Hiri Presentation Fall 2011. This presentation presents the Premium Retail Framework for Retail sales growth and ties several of the lever for growth to market research capabilities and needs

1. Growing in Retail Home Improvement in the
“New Normal”
Winston Ledet - COO
October 20, 2011

2. My Background www.premiumretailsolutions.com
Premium Business Model
Winston Ledet
Premium Retail Solutions, Inc
Chief Operating Officer
• Co-Founder of Retail’s Solutions
Group focused on strategy,
analytics and insight
• Worked with over 50 current and
prospective suppliers
• Former Home Depot
Merchandising Vice President -
Merchandising Strategy and
Innovation
• Led corporate strategy at Home
Depot for three years prior.
• Strategic consulting background
with McKinsey and Company

3. Defining the “New Normal” www.premiumretailsolutions.com
Pre Great Recession New Normal
Temporary Stimulants Temporary Depressants
• Buoyant housing prices • Falling / stagnant housing prices
• 2 million housing starts • 500,000 housing starts
• Ease refinance money • Underwater mortgages - deleverage
• The decline of Sears • European Dept crisis
• Diverse supply base consolidating
Long Term Tailwinds Long Term Headwinds
• Home as an investment • Home spending as consumption
• Positive store growth • Store saturation
• DIY as an enabler • Aging of the population
• Aging of the housing stock • Leverage of the big boxes
• Potential for significant inflation

4. Conditions Under the “New Normal” www.premiumretailsolutions.com
Limited opportunities in new
construction – more manufacturers
chasing retail
Less organic growth in the US and
Canada – square footage growth is
tiny
Greater leverage of the Big Box
players
Pressure on big ticket Purchases
Growing DIFM / BIY

5. Thriving in the new normal www.premiumretailsolutions.com
Building a Consumer
Brand.
Expand Into Adjacent Areas
Current Playing Field
• Traffic
• Conversion
• Share
Driving Bottom Line Profitability.
What is the role for Research and Insights?

6. Growing in the Current Playing Field. www.premiumretailsolutions.com
Traffic Building a Consumer Brand.
Expand Into Adjacent Areas
Current Playing
Field
• Traffic
• Conversion
• Share
Driving Bottom Line Profitability.
Promotion
• Special buys, wing stacks,
clip strips Selling Beyond the Shelf
• Leverage the spend of the • PRO desk and bid room
retailer • Installed sales
• Determining offers that • Web Expand Retail Footprint
work • Increase store count at existing
• Manufacturer directed retail
marketing • New retail partners in core
channels
Education / Theater Improving Location within Store
• New retail partners in new
• POP, packaging, website, • Higher traffic area of the store channels
smartcodes • Higher traffic area in the
• Demos / Training in store department/category

7. Growing in the Current Playing Field. www.premiumretailsolutions.com
Traffic - Example
Lack of greets in the
kitchen department To Do’s for Researchers
leading to lower sales
Understand what is lacking to
Put in greeter / lead drive traffic
generator
Access to timely POS data and
Utilizing POS data appropriate analysis
Pre / Post net of control Improvement loop PDCA

8. Growing in the Current Playing Field. www.premiumretailsolutions.com
Conversion Building a Consumer Brand.
Merchandising & Assortment Pricing Expand Into Adjacent Areas
• Understand your customer • Priced right
Current Playing
• Right product for the market/store • Line structure Field
• Understand JLQ • Traffic
• Everyday price = value • Conversion
• Shoppability optimized • Differentiated pricing PRO vs • Share
• Product quality, warranty & service DIY Driving Bottom Line Profitability.
• POP, packaging, and display
• Extend the aisle
Field Execution & Logistics Off-Shelf and Cross Merch
• Timely delivery • Off-shelf spots in relevant
• Always in stock at the shelf categories and relevant seasons
• Priced correctly • Constantly test and pitch new
ideas
• POP displayed, in good condition
Product Differentiation Grow Shelf Space and SKUs
• Competitive advantage • Target competitive SKUs
• Solve customer needs with • Increase facings
improved product or packaging

9. Growing in the Current Playing Field. www.premiumretailsolutions.com
Conversion - Example
Finding knees in the demand curve
To Do’s for Researchers
Pricing tests for existing items
Conjoint or similar approach
for new products
May dovetail into cost – don’t
be scared
Go on shops – play games
• Recently we priced at this point (a
50% drop)
• Sales rose over 500%

