1. >>APMG 8119: DIGITAL ENTERPRISE REPORT PREPARED FOR: (Mariia, Deepthi, Alexi & Shriram) POSTGRADUATE DIPLOMA IN BUSINESS APMG 8119: DIGITAL ENTERPRISE 2015

2. >>APMG 8119: DIGITAL ENTERPRISE CONTENT Global Trends in Retail Market Space Countdown TodayDigital Business ModelEmerging Digital Model

3. >>APMG 8119: DIGITAL ENTERPRISE Global Trends in Retail Market Space  Online Grocery business is much less profitable than in-store retailing (PWC, 2014)  Even in developed e-commerce markets like UK online grocery shopping is just 6% of the grocery spending in 2014 (PWC, 2014).  We’ll buy 25% of our groceries online in 10 year (Rabobank, 2015)

4. >>APMG 8119: DIGITAL ENTERPRISE Countdown Today Owned by the Woolworths Limited it has 230 Supermarkets Across New Zealand including 59 Franchise Store. 18000 team members. 102 stores providing “Click & Collect” Services. 4 Dry Grocery & 3 Fresh product distribution centre, 2 Meat & 1 Sea food processing plant and 1 central office. Hub to Store travel is 17 Million Km per year, making over 250,000 deliveries.

5. >>APMG 8119: DIGITAL ENTERPRISE Ranking based research – (First Digital,2015) Countdown weekly online orders – 20000 i.e. 1.04 Million yearly orders

6. >>APMG 8119: DIGITAL ENTERPRISE Digital Business Model – (KPMG International,2009). COST REVENUE

7. >>APMG 8119: DIGITAL ENTERPRISE Digital Convergence Equalizer – (KPMG, 2009) DIGITAL CONVERGENCE EQUALIZER – (KPMG, 2009)

8. >>APMG 8119: DIGITAL ENTERPRISE Countdown Digital Customer Segmentation Double Income No Kids Singles Younger than 40 High Income With Children (Countdown, 2015)

9. >>APMG 8119: DIGITAL ENTERPRISE Countdown Revenue – Woolworths Limited, Annual Report - 2014 PARTICULARS FY’14 ($ Million) % Store Sales ** 552996% Online Sales * 2084% Delivery Charges * 6- TOTAL SALES5737100% * (Stuff.co.nz, 2015) ** (Countdown, 2015)  96% of revenue  selling >20000 products in its brick and mortar store.  Countdown has been offering online shopping to customers for >20 years. Online sales contributes to only 4% of overall sale equivalent to 4 stores.  Delivery charges though a part of the revenue it is one of the biggest reason for online sale not picking up.  19% of the online sales is from the Click & Collect model (Capgemini, 2014)

10. >>APMG 8119: DIGITAL ENTERPRISE Countdown Cost – Woolworths Limited, Annual Report - 2014 PARTICULARS FY’14 ($ Million) % Cost Of Goods Sold ** 437981% Salary Cost63012% Cost Of Doing Business ** 3355% Advertising Cost832% Total Cost5427100% * (Stuff.co.nz, 2015) ** (Countdown, 2015)  81% of cost pertains to procurement of goods sold, only way to reduce the same is by increasing the volume. Salary is average $35000 p.a. for its 18000 employees.  Cost of doing business pertains to Running Stores, Energy, Rent, IT & delivery of goods from Hub to stores.  Advertising cost of $82.63, includes digital medium.

11. >>APMG 8119: DIGITAL ENTERPRISE Countdown Profit & Loss – Woolworths Limited, Annual Report - 2014 PARTICULARS FY’14 ($ Million) % Sales5737 Cost Of Goods Sold437976% Gross Margin135824% Other Costs104818% EBIT3105% (% Of Sales)  Countdown works on a high volume low margin model.  They have extended the “mass convenience” value proposition offered in-store to the online experience: same range, same prices, and same promotions.

12. >>APMG 8119: DIGITAL ENTERPRISE Finding Profits In Complexity Sweet Spots – (MIT, 2014) Do Countdown Customers buy from competitors? Why? – Low Product Complexity & Convenience or Less Process Simplification Is there work that Countdown Customers do which Countdown can do? Yes. Shop & Deliver Convenience is Important, but quality, assortment and price matters tremendously

13. >>APMG 8119: DIGITAL ENTERPRISE Heading Here Indent once for subheading Indent twice for body text Body text continues Outdent back to subheading Indent to continue body text EMERGING DIGITAL MODEL - COUNTDOWN

14. >>APMG 8119: DIGITAL ENTERPRISE Customer Segment & Revenue Model Focused Broad Focused Scope Of Shopping Trip Target Consumer Segment Basic Stock-Up Service Mass Convenience Pre-Defined Shopping basket Premium Convenience Basic Staple Goods at regular Intervals with a very low delivery cost to start with E.g. Easy to prepare meals each week Premium Products not available in Store. Consumer are willing to pay higher. Click & collect, Pick-up at central location, Office Delivery, Find a Pick-up (Uber). PRICING MODEL

15. >>APMG 8119: DIGITAL ENTERPRISE Finding Profits In Complexity Sweet Spots – (MIT, 2014) Increase online product assortment Allow customers to form communities Improve search capabilities Add Location based service Personalized login page Improve mass convenience by adding more click & collect locations Implement modern mobile applications Improve customer convenience by offering office delivery or customer pick up Offer more bundled services which will improve customer convenience & revenue

