digital retail business
TRANSCRIPT
DIGITALIZATION OF A RETAIL BUSINESS
NIKE CASEIsmail BAYSALMurat ARSLANLoretta APPIAH
Politecnico di Milano - 2016
STRATEGY & MARKETING LECTURE
CONTENTS•RETAIL BUSINESS
• NIKE
•EXTERNAL ANALYSIS• STEEP ANALYSIS
• PORTER FIVE FORCES
•INTERNAL ANALYSIS• PORTER’S VALUE CHAIN
• SWOT ANAYSIS
• COMPETITIVE ADVANTAGE AND KEY SUCCESS FACTORS
•PROPOSED STRATEGY• BUSINESS CANVAS
• BUSINESS CANVAS VS KSF
• PROPOSED PLATFORM
•CONCLUSION
Politecnico di Milano - 2016
(1) - http://www.retailresearch.org/retail2018.php(2) - https://www.atkearney.com/
RETAIL BUSINESS: Overview
+$7 trillion Market
Size
Top 3 of Retailers are USA originated
China, India,
Malaysia
most developing
markets
#1
+3% CAGR of retaling
market
growing business with high competition
Online retail sales
e-commerce market is increasing 15%
and 21.5% in 2018
Retail shops
decreasing by 22% moving to online
(1) – UK Market - http://www.igd.com/Research/Retail/UK-grocery-retailing/
RETAIL BUSINESS: Segments (by Revenue Shares)
Retail
Speciality Retailers
Online Retailers
Warehouse Retailers
Supermarkets
DepartmentRetailers
ConvenienceRetailers
DiscountRetailers
5,6%5%
47,7%
9,2%
21%
10%
1,5%
Production
• 142 Factories
• From 15 Countries
Sales • $32,3 billion
Retailing
• 1050 Retail Stores
• In 51 Countries
3 Segments
• Apparel• Footwear• Equipment
70.7k Employees20%
Market Share
RETAIL BUSINESS: Nike Overview
US Stores34%Non-US
Stores66%
Non-US Marke
t61%
US Market
34%
Vietnam44%
China29%
In-donesia
21%
Others6%
Footwear60%
Apparel34%
Equipment6%
RETAIL BUSINESS: Sporting Goods Industry (by Revenues-2015)
Nike Adidas VF Under Armour
Puma Asics New Balance Amer Sports Quiksilver0
5
10
15
20
25
30
35
30.6
18.48
7.4
3.96 3.7 3.56 3.3 2.771.35
Contract Manufacturer
Contract Manufacturer
WarehousesRetailer
s Consumers
RETAIL BUSINESS: Nike Business Pipeline
Soci
al
• Lifestyle and Buying habits changes
• Fitness and Health awareness increases
• Equipments of fitness and exercise apparel increases
• Product awareness increases
• Mobile phone and app usage increases
• Brand Awareness increases
• Online shopping increases
• Technology and information are easily reachable
• Consumers are more open to innovation and new practices
• People are seeking seamless experiences
• Consumers are reachable in every channels
Econ
omic
al • Global Economic Changes
• Capital Intensive Business
• Entry Barriers• High Competition• Lower prices of
online stores drive cost competition to Brick-and-Mortar stores
• Location of stores are more important than before
Tech
nolo
gica
l •E-commerce platforms increased
•Easy to start a new e-business
•New marketing channels are open
•Collection, analysis and use of data is usual
•Cognitive Science, Artificial Intelligence, IoT developments serve for retail
•Companies tend to have online shopping portal
•Wide additional services offered by E-commerce giants bring competition
•Location-based App and services make easy for retail stores
•Internet services make easy for consumers to compare prices
•Research in product quality and innovation is getting usual
Politi
cal • USA, Trump has
elected, flow of investment direction changes
• New investment opportunities
• Support of governments (USA,Malaysia, Turkey, UAE)
• Higher taxes on growing countries, Higher opportunities
Ecol
ogic
al
