OLIVER WYMAN IBERIA CASE COMPETITION DECATHLON'S NEW HORIZON - OCTOBER 2017 - DOYOUBUZZ
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OLIVER WYMAN IBERIA CASE COMPETITION DECATHLON’S NEW HORIZON OCTOBER 2017 © Oliver Wyman X NueVista
Executive Summary To reach its 2020 targets, Decathlon Iberia should enter new business by promoting and organizing sports events The polarized sports product market is growing steadily with disruptive players and fierce competition. Target consumers value experience more and are willing to buy online • Spanish sportswear market grows steadily at CAGR 2%, rising to 5.15 billion EUR in 2020, while discount textiles has grown rapidly by CAGR 17.9% • The apparel market is polarized and experiencing fast changes with disruptive players. Spanish sportswear market is dispersed with fierce competition • In Spain, more young people participate in sports and they prefer to spend money on experience over purchasing • Nowadays, more apparel sales is generated online globally. In comparison to other major markets, Spain has a rather low online sales proportion and still has a great potential in online sales development Based on the need of increasing profits quickly and current apparel market’s situation, Decathlon Iberia should start promoting and organizing sports events • Organizing three types of sports events can maximize personal experience of Decathlon’s major customers and have a rather low cost to boost Decathlon Iberia’s revenue with several new income sources including registration fee and sponsorship • Online campaign on social medias following the sports events could increase Decathlon Iberia’s presence in target customers, which can boost event participation and sales • By promoting and organizing sports events, Decathlon Iberia could also enhance customer loyalty, thereby increase its digital capabilities and drive its online sales To successfully launch this new business, Decathlon Iberia has 3 stages of implementations: preparation (2017), testing round (2018) and expansion (2019-2020) • In stage 1 (2017), Decathlon will mainly focus on internal preparation, then in stage 2 (2018), Decathlon can launch in 4 major cities as a testing round, and if succeed, Decathlon can expand it to all 10 cities in stage 3 (2019-2020) © Oliver Wyman X NueVista 1
AGENDA
A Understanding of the Project
B Market Analysis
C Strategy and Financial Analysis
D Implementation Plan
© Oliver Wyman X NueVista
Since 2010, Decathlon Iberia has suffered from profits stagnant growth,
and it is now facing the challenge of reaching its 2020 targets
Decathlon Iberia has a 4.4% CAGR in revenue. However, its profits Decathlon Iberia will need an alternative
only increase by 2.8% CAGR annually drive for profits by launching new sports- A
related business. Alternative solutions
Revenue for Decathlon Iberia EBIT for Decathlon Iberia
(2010-2015, EUR million) (2010-2015, EUR million) include:
B
+4.4% +2.8% • Enter the business of promoting
1,895 and organizing events
187
1,662 1,608 1,662 1,742 175 168 166
185 C
1,530 161 - Increase profits from events registration fees
and sales of event-related supplies
- Increase social media presence to promote
online sales
D
• Develop a network of sports
centers in Spain and Portugal
- Increase profits from membership fees and
2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 sales of related sports equipment
- Promote Decathlon’s community-based brand
Decathlon Iberia has also increased its investment in logistics to image and engage with more customers
enable its digital strategy
• Become a provider of sports travel
- Increase profits of travel package and sales of
related sports equipment
Decathlon is expected to strengthen its
- Closely collect customer’s feedback for each
operations in the online channel by
type of sports to improve product features
increasing the size of its largest logistic
center in Spain. The logistic center has
increased its size to 48,000 sqm, aiming to Meantime, in order to keep up with its
increase Decathlon’s online sales capacity. digital strategy, Decathlon Iberia will
also need to focus on online sales.
Source: Decathlon Internal Data, Euromonitor; NueVista Analysis
© Oliver Wyman X NueVista 3To boost its profits within a fair cost in next 3 years, Decathlon Iberia should
enter the business of promoting and organizing events
Enter the business of promoting Develop a network of sports centers in Become a provider of sports travel
and organizing events Spain and Portugal
A
• Event planning and equipment supply • Partnership with local sports centers • Trip organizing
Predicted • Partnership with other companies (Sponsorship, business partner, etc.) • Accommodations and transportations
Cost • Operation and marketing • Maintenance in centers’ facilities • Operation and marketing
B
Revenue in the “Sport Events” in Spain is Fitness market in Iberia has a high penetration Sports travel market is rapidly growing
Market growing rapidly and is expected to show rate with low membership growth, thus the new with CARG 6% and average profit margin
is considerably high
C
Potential an annual CAGR 7.5 %, resulting in a network of sports centers is unlikely to attract
& market volume of 334 USD million by new comers in fitness market.
