Change Initiatives For 2015

Gerson Customer Service and Order Processing

During peak order season we will be adding a second shift of personnel for entering and auditing received orders. The second shift will start in January 2015 to coincide with orders being received for the Fall/Holiday 2015 product program. We receive approximately 6,000 customer orders over a four week period that must be entered and audited prior to placing the orders with our China factories. Adding a second shift will reduce the process time and allow Gerson to place factory orders earlier thus giving us the benefit of receiving earlier ship dates from the China factories. Receiving customer orders by our seasonal program cutoff date and processing quickly and accurately is critically important when sourcing product in China today.

We also plan to separate our Fall and Christmas customer orders for 2015 into two separate orders: one for Fall/harvest/Halloween products and a separate order for Christmas products. Each of the two orders will require a specific ship date from the customer. This will allow Gerson to process the orders received much faster and more accurately. While a customer will likely want their Fall/harvest/Halloween product shipped earlier than their Christmas order, they can specify that the orders ship together. Shipping orders separately will ensure the timely delivery of each separate seasonal order.

The program cutoff date will be the same for both orders: Friday, February 13, 2015. We do ask that customers try to submit to our office the Fall/harvest/Halloween orders much earlier than the cutoff date. Most importantly we will again this season be placing a pre-buy order with our factories at the end of January for the Fall/harvest/Halloween product line to insure we receive timely delivery to our DC. We believe this pre-buy order helped greatly in getting Fall/harvest/Halloween product delivered to our DC in June, July and early August 2014. Our goal is to begin shipping Fall/harvest/Halloween product orders in early July and be finished by the end of August. Our goal is to begin shipping Christmas product orders at the end of July/early August and complete by the end of September. Please note that customers can specify later ship dates based on their store requirements.

We will communicate with our customers via email if we have your email address, sending an order receipt confirmation with the full details of your order within 48 hours of the date when we enter and audit your order. Starting with the Fall/Christmas 2015 seasonal program, we will communicate factory item cancellations to customers within 60 days of the program cutoff date. Unless you request by checking a box on your order form to opt out, your packing list will now show the wholesale each cost to help customers with the product check in process.

Gerson Purchasing Department

We are creating additional incentives for our China factories to meet specified purchase order ship dates and to help elevate our purchase orders in shipping priority with each factory. We have also created an improved system in our Olathe office to monitor factory ship dates to minimize shipping delays. To this end we have implemented a policy for all Gerson factories to submit weekly production updates showing the exact status of each purchase order. We are also thoroughly evaluating our factory inspection and audit protocols and staffing. We currently have six Gerson full time product inspectors across mainland China. We have also established an improved factory evaluation program that provides a report card for each factory. This information is provided to our product merchants as they are responsible for working with any factory found to be deficient on a corrective action plan. Those factories not producing quality product delivered on time will be eliminated as a vendor.

Gerson Product Sourcing

We have opened a Gerson sourcing and logistics office in Shanghai. This is in addition to our longstanding office and showroom in Hong Kong. Gerson Shanghai is currently looking to add support staff to our current three person office. The Shanghai staff will be responsible for increasing the amount of factory visits and factory communications and to build closer relationships with key factories. We believe this will greatly improve the on time shipping of quality products from our China factories.

Gerson Business Practices/Operations

We are happy to announce that Sterling will join Gerson International as a book and buy program beginning with the Christmas 2015 program. With growing labor shortages in China, factories can no longer accommodate later arriving purchase orders from US importers. With the exception of Sterling Christmas trees which will be stocked much later into the calendar year, all other Sterling products will fall under the pre-book program and the February 13, 2015 order cutoff date. This will definitely help with timely deliveries of the Sterling Christmas product line for 2015. With our new computer system all Sterling and Gerson International products are now on one system and GIL and Sterling orders will ship together if ordered together.

The Sterling showrooms in Olathe, Atlanta, and Dallas will remain open during all markets including March and July in Atlanta and June in Olathe and Dallas. At once Sterling, GIL, and closeout inventory will be on display during the March and July markets in Atlanta and available for purchase and immediate shipment.

We are also expanding our showroom in the Las Vegas World Market Center moving from the 9th floor down to the 8th floor on the atrium of Building C with a total of 5,800 square feet of display space. This will allow us to display a majority of our seasonal product lines (GIL and Sterling) as well as all of our Gerson branded product lines during the January and August shows in Las Vegas.

Gerson Technology Investments

We will begin to see the efficiencies of our new computer system in January 2015. Our new system went live in April 2014 and we struggled with system conversion going into the Fall/Christmas shipping season. We have spent a significant amount of resources on fixing the issues and are happy to report most of the issues have been fixed. We are very excited with the capabilities our new system has to offer and we are confident our Company and our customers will see the benefits moving forward.

We have also invested significant additional capital in new showroom scanning equipment and software. Beginning in December 2014, most of our showrooms and tradeshows will be utilizing I-Pad minis to scan orders. This will help in speeding up the scanning process and make for a more enjoyable showroom experience. It will also help us process showroom orders much faster.

Gerson BTB E-Commerce

Gerson has been operating its BTB E-Commerce website (gersoncompany.com) for the past several years. Customers have the ability to view every Gerson product offering and to purchase on-line every product except the seasonal pre-book merchandise (GIL and Sterling). Customers can now log on our website and look up their order status, what has shipped, download an invoice, and get small package shipment tracking information. To access the website you need a user name and password that can be obtained from Christine Kessler at ckessler @ gersoncompany.com.

Gerson Olathe Distribution Center

During the peak shipping seasons of January and February and again in July through September, our distribution center will operate with two full time shifts, operating 16 hours per day, with a single shift on Saturdays. This will begin in January 2015. During peak season we receive and ship out to customers a tremendous amount of product during a very short time window. We estimate going to two shifts per day will allow us to process and ship 30% more orders per day.

READ DECEMBER 2014 LETTER TO CUSTOMERS