internet retailing
DESCRIPTION
Mikael Olander, CEO CDON Group. MTG Capital Markets Day 2010TRANSCRIPT
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 1
2010 Capital Markets Day
Mikael Olander, CEO CDON Group
Internet Retailing
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 2
Where do you put your money?
Indexed growth
performance2003–2009
Swedish retail sector
Swedish internet retail
CDON Group
So
urc
e:
Ha
nd
eln
s U
tre
dnin
gsin
stitu
t H
UI
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 3
Background
Segments and brands
Fashion
NELLY.COM
LINUSLOTTA.COM
Health &Sports
GYMGROSSISTEN.COM
BODYSTORE.COM
Entertainment
CDON.COM
BOOKPLUS.FILEKMER.SE
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 4
What is bought online?
1. Clothes/shoes 46 %
2. Home electronics 39 %
3. Movies and music 25 %
4. Books 24 %
5. Home decoration 9 %
6. Sports- and leisure 5 %
7. Cosmetics and hair-care 4 %
8. Food 4 %
Background
Positioned in the largest segments
So
urc
e:
Po
ste
n N
ord
en 2
01
0
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 5
Cdon.comCdon.com is the Nordic online market leader on DVD’s,
games, CD’s and entertainment. Primary target group is men/women 18-45. Main online competitors are Ginza.se,
Webhallen.se, Adlibris.se and Coolshop.dk
Nelly.comNelly is the Nordic online market leader on fashion in the
target group women 18-35. Main online competitors are Bubbleroom.se, and Asos.com
Gymgrossisten.comGymgrossisten is the Nordic market leader, on- and off-line, in sports nutrition. Primary target group is men 18-35 that work-out +4 times/week
Background
Competitive position
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 6
Background
Tripled sales in four years
Starting in 1999 with Cdon.com selling CD’s in the Scandinavian countries the last decade has been characterized by significant organic growth, launch of new product lines, geographic expansion and e-commerce acquisitions.
Maximizing sales on each siteAggressively expanding assortment and adding new product groups
Pan-Nordic rollout utilizing the Internet Retailing setupCdon.com and Nelly.com are Pan-Nordic today
Expanding the product portfolio through acquisitionsBought three companies in 2007, one in 2008 and one in 2010
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 7
Background
Timeline – key events
1999
Founding of CDON.com as an
online record store within MTG in
Sweden, Norway and Denmark
1999 2000 2003 2004 2005 2006 2007 2008 2009 2010
2000
New stores for DVD movies
and computer games
launched as well as launch in
Finland
2003
Swedish bookstore
launched
2004
CDON.com is first to launch a
Nordic online digital music store
2005
Mobile phones and consumer
electronics store launched
2006
Digital movie-rental store
(VoD) added
2007
Mp3 bookstore
launched
2007
Acquisition of Nelly.com
Acquisition of LinusLotta.com
Acquisition of BookPlus.fi
2008
Downloadable PC games store, merchandise
store and Norwegian bookstore launched
2008
Gymgrossisten.com and Bodystore.com
acquired and rolled out in Norway
2008
Pan Nordic roll-out of Nelly.com
2010
Acquisition of Lekmer.se
2009
Integration of BookPlus.fi in
CDON.com, expansion of
Fashion’s and Health &
Sports’ private label offerings
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 8
Background
Sales and EBIT development (TSEK)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
2005 2006 2007 2008 2009
Health & Sports
Fashion
Entertainment
EBIT
+25 %
+23 %
+41 %
+36 %
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 9
Health
& S
port
sE
nte
rtain
men
t 76
Sales 2009: SEK 1,337m
Growth: 26 %
EBIT 2009: SEK 93m
Sales 2009: SEK 203m
Growth: 157 %
EBIT 2009: SEK 6m
Sales 2009: SEK 213m
Growth: 47 %
EBIT 2009: SEK 26m
Background
Sales by segment and market
%Share of CDON Group sales
Norway
Denmark
Sweden
Finland52
15
24
9
Fash
ion
12
12
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 10
Business model
Growth platform
Get big fast
Synergies of scale leads to a
positive sales spiral increasing
our competitive advantage
building barriers of entry
All segments within Cdon Group
shall have potential to reach
market leading positions and
correspond to the entertainment
segment in revenues.
Larger volumes
Lower costs
Customer
benefits
Larger
volumes
Lower costs
Customer
benefits
Larger
volumes
Lower
costs
Customer
benefits
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 11
Business model
Scale impact on cost structure
CDON Group cost drivers
72 % Cost of goods sold
13 % Direct selling costs (postage, fulfilment, bank&cc
and bad debt)
6 % Marketing & IT
8 % Organisational (salaries, rent, admin)
1 % Other opex
Vari
ab
le c
osts
Fix
ed
co
sts
85 %
15 %
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 12
Business model
Focus areas
Ny bildUnique reach
Three focus areas that sets us apart from our competition
are our:
• Mass marketing through Internet and TV advertising,
driving sales and building brand awareness. MTG’s
channels are our preferred choice but also working
with TV4, Pro7 and WSOY media group (Finland)
• Huge cross sale and CRM potential in two million
active customers
• Best in class in-house SEO/SEM competence
Nordic brand awareness
General share of all 18-47 year old that know either brand, ranging from ’heard
of’ to ’know very well’
Cdon.com 95 %
Nelly.com 64 %
Gymgrossisten 46 %
YouGov, Oct 2009
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 13
Aggressively grow existing brands Grow existing brands by concept development and product range expansion
Example:
Private label collection
Launched 2008. It nowconstitute approximately
20 % of total sales
Business model
Strategy
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 14
Geographical roll-outGrow existing brands by geographic roll-out
Business model
Strategy
Example:
Lekmer to launch Pan-
Nordic in Q4, 2010
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 15
Acquire new brandsContinued growth through CDON Group growth vehicle, utilizing existing
infrastructure, through acquisitions and inhouse start-ups
Example:
Acquired in 2010. Broadening ofassortment in progress, Pan-Nordic
roll-out to be executed this year. Scale-synergies with IT-platform migration, postal and payment
agreements, group marketingetc. initiated
Business model
Strategy
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 16
Internet retailing
Large and growing market
Large marketThe Nordic online retail market is valued at SEK 61 billion, corresponding to approximately
3,8% of the total retail sales in 2009
Untapped potentialThe penetration in more mature markets like the US is more than 50% higher than in theNordics1. Posten Norden expects the total Swedish distance retail market to double in the
next five years
So
urc
es:
1. Sw
ed
ish
Re
tail In
stit
ute
HU
I, P
ost
en
No
rde
n,
an
d F
orr
est
er
Re
sea
rch
6.0%
4.7%3.8% 3.7% 3.5% 3.4%
0%
2%
4%
6%
8%
US Denmark Nordic avr. Sweden Norway Finland
Online Retail Penetration 20091
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 17
• E-commerce is growing explosively
• Acquisitions are successfully integrated combined
with strong organic growth
• Posting record sales and EBIT in 2009 and Q1, 2010
The most powerful e-commerce company in the
Nordic region is poised for continued fast and
profitable growth!
Summary
Conclusion
Modern Times Group MTG ABNasdaq OMX Stockholm : MTGA, MTGB 18
2010 Capital Markets Day
Mikael Olander, CEO CDON Group
Internet Retailing