There are 3 major type of travel:
Feasibility 2020 - Sports Event Tourism (Olympic, World Cup) D
Membership growth
8
"Sport Events" revenue in Spain % - Nostalgia Sports Tourism (Camp Nou)
(2015 – 2020e; USD million) United Kingdom
6 - Active Sports Tourism (Individual
% France participation as leisure activity)
+7.5% Germany Average growth
4 Russia of top 10 markets
334
276 296 316 %
Netherlands However, in Iberia’s market:
254 Turkey
233 2 Italy Sweden - Traveling budget is very limited
% Poland Spain - People tends to seek for professional
0
%
guidance when participating in sports travel
2% 4% 6% 8% 10% 12% 14% 16% 18%
- International sports tourism market is
Penetration rate (% of total population) competitive
2015 2016 2017e 2018e 2019e 2020e
Make profits by charging registration fees Profits can not be estimated directly, but The average profit margin of traveling
Profits and boosting sales of related good the increase of customer participation rate industry is considerably high. For a travel
could be future revenue agency, the profit margin is ~10%
Payback The event can bring instant profits in Network establishment is very time-consuming, Sports travel can have instant high profits,
Period rather short payback period. and instant profits are hard to achieve. and its payback period is generally short
Overall
Rating
Source: Statista, NueVista Analysis
© Oliver Wyman X NueVista 4Spanish sportswear market grows steadily at CAGR 2%, rising to 5.15 billion
EUR in 2020, while discount textiles has grown rapidly by CAGR 17.9%
While apparel and footwear market in Spain remain stagnant, the sales of sportswear increase steadily with 2.1%CAGR,
and is expected to increase at 2% CAGR until 2020 A
Sales of Apparel and Footwear in Spain Sales of Sportswear in Spain
(2011-2016, EUR million) (2011-2020e, EUR million) B
+1.9%
+2.1%
25,031 24,061 24,863
23,504 23,710 24,445 4,786 4,888 4,981 5,065 5,153
4,386 4,497` 4,671 C
4,311 4,289
D
2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e 2020e
The most purchased sports products are textiles, and within the textile sector, the sales grow fast at discounter, with
CARG 17.9% in the past 5 years
Sports products purchased in Spain
(2014; %, by type) Sales growth in Spain within the textile sector
4.0% (CAGR 2012-2016; 2012 sales=100)
9.0% 17.9%
Textiles 4.0%
Water sports items 14.0%
Fitness equipments
Hunting / Fishing 70.0% 5.0% 4.4%
17.0%
Skiing 0.4%
Golf
Discounter Luxury Fast fashion Medium mass
Source: Statista; Eurostat; El Oberbatorio Cetelem
© Oliver Wyman X NueVista 5The apparel market is polarized and experiencing fast changes with disruptive
players. Spanish sportswear market is dispersed with fierce competition
Apparel retail is a polarized market where only high-end Sportswear Market is dispersed, top 10 major
premium and low cost products have bargaining power players occupy less than 40% market share. A
Apparel product portfolio positioning Company Shares of Sportswear in Spain
(2016, %) B
High-end Premium
Sportswear 100%
C
NIKE 15.1%
D
Adidas 11.1%
Decathlon 2.6%
Decathlon is the third
Puma 2.2%
player in this market, but
Professional its market share is way
Luxury Alfico 1.5%
Sports below NIKE and Adidas
Fashion Affordable Sports
Fast Fashion Asics 1.4%
Sports
VF Jeanswear 1.3%
Now players like
PRIMART is disrupting
Wolverine 0.7%
the market by entering
the sports business
Alnisa Sport 0.4%
Skechers 0.3%
Others ~63%
Low Cost
Source: Statista; Eurostat; NueVista Analysis
© Oliver Wyman X NueVista 6In Spain, more young people participate in sports and they prefer to spend
money on experience over purchasing
In general, more people in Spain do sports on a weekly Cycling, Swimming, Hiking, Running and Fitness are the
basis. Young group has the highest participation rate most popular sports in Spain. Decathlon has successfully A
with a high growth covered 10 most practiced sports
Sports Practice on a Weekly Basis in Spain Most practiced sports categories in Spain B
(2010 and 2015; % of surveyed population) (2015; % of surveyed population)
