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