16. >>APMG 8119: DIGITAL ENTERPRISE Post 10 Year Value Proposition DIGITAL CONVERGENCE EQUALIZER – (KPMG, 2009)

17. >>APMG 8119: DIGITAL ENTERPRISE Theoretical Implication: -KPMG Digital Business Model provides a structured approach to developing digital strategy. -Digital Convergence Equalizer is an excellent device for identifying key value proposition which is critical for any organization to succeed. -MITs complexity sweet spot helped in devising a futuristic plan by increasing product variety while maintaining process simplicity. Managerial Implications: -Replicating Mass Convenience model from offline to online is not enough. -Digital equalizer can be used to identify its key value proposition and improving the same -New Revenue Model options will help increase its sales volume and overcome high fixed store operating cost. -Improve its complexity sweet spot by increasing its product assortment and further simplifying the delivery process.

18. >>APMG 8119: DIGITAL ENTERPRISE References: Agriland. (2015). We’ll be buying 25% of our groceries online in 10 years new report says. Retrieved from http://www.agriland.ie/farming-news/well-be-buying-25-of-our- groceries-online-in-10-years-new-report-says/http://www.agriland.ie/farming-news/well-be-buying-25-of-our groceries-online-in-10-years-new-report-says/ First Digital. (2015). Groceries Online Report – NZ SEO Reach. Retrieved from http://www.firstdigital.co.nz/blog/2015/03/24/groceries-online-industry-report-nz/ http://www.firstdigital.co.nz/blog/2015/03/24/groceries-online-industry-report-nz/ KPMG. (2009). Emerging Business Models to Help Serve Tomorrow’s Digital Tribes. Retrieved from https://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/e merging-business-models-O-0906.pdf https://www.kpmg.com/CN/en/IssuesAndInsights/ArticlesPublications/Documents/e merging-business-models-O-0906.pdf Massachusetts Institute Of Technology. (2014). Revisiting Complexity in the Digital Age. Retrieved from http://mitsmr.com/1pcP4Knhttp://mitsmr.com/1pcP4Kn PWC. (2014). Click and Cash How to profit in Online Grocery Shopping. Retrieved from http://www.strategyand.pwc.com/media/file/Strategyand_Click-and-cash.pdf http://www.strategyand.pwc.com/media/file/Strategyand_Click-and-cash.pdf Stuff.co.nz. (2015). Online Grocery Shopping is beginning to click with Kiwis. Retrieved from http://www.stuff.co.nz/business/money/70321955/Online-grocery-shopping-is- beginning-to-click-with-Kiwis

19. >>APMG 8119: DIGITAL ENTERPRISE References: Stuff.co.nz.(2014). Click, Collect? The retailers fighting back. Retrieved from http://www.stuff.co.nz/dominion-post/business/9725676/Click-collect-The-retailers- fighting-back http://www.stuff.co.nz/dominion-post/business/9725676/Click-collect-The-retailers- fighting-back Strategyzer. (2015). The Business Model Canvas. Retrieved from http://businessmodelgeneration.com/canvas/bmc?_ga=1.213998992.645013967.1 441919694 http://businessmodelgeneration.com/canvas/bmc?_ga=1.213998992.645013967.1 441919694 Strategy-Business. (2013). What if Clay Christen is right about the gorcery business (and Amazon is wrong)?. Retrieved from http://www.strategy- business.com/blog/What-if-Clay-Christensen-Is-Right-about-the-Grocery-Business- and-Amazon-Is-Wrong?gko=58cde%20-http://www.strategy- business.com/blog/What-if-Clay-Christensen-Is-Right-about-the-Grocery-Business- and-Amazon-Is-Wrong?gko=58cde%20- The Guardian. (2009). Digital Tribes. Retrieved from http://www.theguardian.com/digital-tribes/interactive/digital-equaliser http://www.theguardian.com/digital-tribes/interactive/digital-equaliser Woolworths Limited. (2014). Annual Report 2014. Retrieved from http://www.woolworthslimited.com.au/annualreport/2014/index.html http://www.woolworthslimited.com.au/annualreport/2014/index.html

20. >>APMG 8119: DIGITAL ENTERPRISE References: Woolworth Limited. (2015). Woolworth Strategy. Retrieved from http://ausfoodnews.com.au/2015/05/06/woolworths-announces-new-strategies-to- win-over-grocery-shoppers-afn-reveals-full-detail.html http://ausfoodnews.com.au/2015/05/06/woolworths-announces-new-strategies-to- win-over-grocery-shoppers-afn-reveals-full-detail.html

21. >>APMG 8119: DIGITAL ENTERPRISE THANK YOU

22. >>APMG 8119: DIGITAL ENTERPRISE The Business Model Canvas – (Strategyzer,2015).

23. >>APMG 8119: DIGITAL ENTERPRISE Value Proposition Contd… (Strategy + Business, 2013) -Shopping occasion’s cut across traditional customer segmentation, it can be Top-Up or Fill-In & Stock-Up -In next few years as grocery business will cater to larger % of Stock-Up needs Countdown can concentrate on the same.