalty Category Role Shelf Height & Depth SKU Dimensions, Pack Size Critical Mass Balance Variety & Duplication Thousands of possible choices Clustered Customer Segments Financial Objectives Presentation Balance & multiple store configurations Attribute Constraints & Item Associations Assortment Available Space Unit Quantity Service Levels Store Specific Demand Optimization is required

SAS ASSORTMENT OPTIMIZATION Optimally choose the best performing mix of SKUs for specific space Optimization objective- Subject to: Maximize financial objectives Decision variables - describing the actions that can be taken» Customer Decision Tree, Eligibility list Constraints- describing the limits of the decision variables» Item selection requirements: days of supply, consumer loyalty, item relationships, minimum presentation size» Physical properties: Item and shelf dimensions Optimization Tasks» Score each item based on financial objective and occupying linear space.» Determine inventory requirements based on service level and local demand.» Calculate product block shape that maximizes shelf space.» Optimally determine breadth & depth by store considering space trade-offs.