2015 2010 38.7% 38.5% C
31.9% 30.4%
29.0%
46%
TOTAL +4.5% 22.4% 20.0% D
37% 16.8% 14.2%
11.7% 11.3%
Gender
50%
Men +2.1%
46%
Tennis
Basketball
Chess
Football
Body
Paddle
Running
Cycling
Hiking
-Building
Swimming
Gym
42%
Women +7.9%
29%
Age
76% Decathlon Presence
15-24 years +5.6%
58%
In addition, customers concern more on an experience than
on simply buying something
53%
25-54 years +5.8%
• 78% millennials would choose to spend money on an experience or
40%
event over buying something
• 55% say they’re spending more on events and live experiences than
26% ever before
over 55 years +3.2%
22% • 72% say they would like to increase their spending on experiences
rather than physical things in the next year
Source: Ministry of Education, Culture and Sport of Spain; Euromonitor; NueVista Analysis
© Oliver Wyman X NueVista 7More apparel sales is generated online globally. In comparison to other major
markets, Spain still has a great potential in online sales
Globally, E-Commerce platforms (Alibaba & Amazon) play In Spain and other major markets, online sales market
important roles in apparel retail market with high absolute share has increased rapidly. But compare to major A
percentage value growth markets, Spain still has a high potential to grow
E-Commerce vs The World’s Most Dynamic Markets in Apparel and Footwear Online sales market share B
(Absolute Value Growth, USD Billion; CAGR 2011/2016) (2014 - 2016; % over total apparel sales)
CARG (2011/2016) 23.0% C
100 93 80%
Absolute Value Growth
80 21.0%
60%
59 D
60 19.0%
43 40%
40 17.1% 17.2% 17.3%
24
20 14 13 20%
9 7 6
0 0%
China Alibaba US India AmazonRussia Mexico Turkey UK
Group
In Spain, Amazon makes most revenue online and is expected to
be the leader in apparel market in coming years
Top apparel retail online companies by revenues in Spain
(2016)
4.0%
2.5% 3.0%
1.2% 1.2% 1.2%
2014 2015 2016
Source: Euromonitor
© Oliver Wyman X NueVista 8Based on the need of increasing profits quickly and current apparel market’s
situation, Decathlon Iberia should start promoting and organizing sports events
1
• Need to have alternative income, which could Increasing profits with clear
generate high revenue with a rather low cost revenue model and high A
profit margin
• To cope with the fierce competition in apparel Enter the business 2 B
Decathlon Iberia
markets, Decathlon needs to expand its Emphasizing on experience
needs to boost of promoting and
market share rapidly instead of direct sales
profits by 2020 organizing events
C
3
• More millennials participate in sports and they Associating with online
value experience over purchasing campaign to increase
Decathlon’s presence D
In Spain people age from 15 to 54 are more active to participate in sports events, and those who don’t are due to lack of
money and sports options. Decathlon can offer them big marathon and frequent community-based sports events
Share of people who attend sports events Main motivations for not attending in person to sports events
in person in Spain in Spain
(2015; %) (2015; %)
Lack of interest
Comparable
54.7% 55.0% 1.8% Lack of time low entrance • Big Marathon
47.8% 4.9% 1.2% It is expensive fee and higher • Frequent
43.7% frequency
41.2% 7.5% 2.0% 31.3% Preference for watching TV
community-
2.0% based sports
or online Community-
29.1% events
8.8% Lack of what is on offer in based sports
• Online
22.4% the area where they live events are
easy to get registration
Difficulties in getting out of home access • Aim people age
9.1% Don’t have anybody to go with from 15 to 54
18.7% Web registration
21.8% There is a few information and searches
15-19 20-24 25-34 34-44 45-54 55-64 65-74 75+ Difficulties to get tickets
(By age group) Hard to understand
Source: Ministry of Education, Culture and Sport of Spain; NueVista Analysis
© Oliver Wyman X NueVista 91 Organizing three types of sports events can maximize personal experience of
2 our major customers, which could lead to a higher spending…
Event Types Event Details
A
• Marathon