• Sustainable/Recycling product campaigns
• Producers avoid unethical practices
EXTERNAL ANALYSIS : STEEP Analysis
(1) - https://www.thebalance.com/all-us-store-closings-2891888(2) - http://smallbusiness.chron.com/social-factors-affecting-retail-business-71662.html
EXTERNAL ANALYSIS : Porter’s Five Forces Model
Supplier Power
High Power of overall Supplier
Large Population of Suppliers
Moderate size of individual Suppliers
Buyer Power
Low Switching Costs
Moderate substitute availibility
Price sensitive customers
Competitive Rivalry
Low Market Growth Rate
High Aggressiveness of Firms
Moderate Concentration
Low Switching Costs
Limited Product Differentiation
Threat of Substitutio
nModerate
Availiability of Substitutes
Moderate Performance per
Price of Substitutes
Low Swtiching Costs
Threat of New Entry
High cost of Brand Development
High Economies of Scale
High Incumbent Advantages
Low Swtiching Costs
Low LowHigh High Low
INTERNAL ANALYSIS: PORTER’S VALUE CHAINInbound Logistics
• High inventory control
• Purchasing Raw Materials locally
• Local Logistic Providers
Operations
• Outsourcing Manufacturing&Assembly
• Research and Development
• Innovation( Technologically)
Outbound Logistics
• Strong Control over Distribution Channel
• Good Relationships with its suppliers
• JIT delivery
Marketing and Sales
• Strong Brand Recognition and Reputation
• First mover in e commerce
• Expand over wide area of markets
Service
• Information Technologies(IT) for better customer service
• Customer Care both pre and post sale
Firm Infrastructure
• IT systems for supply chain
• E-Commerce
• Financial Position
HR Management
• Strong Management Team
• Core values and culture(Teamwork, competitiveness, learning environment)
Technology Development
• Continuous Improvement on products
• Customer orientated product development
Procurement
• Good Supplier Relationships
• Localized Bulk Procurement
Supp
ort A
ctivi
ties
Prim
ary
Activ
ities
http://investors.nike.com/investors/news-events-and-reports/?toggle=topBannerhttp://marketrealist.com/2016/10/whos-taking-bite-nikes-market-share/
INTERNAL ANALYSIS: SWOT ANALYSISSTRENGTHS
• Strong Brand Recognition (Global Brand)• High Product Quality• Effective Marketing Strategy • Outsorcing manufacture&assembly at overseas(lower
labor costs)• Strong Distribution Chain• Strong R&D and Capacity of Innovation• Customer Relationship and Satisfaction
WEAKNESSES
• Highly driven by footwear business • Labor unfriendly conditions(manufacturing plants located
in overseas)• Some customers perception to Nike(being too preimium
and luxury)
OPPORTUNITIES• Emerging Markets (China, India, etc) people (new
customers) are interested in western lifestyles• Demand for innovative products• Among Young People, popularity of Nike increases as
fashion brand not only sports brand• Company can capture new segments (offering quality at
lower prices)
THREATS• Currencies may lead instabilities (nature of international
companies)• High Competition in Industry (Under Armour in
basketball business, Adidas in running business)
Critical Factors
High Buyer Power
Limited Differentiation
High Competition
Distruptive E-Commerce
Low Switching Costs
Competitive Advantage
Strong Brand Identity
Wide Supply Chain
Financial Position
High R&D of Products
Economies of Scale
Product Portfolio
What Customer Wants?
