The battle of the channels – an outsider’s view –

Daniel Ropers – Managing Director – bol.com

Agenda

12.05 – 12.15 De ambitie van bol.com

12.15 – 12.35 Is ‘the battle of the channels’ al verloren?

12:35 – 12:40 Optioneel: digitale boeken, een paar inzichten

2003

2005

2007

2009

2011

0

50

100

150

200

250

300

350

400

Consumer Sales bol.com in M Euro

bol.com: Famous in NL (& increasingly BE)

2006-2011:

Revenues x4

Largest online shopping site: >150M visits/year

From Books to Baby: >5.5 Mio products offered

>3.5 Mio active customers

bol.com: uitgegroeid tot een verzameling van speciaalzaken

BoekenNederlandsUK/USInternationaal

Dig

itaal

2e h

an

ds e

n

aan

geb

od

en

via

derd

en

Nie

uw

EntertainmentCDDVDSoftware

Klein SCEDigitale cam.Mobiele telefoonsNavigatie

Groot SCETVComputerDVD speler

SpeelgoedTrampolinePuzzelsSchaatsen

KHHKoffieapp.FohnElectrische tandenbor-stel

GHHWasmachineVaatwassersStofzuiger

BabyAutostoeltjeBuggyLuiers

Koken& Tafelen

En nog meer

A quarter of the Dutch population is a regular customer at bol.com

De beste winkel...

Onze definitie van de beste winkel

Biedt maximale keuze in product, prijs, vorm, en beschikbaarheid

Helpt je te kiezen door optimaal aan

te sluiten bij persoonlijke behoefte

Is overal toegankelijk en aanwezig, waar

vraag ontstaat Klant staat centraal

Typical online market share distribution

Market leader

“Also-ran’s”

100+ niche players

Market seems to yield natural monopolies

In the online world, the best get big and the biggest get bigger: fat cats win

The bol.com business model

Awareness, preference, satisfaction

Revenue growth

Economies of scale

Lower pricesImproved service

New servicesMore

marketing

Scale / Knowledge / Brand

A machine that is capable of delivering even more service quality at lower costs

So what?

15

The real impact of online…Transparency!

1 – Customers know what’s available and are able to choose what’s best for them

2 – Opportunities arise in the ‘long tail’ of consumer demand

3 – Revenues and profits in traditional models under pressure

4 – Scale based economies and network effects drive ‘Winner

takes all’ principle

Business opportunities in the ‘long tail’

Market distribution in an intransparent market:Majority of value and demand (>80%) in small portion of the (theoretical) supply

Distribution of demand in a transparent market:50% of value and demand the ‘long tail’ of niche proposition

LOS

T

MA

RK

ET

MARKETOPPORTUNITY

# products, sorted by popularity

# of customers

The ‘long tail’ of information and entertainment

Mass media. Definition: formats targeted at broad audiences, based on ‘one size fits all’-average of reader (and advertiser!) interests)

Larger, online interest segmentsDefinition: specialized but large enough segments to merit regular attention from large groups of readers

UN

DER

PR

ES

SU

RE

ALREADYTHRIVING ONLINE

Interest segments, sorted by popularity

# of interested consumers

ONLINE OPPORTUNITIES

Special interest segments / nichesDefinition: specialized segments that draw attention less frequently and/or from smaller groups of readers

Voorbeelden van online ‘category killers’

Integrated (online) vertical is better for consumers AND advertisers

... that’s relevant for me to get inspired...

... make the right

choice, ...

... allow for an easy

transaction...... and share

my experience with others

They offer all the

informationI need ...

Consumer network effect Advertiser network effect

Double networkeffect

They have the best qualified reach...

... allow me to present adequately what I have

to offer...

... convert directly into

transactions at low cost ...... And to get

instant feedback on the added value

of my offers

… and that attraction is reflected by the advertising rates

Ad

vert

isin

g c

ost

/ con

su

mer

Degree to which the customer is likely to transact

Are we doomed?

No, not if we:

• Face the facts and understand the economic & demand dynamics

• Redefine the definition of market and competition

• Increase scale, save cost, and monetize assets in traditional media

• Increasing the granularity of our view. That will yield plenty of online opportunity in the niches!

• Learn new tricks to grab them!

22

dropers@bol.com@DanielRopers

-Market is developing very fast-Major hurdles for even faster growth:- Supply of titles- Ease of use (DRM)- High prices (VAT!)- One-dimensional commercial model

-Major threat:- Illegal distribution – can be countered if we act now!- Closed systems – lock in of customers in this early stage is bad for everybody- Super-aggressive market development by 1 or 2 parties can create monopoly

-Major opportunity:- Small language area allows for pace setting in developing the market- So far, closed systems not very successful – open system opportunities?- Market is infant, potential is huge!

Some thoughts on digital books