• Organizing cheap(Less than other major marathon events), easy-to-join marathons for running-lovers once a year
• Target people from all ages who could run and is willing to participate in marathons B
• Experience focusing: sense of achievements & participations
Big Major Events:
Marathon & • Triathlon (Swimming, Running, Cycling) C
Triathlon • Combing 3 top favorited sports in Spain
• Organizing medium-sized, less professional triathlon once a year, so that any amateur triathlete could participate in
• Target people who are not professional triathletes D
• Experience focusing: sense of achievements & participations
• Community treasure hunting
• Organized on a monthly basis (start from once a month)
• Participants sign up and compete as teams, through entertaining activities the winning team will discover treasure
offered by Decathlon
Community- • Mainly target ages from 12 to 35 years old
based • Experience focusing: participations, community bonds
high frequency
sports events • Family community sports activities
• Organized on a monthly basis (start from once a month)
• Designing events like mini-Olympics for families, attracting more busy dad and mom to participate in sports
• Mainly target parents from 25 to 50 years old with their kids
• Experience focusing: Children development, family bonds
• One day hiking group
Group Sport • Organized on a bi-monthly basis (start from twice a month and gradually increase the frequency based on needs)
Events: • Calling for participation to a day trip on hiking or mountain sports, designing the routes for participants
Hiking & • Target people over 15 years old, photographers and adventurers
Mountain Sports • Experience focusing: sense of achievements, nature experience
Source: NueVista Analysis
© Oliver Wyman X NueVista 101 … and can also have a rather low cost to boost Decathlon Iberia’s revenue
2 with several new income sources
Major Revenues and Costs for organizing three types of events in Iberia Monthly Revenue & Cost Evolution of
Decathlon after entering new business A
Major profits* Major costs* (2018-2020e; EUR Million)
• Marathon • Marathon
Monthly Revenue Monthly COGS B
• Registration fee (60€, as the • Operations (HR and marketing)
cheapest official marathon offered • Food and beverages for participants Monthly Cost Monthly OPEX
in Spain) • Marathon facilities
1.8 C
Zurich Barcelona Marathon
has over 20,000 participants
with a 70€ registration fee
• Triathlon (Swimming, Running, Cycling) • Triathlon (Swimming, Running, Cycling) 1.5
D
• Registration fee (Early bird 200€, • Operations (HR and marketing)
Regular price 250€) • Food and beverages for participants
Ironman has 1600 • Triathlon facilities
participants with ~250€ fee • Insurance fee 1.2
• Community treasure hunting • Community treasure hunting
• Registration fee (Individual: 25€, • Operations (HR and marketing)
Group: 22€) • Prizes and gifts for final competition 0.9
• Related apparel & equipment’s sales winners
• Family community sports activities • Family community sports activities
• Registration fee (50€/kid, parents are • Venue fee
free to join) • Operations (HR and marketing) 0.6
• Related equipment’s sales • Related facilities
• Partner advertisement fee (200€ for • Prizes and gifts for final competition
each booth) winners
0.3
• One day hiking group trip • One day hiking group trip
• Registration fee / Group trip fee • Operations (Guide & transportation）
(45€ per person) • Food and beverages for participants
• Related equipment's sales • Insurance 0.0
Year 1 Year 2 Year 3
* More information can be found in the Excel file attached
Source: Desktop Research; NueVista Analysis
© Oliver Wyman X NueVista 11Financial projections for all sports events
Given all three types of event, Decathlon Iberia is expecting to have over 49 million EUR revenue in the next 3 years,
with a net profit of 16.6 million EUR*
Account(€) Y1 - 2018 Y2 - 2019 Y3 - 2020 Total A
Revenue from event 1 4,237,500 5,085,000 6,102,000 15,424,500
REVENUE Revenue from event 2 3,048,000 3,048,000 3,048,000 9,144,000
