Building Retail Channel Strategy for A Global Electronics Company Date Download the full document at: www.gazhoo.com

Contents Channel strategy project overview Review of channel dynamics and key trends Review of targeted retailers Review of consumer value proposition needs How competitors are going to market Strategic opportunities and examples of tactics Audit of existing channel plans and next steps Download the full document at: www.gazhoo.com

Channel strategy project overview

Review of channel dynamics and key trends

Review of targeted retailers

Review of consumer value proposition needs

How competitors are going to market

Strategic opportunities and examples of tactics

Audit of existing channel plans and next steps

The Channel Strategy Project was intended to create a retail channel foundation and strategic alternatives for an evolving marketplace Channel Strategies must address process, technology, and organizational opportunities The Channel Imperative A business and customer-driven foundation of channel capabilities and strategies to grow sales, profit, and market share Solidifying industry leadership in digital management Strong and loyal channel partner relations Consistent consumer brand equity across categories Innovative abilities to identify and build new channel opportunities Less reliance on “follower” strategies vis a vis competitors Supply chain efficiencies where customer value is not impeded Customer-focused orientation, fully supported by right metrics and data Initial digital successful across key retail sectors and key categories Growing Client X brand affinity Good marketing and sales intelligence Challenges in adapting current infrastructure, processes, and technology platform to the new multi-channel business models Challenges in supporting a seamless end-to-end customer experience Download the full document at: www.gazhoo.com Desired Future Capabilities Current State

Solidifying industry leadership in digital management

Strong and loyal channel partner relations

Consistent consumer brand equity across categories

Innovative abilities to identify and build new channel opportunities

Less reliance on “follower” strategies vis a vis competitors

Supply chain efficiencies where customer value is not impeded

Customer-focused orientation, fully supported by right metrics and data

Initial digital successful across key retail sectors and key categories

Growing Client X brand affinity

Good marketing and sales intelligence

Challenges in adapting current infrastructure, processes, and technology platform to the new multi-channel business models

Challenges in supporting a seamless end-to-end customer experience

Four key objectives were addressed within a carefully managed scope Identify broad retail trends and analyze the nature of specific retail channels across Client X’s key categories Identify the impact on Client X of key retail channel trends, issues, and environmental changes Develop retail channel strategies to build segment focus, profitability, and competitive strength Identify areas of opportunity to build retail channel relationships What do retailers expect from Client X from a relationship and service standpoint? What are Client X’s competitors doing to address changing retail models? How are consumers changing and what can Client X do to grow consumer value? How well is Client X positioned to execute its channel strategy? Project Objectives Project Focus Download the full document at: www.gazhoo.com

Identify broad retail trends and analyze the nature of specific retail channels across Client X’s key categories

Identify the impact on Client X of key retail channel trends, issues, and environmental changes

Develop retail channel strategies to build segment focus, profitability, and competitive strength

Identify areas of opportunity to build retail channel relationships

What do retailers expect from Client X from a relationship and service standpoint?

What are Client X’s competitors doing to address changing retail models?

How are consumers changing and what can Client X do to grow consumer value?

How well is Client X positioned to execute its channel strategy?

Our eight week project approach focused on Retailers, Competitors, and Consumers, primarily within the consumer electronics sector Selected Client X product and sales force interviews Retailer interviews (26) / Store visits Competitive and retailer service channel analysis Competitive analysis and secondary research Interviews with XYZ subject matter experts Review of existing research efforts at Client X Qualitative Consumer Value Proposition focus groups Two Client X workshops with 10 – 12 key stakeholders Validate Initial Hypotheses Asses External Environment Determine Strategic Implications Week 1 - 2 Week 3 - 6 Week 7 - 8 Competitive Dynamics Consumer Perspective Channel Trends PHASE I PHASE II PHASE III Executive Workshop Validate Initial Hypotheses Asses External Environment Determine Strategic Implications and Develop Recommendations Week 1 - 2 Week 3 - 6 Week 7 - 8 Competitive Dynamics Retail Channel Trends PHASE I PHASE II PHASE III Consumer Perspective Executive Workshop Examples of key project activities Download the full document at: www.gazhoo.com