10. Growing in the Current Playing Field. www.premiumretailsolutions.com
Conversion - Example
Reason for Purchase
Other
Replacement 3%
10%
Don’t
remember Specific Room Purchase by Room
12% 38%
Other
Basement 18%
Project or Attic
12% 2%
Childs
bedroom Kitchen
Good deal New home 2% 46%
13% 13% Closet
6%
Child's
bath
6% Garage
9% Utility /
Laundry
11%

11. Growing in the Current Playing Field. www.premiumretailsolutions.com
Conversion - Example
To Do’s for Researchers
Who buys, when do they buy
Gender of Decision Consumer Purchase
and why do they buy
Maker Occasions
In-store tests and tracking
Unplanned
Break away from conventional
36% thinking
Planned
64%

12. Growing in the Current Playing Field. www.premiumretailsolutions.com
Conversion - Example
Disregarding Price – Consumers prefer bottom
loader more then 2 to1
To Do’s for Researchers
Conduct concept tests and
choice based mapping
Push the development teams
to try new things
Top Bottom Use another category /
Loading Loading industry as an analog
70%
30%
A) Top Loader B) Bottom Loader

13. Expanding the Playing Field www.premiumretailsolutions.com
Building a Consumer Brand.
Owning Categories
Expand Into Adjacent Areas
Power in providing an entire
category. Current Playing
Field
Simplify the life of a merchant • Traffic
• Conversion
and gain control of key levers • Share
What products in your bay or Driving Bottom Line Profitability.
Customer/Project Adjacencies
run can you produce or source?
What other products do my
customers buy that my brand
and/or relationships give me an
advantage in?
Manufacturing Adjacencies
e.g., power tool company
What other products does the expanding into paint sprayers
retailer sell that fit my
manufacturing expertise?
Often this is a good place to look
e.g., Vinyl Molding to Vinyl for acquisitions
Fencing

14. Expand the Playing Field - Example www.premiumretailsolutions.com
Attic To Do’s for Researchers
Use consumer insights to get
the customer view of the
category
Stretch your partners to think
beyond the 4 walls
Know more about your
category than anyone
Be patient – this is very
counter-cultural to a
manufacturer – but not too
patient

15. Build a Consumer Brand. www.premiumretailsolutions.com
Building a Consumer Brand.
Expand Into Adjacent Areas
Why is it valuable?
Current Playing
• Build high switching costs for retailer Field
• Build credibility with consumers • Traffic
• Conversion
• Develop strength and stability in sales • Share
• Create stronger case for expanding into new Driving Bottom Line Profitability.
categories
Ways to Build a Consumer Brand
• Proprietary technology
• Consumer advertising
• Commercial channel success

16. Building a Brand - Example www.premiumretailsolutions.com
WORX
To Do’s for Researchers
Know your brand’s real value
and short comings - track it
• Go around the retailer ongoing and respond
• Talk to your customer Know who key influencers are
directly
Understand impact of channel
marketing and messages
If it can’t be done make the
organization face reality
The #1 Brand in Cordless String Trimmers with
NO retail distribution – now in Home Depot and
Lowes

17. Drive Bottom Line Profitability www.premiumretailsolutions.com
Building a Consumer Brand.
Product Line Profitability
• One-view of cost (avoid getting picked apart by retailer Expand Into Adjacent Areas
behind the line programs)
• Use new product introductions to eliminate / obsolete Current Playing
Field
low profitability products • Traffic
• Drive operational and logistical efficiencies • Conversion
• Share
• Expense productivity
Driving Bottom Line Profitability.
Driving Cost Out
• Distribution costs
• Manufacturing costs
• Packaging costs
• Minimizing return costs
Retailer Negotiations
• Index commodity prices
• Start early on price increases (expect it to take months)
• Packaging costs

18. Understanding Cost - Example www.premiumretailsolutions.com
The Reality of Cost in the “New Normal” To Do’s for Researchers
Understand the CTQs for your
• Component costs are high and rising products
• Retailers have significant leverage to deny, Experiment with ways to take
delay and decrease price additions cost out without impacting the
customer
• Manufacturer who do not know how to
intelligently cut costs will lose profitability or
Competitive intelligence on
lose business
cost
Waiting for his cost
increase to be approved

19. A Parting Thought – The Big Picture www.premiumretailsolutions.com
Traditional - If you are
not growing square
footage – you have
started your decline
Digital – If you are not
growing customer
interactions – you have
started your decline
How will your product
be sold in the future