Revenue from event 3 6,480,000 8,100,000 10,125,000 24,705,000
B
Total revenue 13,765,500 16,233,000 19,275,000 49,273,500
Total cost for event 1 684,000 787,400 911,480 2,382,880
COGS Total cost for event 2 1,032,000 1,032,000 1,032,000 3,096,000
C
Total cost for event 3 2,764,800 3,456,000 4,320,000 10,540,800
Gross profit 9,284,700 10,957,600 13,011,520 33,253,820
Staff 975,000 975,000 975,000 2,925,000
D
OPERATING EXPENSES Facilities&office 400,000 393,000 393,000 1,186,000
General 1,780,000 1,780,000 1,780,000 5,340,000
EBITDA 6,129,700 7,809,600 9,863,520 23,802,820
DEPRECIATION &
Depreciation&amortization 0 0 0 0
AMORTIZATION
EBIT 6,129,700 7,809,600 9,863,520 23,802,820
Interest expenses 0 0 0 0
Interest &Tax
Tax 1,838,910 2,342,880 2,959,056 7,140,846
Net profit 4,290,790 5,466,720 6,904,464 16,661,974
In terms of margin and ROI analysis, business of organizing sports events will have better performance than in 2015
Analysis Definition Y1 - 2018 Y2 - 2019 Y3 - 2020 Decathlon 2015
Gross margin Gross profit/Revenue 67.45% 67.50% 67.50% 35.80%
EBIT margin EBIT/Revenue 44.53% 48.11% 51.17% 9.70%
Net profit margin Net profit/Revenue 31.17% 33.68% 35.82% 7.00%
Analysis Definition Y1 - 2018 Y2 - 2019 Y3 - 2020 Decathlon 2010 – 2015
Gain from investment/
Return on investment 28.61% 36.44% 46.03% ~40%
total investment
* More information can be found in the Excel file attached
Source: NueVista Analysis
© Oliver Wyman X NueVista 123 Online campaign for the sports events can reinforce Decathlon Iberia’s
presence in target customers, and boost event participation and product sales
The major audience of social medias age from 18 to 45, and they tend to Follow-up social media campaigns and
share information and participate in virtual campaigns other usages could be created to help A
In general, there are 54% Spanish Social network users in Spain promoting and organizing sports events
(2015 2020e; Million) 22.29
participate in social networks. In addition, 21.32 21.79
Sports events sharing
20.84 B
users are increase steadily. Most active 19.88
20.36
- Content: Participants can upload their photos or
social media users age from 18 to 45,
videos on social media to share their experience
covered our preliminary target audience
- Satisfying the passion for social sharing
2015 2016 2017e 2018e 2019e 2020e
- Encouraging more potential clients to participate in
C
Frequently carried out activities on social networks by users in Spain Decathlon’s sports events
(2016; %) - Drive online sales by increasing online shop visitors
79% Chat/send messages D
57% Watch videos/listen to music
48% See that contacts are doing Online sports tracking platform
36% Publish content
36% - Content: Participants are able to track their progress
Follow influences
31% Professional purposed/study and compete with their friends to people nearby
29% Commenting current affairs through Decathlon App or official website
Needs
26% Online games - Satisfy their need of participating in virtual
Sharing information 23% Follow brand campaigns
23% Get to know people - Encouraging more potential clients to participate in
Participating in 23% Take part in competition Decathlon’s sports events and online competitions
virtual campaign 19% Take about products - Increase online customer stickiness by expanding
16% Buy/sell to contacts Decathlon’s online services
Both 14% Interact with others nearby
14% Contact brand customer service
With higher presence in social medias, Decathlon can develop more campaigns for more exposure, such as:
#myDecathlonSports #ExerciseWithDecathlon #DecathlonFitnessChallenge
- Encourage clients to upload Invite fitness related Key Opinion Leader to post fitness tutorial, invite - Develop online campaigns for followers to invite
sports videos, then repost by subscribers to follow the instruction and express their opinions their friends and to complete a short term fitness
Decathlon official account Connecting social network to Decathlon website. Build sports blog, contest together.