Selected Client X product and sales force interviews

Retailer interviews (26) / Store visits

Competitive and retailer service channel analysis

Competitive analysis and secondary research

Interviews with XYZ subject matter experts

Review of existing research efforts at Client X

Qualitative Consumer Value Proposition focus groups

Two Client X workshops with 10 – 12 key stakeholders

Our review focused on retail channels for Client X’s “Home” categories, with emphasis on six key retailers and insights gathered for nine competitors. Category Focus Focus for Channel analyses Competitor Focus Retail channel-related insights Home Office Mobile Electronic Superstores Best Buy Circuit City Department Stores Sears Discounter/Mass Merchant Regional Electronic Specialists Pro Group (Ultimate) Direct to Consumer (B2C) Amazon.com Electronic Specialists RadioShack CompUSA Channel and Retailer Focus Retailer on-site interview and analysis Insights for several secondary-focus retailers were also gathered. These included Wal-Mart, HH Greg, The Wiz, Bernie’s, and Fry’s Content Cleansed to protect the client.

One to two national retail chains dominate consumer electronics sales in each retail channel Source: TWICE Market Research: “Top 100 CE Retailers”, 2001 In 2000, total CE sales were estimated at $8.6 billion, with 13.4% growth, 2000 over 1999 Download the full document at: www.gazhoo.com Consumer Direct Computer Stores Electronics/Appliance Stores Multi Region Electronics Only Home Office Stores Mass Merchants Miscellaneous Warehouse Clubs Consumer Direct -7% 3% 13% 23% 33% 0% 5% 10% 15% Market Share Growth = 3,450 Sales in 2000 y = 62% Best Buy Circuit City SEARS CompUSA RadioShack Wal Mart Target Stores Staples Office Depot Kmart Sam's Club Costco Toys R Us PC Connection Office Max Fry's MicroWarehouse Good Guys The Wiz Micro Center

The digital market place will evolve in at least three stages, the speed of which needs to monitored to evaluate channels strategies Product introduction – few set standards; Manufacturers focus on making their technology the industry standard Products compete on innovation Uncertainty about software or other compatible products Diffused federal regulations Product standards evolving; Increased collaboration between manufacturers resulting in industry being closer to a single standard Products compete on features and convergence attributes More suppliers start producing software for the digital products Fed starts to introduce selective laws covering the category Set industry standards; Laggards scrambling to adapt to standard New product categories defined by convergence trends Products compete on price Several suppliers produce software resulting in lower costs and increased reach Comprehensive federal guidelines Stage 1 – Digital Introduction Stage 2 – Digital Growth Stage 3 – Digital Maturity Digital Penetration < 10% Digital Penetration < 25% Digital Penetration 10 - 25% Prices high, aimed at market skimming Only available at certain specialists stores Ads focused on category awareness and education Consumer – lack of wide-spread knowledge and digital understanding; early adopters buying the product Price on the decline; but still too high to reach mass markets Product distribution to department stores and other selective outlets Ads focused on Brand unique selling proposition and positioning Increased consumer knowledge; Advent of stronger opinion leaders Commodotized products resulting in very affordable prices Significant product distribution through mass merchandisers such as Wal-Mart, K-Mart, Target Promotion-oriented advertising Consumers understand the category and the products; mass market attractiveness Product evolution Price, Ads, Distribution Consumer Download the full document at: www.gazhoo.com

Product introduction – few set standards; Manufacturers focus on making their technology the industry standard

Products compete on innovation

Uncertainty about software or other compatible products

Diffused federal regulations

Product standards evolving; Increased collaboration between manufacturers resulting in industry being closer to a single standard

Products compete on features and convergence attributes

More suppliers start producing software for the digital products

Fed starts to introduce selective laws covering the category

Set industry standards; Laggards scrambling to adapt to standard

New product categories defined by convergence trends

Products compete on price

Several suppliers produce software resulting in lower costs and increased reach

Comprehensive federal guidelines

Prices high, aimed at market skimming

Only available at certain specialists stores

Ads focused on category awareness and education

Consumer – lack of wide-spread knowledge and digital understanding; early adopters buying the product

Price on the decline; but still too high to reach mass markets

Product distribution to department stores and other selective outlets

Ads focused on Brand unique selling proposition and positioning

Increased consumer knowledge; Advent of stronger opinion leaders

Commodotized products resulting in very affordable prices

Significant product distribution through mass merchandisers such as Wal-Mart, K-Mart, Target

Promotion-oriented advertising

Consumers understand the category and the products; mass market attractiveness