RETALIX LTD.

Leverage our Connected Services customer base to build collaborative retailer-supplier communities
Through the collection of sales and inventory data obtained in providing Connected Services to Tier 3 and Tier 4 retailers, we are able to provide
suppliers with aggregated Tier 3 and Tier 4 sales data, including visibility into inventory movement and aggregated market share information. This data
enables suppliers to better understand market trends and changing consumer demands, which previously had been difficult to gauge because of the large
number of independent retailers and the fragmented nature of the market, thereby enabling suppliers to optimize their supply replenishment strategy. As we
add more retailers to our Connected Services, we are able to offer suppliers an increasingly valuable service as we are able to provide them with access to
data from a wider group of retailers and, as a result, a more detailed, timely and accurate view of the marketplace. We first established a community, or emarketplace,
for suppliers in the retail food industry in Israel, where the number of retailer subscribers to our Connected Services through our StoreNext
Israel venture has reached a critical mass. We have further expanded this community to enable collaboration between retailers and suppliers in Israel to
allow them to share with each other inventory and pricing information. We intend to provide similar e-marketplace and collaboration services through our
StoreNext USA venture as the number of subscribers to our Connected Services in the United States grows. We intend to continue to leverage our
Connected Services to increase the value of the community to suppliers and to provide us with an additional source of revenue.
Continue broadening market penetration through strategic acquisitions
Historically, we have grown through a combination of internal expansion and strategic acquisitions of companies with related businesses and
technologies. Over the past few years, we have made a number of strategic acquisitions to expand our product offerings and market position, including the
acquisitions of IDS, TCI Solutions, UNIT, OMI International, PalmPoint and BASS. We continue to evaluate opportunities to acquire complementary
businesses and technologies in the retail and distribution information systems market in order to improve service to our customers, complement our
product offerings, increase our market share, advance our technology, expand our distribution capabilities and penetrate new targeted markets.
Continue to expand into new geographic markets and additional retail and distribution market sectors
In the past our primary geographic markets were North America, Israel and Europe, particularly the United Kingdom and Scandinavia. In 2004, we
announced significant new sales that were viewed as market entries in new markets, such as France and Italy in Europe, and China, Japan and India in
Asia. We aim to continue to establish our presence in these new markets, as well as to expand into additional countries in Europe, Asia and Latin America.
In addition, we are beginning to expand into other types of retail sectors, such as health and beauty and pharmacy, which have retail characteristics that are
similar to the food and fuel retail and distribution market sectors, in an effort to broaden our addressable market.
Our Products
We have a broad portfolio of software solutions that are designed to meet the retail operations, supply chain management and execution, and
customer management needs of the entire range of food and fuel retailers and U.S. grocery and convenience store distributors, from multi-national
supermarket and major convenience store chains and major fuel retailers to local independent grocers. We offer our customers a full suite of software
products to address all the principal elements of their retail operations:
In-Store Solutions: Suite of software solutions that provides supermarkets, convenience stores, fuel retailers and QSRs with business applications
supporting multiple types of customer service points, such as regular checkout, self-scanning and self-checkout, providing comprehensive in-store
operational and management tools for POS, front-office and back-office operations and allowing mobile applications that enable in-store personnel to carry
out back-office tasks using mobile computing devices. Our in-store solutions consist of our POS systems – StoreLine for the supermarket and grocery
market and StorePoint for the convenience store and fuel retail market – as well as additional back-office modules, Retalix Pocket Office and Retalix Back
Office. In terms of contribution of our various software solutions to our historical revenues, we have derived the substantial majority of our product sales
from the sale of our in-store solutions, specifically our StoreLine and StorePoint solutions.
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