fitness experience sharing to transfer Decathlon from online shopping - Users gain more motivation and feel more
website to integrated lifestyle sharing portal connected to their friends
Source: IAB Spain; Statista; NueVista Analysis
© Oliver Wyman X NueVista 13Case study: Decathlon UK successfully launched its sports series and
attracted more local people to participate in sports events to drive sales
Decathlon UK started its sports series project from 2011, started with family Decathlon UK has a higher CAGR in
fun day, then gradually changed to sports series events including running, sales compared to industry average A
hiking and fitness, they are also working on horse riding and cycling. Decathlon UK Sportswear Sales
(2011 - 2016; GBP Million)
B
+13.8% 60.6
55.1
50.6 C
44.3
37.3
31.8 D
- As part of a UK wide initiative, the Decathlon Sports Series will be staging a host of 5k and
10k running events, aiming to increase participation in running, whilst creating a sporting
occasion to add to the calendar by bringing together the local community
2011 2012 2013 2014 2015 2016
- All Decathlon Sports Series events are free and exclusive for Decathlon Card holders, where
each participant will receive a Sports Series Goody Bag and Medal at the end of the race. In Sportswear Sales in UK
order to register for Decathlon Card, one need to submit related data and sports interests online, (2011 - 2016; GBP Million)
so Decathlon UK could also gather users’ information to improve their sales strategy
+7.6% 6,828
6,279
As the sports series involve more and more participants, some bloggers 5,692
5,293
voluntarily joined the campaign of “Decathlon Bloggers Community” to 4,727
4,989
share their experience on “Sports for All”
The group is formed of some of the UK’s most influential
Fitness and Sports Bloggers brought together to form the
awesome #DecathlonBloggersCommunity by Decathlon UK
2011 2012 2013 2014 2015 2016
Source: Decathlon UK website; Euromonitor; NueVista Analysis
© Oliver Wyman X NueVista 14By promoting and organizing sports events, Decathlon Iberia could also
increase its digital capabilities and drive its online sales
Currently, Decathlon Iberia, as a top-ranked e-commerce website, doesn’t work efficiently. With 4.8 million site visitors
every month, only few users were successfully converted to Decathlon’s customers A
Registered Engaged • Low registration rate: only 8% of
Visitors Buyers website visitors would registered online
B
4.8 million 8% 1.2%
6% • Low engagement rate: only 6% of
registered user would select items online
C
Anonymous Unengaged Abandoned • Low payment rate: only 1.2% active
-92% -94% -98.8% users would make the payment
D
Updated Online Customer Journey (Website based e-commerce)
Visitors Users Active User Buyers Promoters
Registered Engaged Paid Engaged
• Sports events • Making sports events • By recommending events • With specific needs
• With online sports
could attract new registration online could to related apparel and – to participate in
tracking platform, user
website visitors significantly increase the equipment, registered certain event –
experience could be
• With higher registration rate users could engage with users are more
tracked and analyzed
exposure on social • User data can be collected more product selections likely to purchase
to increase their
media, more new during the registration • User preference could be from Decathlon
satisfaction rate
visitors could also process to improve recorded and be applied
be introduced to Decathlon’s portfolio to improve customer
official website purchasing experience
Source: Guesswork; Statista; NueVista Analysis
© Oliver Wyman X NueVista 15To launch this new business, Decathlon Iberia has 3 stages of implementations
from 2017 to 2020
Stage 1 - Now~ 2017 Stage 2 - 2018 Stage 3 - 2019~2020 A
Preparation Testing round Expansion
Goal Internally prepared for Launch in 4 major cities – Madrid, Gradually launch in all 10 selected B
launching this new business Barcelona, Valencia and Lisbon cities based on performance
C
• Market research • Recruiting & training • Performance evaluation
• Organizational structure • Content design • Recruiting & training
adjustment (Internal and • Event planning (Including venue • Content design D
Main external recruiting) selection, budgeting etc.) • Event planning (Including venue
Operations • Content design • Partnership development selection, budgeting etc.)
• Event planning • Marketing promotion (Online and • Partnership development
• Partnership development offline) • Marketing promotion (Online and
offline)
• Triathlon in June • Triathlon in June
• Marathon in October • Marathon in October
Events N/A
• Other events will be held on • Other events will be held on a
Information
a regular basis regular basis and increase
frequency based on performance
• Prepared for related • Establish connection between • Continue to connect events and
online sales support, events and online sales by online sales
Others including website design, providing selected items for • Collect data from participants to
social media campaign participants, related social media improve product design and future
campaigns event implementation
Source: NueVista Analysis
© Oliver Wyman X NueVista 16You can also read