Innovative Solutions
Seamless Experiences
Easily Reachable
Affordable Prices
Personalization
Key Success Factors
High Operational Efficiency
Increase Perception of Brand
Give Innovative Experiences
Understand Customer
Be everywhere you need to be
EXTERNAL
Competitive Advantage & Key Success FactorsSOCIAL BUYER
POWERCOMPETITIVE
RIVALRYTECHNOLOGICALECONOMICAL
STEEP ANALYSIS PORTER’S FIVE FORCES MODEL
INTERNAL
PORTER’S VALUE CHAINSWOT ANALYSISOPPORTUNITIES
STRENGTHSPRIMARY ACTIVITIES
SECONDARY ACTIVITIESTHREATS
WEAKNESSES
PROPOSED STRATEGY: BUSINESS CANVAS
• Innovative Tech Developer Startups/Mature Companies (Smartthings, Qualcomm, Google, AmazonCloud)
• Distribution Channels
• According to Sport Activities (Basketball, Fitness, Tennis)
• Young Generation
• Mid-aged Upper/Middle Class
• Online Shoppers• Loyal Customers
• Decrease of Operational Costs• Efficient warehousing (smart digital stores)• Increase of sales (digital shopping experience)• Increasing Brand Identity due to the
innovation
• Investment of Digitalization• Outsourcing/Acquisition• New spots for retail stores (rent)
• Develop a secure digital shopping system (Integrate it Online Shopping)
• Rent Small Areas in sporting facilities
• Outsourcing/ Acquisition of ICT Company
• Marketing Specialists• IT Specialists• Customer Call Center
• Digital Shopping Experience (Auto Pay, Digital Fitting Rooms, Smart Screens)
• Decrease operational costs by digitalization (No employee)
• Full Customer Customization & Recognition at Shops (Smart Shops)
• Locate in Fitness/Sporting Facilities (Sell gym equipments in gyms within your digital shops)
• Fully integration of warehouses and manufacturing
• Advertisements• Sponsorships• Loyalty Programs
• Social Media• Call Center for
Assistance
VALUE PROPOSITION
CUSTOMER RELATIONS
CUSTOMER SEGMENTS
CUSTOMER CHANNELS
REVENUE STREAMS
COST STRUCTURE
KEY RESOURCES
KEY ACTIVITIESKEY PARTNERS
PROPOSED STRATEGY: BUSINESS CANVAS vs KSF
• Decrease of Operational Costs• Efficient warehousing (smart digital stores)• Increase of sales (digital shopping experience)• Increasing Brand Identity due to the
innovation
• Investment of Digitalization• Outsourcing/Acquisition• New spots for retail stores (rent)
• Digital Shopping Experience (Auto Pay, Digital Fitting Rooms, Smart Screens)
• Decrease operational costs by digitalization (No employee)
• Full Customer Customization & Recognition at Shops (Smart Shops)
• Locate in Fitness/Sporting Facilities (Sell gym equipments in gyms within your digital shops)
• Fully integration of warehouses and manufacturing
VALUE PROPOSITION
REVENUE STREAMS
COST STRUCTURE
Competitive Advantage
Strong Brand Identity
Wide Supply Chain
Financial Position
High R&D of Products
Economies of Scale
Product Portfolio
Key Success Factors
High Operational Efficiency
Increase Perception of Brand
Give Innovative Experiences
Understand Customer
Be everywhere you need to be
Store Data
Customized Data
Sale Trends & KPIs
Retailer Management
Digital Sale Experience
(No Employee)
Store Data
Smart Manufacturing
Wholesale Management
PROPOSED PLATFORM
User Data
Customized Data
Customized Offers
Shopping History
Digital Shopping Experience Customized
Auto-Go-Cabin
Customized Shopping
Auto Recognition of
Customer
Walkout-Auto Payment
Order to Home
Digital Fitting Screens
PLAT
FORM
Consumer Data Collection & Analysis
Retail Store Data Collection & Analysis
Manufacturing & Wholesale Data
CONCLUSION
• Sustain Competitive Advantage
• Increase Profit
• Understand Customer Needs
• Be Innovative and Different
TECHNOLOGY CUSTOMER
COMPETITORSCOMPANY
THANK YOU!
Ismail BAYSAL - Murat ARSLAN - Loretta APPIAH
INTERNALEXTERNAL