Mark Ward, Officeworks

Officeworks “Every Channel” Retailing

Online Retailer Conference

March 16/17

1

Our History Key Milestones

First ‘big box’ Officeworks store opened

in Richmond

Officeworks acquires Viking

Officeworks Online & Viking become

Business Direct

Wesfarmers acquires Officeworks

Officeworks acquires

Harris Technology

Our History Circa 1993

• Proposal for a chain of low price warehouse style office supplies outlets

• Opportunity to rationalise a very unstructured market, and take a substantial

market share

• Exploit concept and formula which has proven successful in the US Market

• Profitability depends upon economies of scale – no current competitor seems

willing to invest required funds

• Proposal covers 60 stores over five years

Our History Original Strategy

Established as a ‘category killer’

• ‘Big box’ stores

o One stop shop

• Wide range

• Low prices everyday - guaranteed

• Primarily focused on B2B customers

o ‘Taking Care of Business’

Our History

Store network by size 1994 - 2007

Total

Stores 1 4 10 20 28 35 48 53 60 71 83 92 100 113

3 3 6 6 7 10 10 12 12 12 12 12 12 1 1 7

14 21

24

33 35 39 43 43 43 44 43

1 3

4 5

6

10 18

26 30

38

1

1 1

1

2

3

3

6

11

2

2

4

7

8

8

9

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Extra Large > 1800m2 Large 1350m2 - 1800m2 Medium 1000m2 - 1350m2 Small 600m2 - 1000m2 Extra Small 300m2 - 600m2

Our History Store Layout

1994 2007

Our History Channel Sales Split 2007

Stores 87%

Phone/Fax 6%

Online 6%

Our History Circa 2007

Customer & team trust eroded over time

• Pricing Trust – Channel Conflicts

• Poor in Stock Position

• Lack of ongoing investment

• Store look & feel compromised

• Event focused trading calendar

Changing customer

• Online shopping

• Technology savvy

• Value focused

1 Market Size 2012 (2012 – 2014 Office Products in Australia, Penfold Research) 2 Officeworks estimate.

Addressable

market

>$30.3bn2

• Technology

• Advanced Print & Copy services

• Other business services

• Commercial furniture

• Print & Copy services

Total office products market1

$11.8bn

FY08 – FY12

CAGR

(1.9)%

FY12 – FY14F

CAGR

(1.7)%

Core office

products

market

$6.9bn

• Writing instruments

• Paper, pads & books

• Labels, envelopes &

mailroom

• Computer

consumables &

accessories

• Presentation products

• Business machines

• General office supplies

• Filing products

(2.3)% (4.5)%

Non-core

office products

market

$4.9bn

• Kitchen supplies

• Cleaning & janitorial

• Office furniture

• Printing services

• Promotional products

• Work wear

• Packaging supplies

(1.3)%

2.2%

Office Supplies Industry Market Size & Growth

• Office Supplies Market - flat

• Addressable market >$30 billion

• Business lacked uniqueness

• Fragmented, rapidly changing competitive environment

• More technology savvy, value conscious consumer

• Challenging trading conditions during financial crisis

• Price deflation, a new reality

Office Supplies Industry Market, Environment & Officeworks

Lowest Prices Everyday

• 5% price guarantee

Widest Range

• From generalist to specialist

Great Service/s

• Multiple channels to market

o ‘Every Channel’ capability

o Seamless shopping experience

Officeworks Strategy 2008

• Great Service & Services

• Immediacy of Purchase

• Convenient locations

• Ability to showcase range

• Easy access & parking

• Long trading hours

• Click & collect

• Interactivity / “how to” classes

• Customer focused returns

Every Channel Approach Stores Uniqueness – A Compelling Offer for Customers

• Kids Club & kids area

• Community involvement

• Meeting rooms

• Free in-store Wifi

• Customer Accounts

• Special Orders

• Assembly

3 3 6 6 7 10 10 12 12 12 12 12 12 12 8 10 17 21 22 23 22

1 1

7 14

21 24

33 35 39 43 43 43 44 43 43 52 53

55 56 59 62 66

1 3

4 5 6

10 18

26 30

38 41 44

45

43 41

45 44

44

1

1 1

1 2

3

3 6

11 19

20 20

20 20

21 21

23

2

2

4

7

8

8

9

11 4 5

4 3

3 2 1

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Extra Large > 1800m2 Large 1350m2 - 1800m2 Medium 1000m2 - 1350m2 Small 600m2 - 1000m2 Extra Small 300m2 - 600m2

Every Channel Approach Store Network by size 1994 – 2015

Total

Stores 1 4 10 20 28 35 48 53 60 71 83 92 100 113 126 128 133 139 141 150 152 156

Wesfarmers

acquisition

Every Channel Approach Store Layout 2007

Every Channel Approach Store Layout 2015

• 24/7 Convenience

• Ease of Navigation & Purchase

• Personalisation

• Same day / next day delivery

• Free delivery

• No hidden fees

• Mobile sites

• Online & in-store stock visibility

Every Channel Approach Online Uniqueness – Making Digital as Strong as Physical

• Extended product range

• Detailed product specifications

• Multiple product images

• Articles and video content

• Easy returns

• Tailored websites

• Social media

And a compelling online offer

2016 2007

2010 Advertising

21

Local area marketing press

Advertising 2010 ‘We refuse to be beaten on price TV ad’

22

Student journey

Home workspace

Medium business

Home work School

office

Small micro

business office

DIFM

DIY

Every Channel Approach What we are trying to do?

Traditional

media

Store team

members

Digital

media

Internet

Apps

Social

media

B2B sales

reps/account

managers

Call centre

team members

Stores

Online Phone

/fax

Officeworks Strategy Customer First - Anywhere, Anyhow, Anytime

• Seamless customer experience

• Ongoing investment

o New stores & formats

o E-Commerce investments

o Call centre optimization

o New avenues to market e.g. eBay

• Providing inspiration, innovation & differentiation to:

o Products & Ranges

o Service & Services

• Shift from functional to inspirational

• Sourcing best quality at lowest prices

• Exclusive distribution of new brands

• Balance of private and national brands

Officeworks Strategy Adding ‘Want’ to ‘Need’

26

Customer Engagement 2014 ‘Grow up TV Ad’

27

Customer Engagement 2015 Embrace your inner artist – April Catalogue

Social

Media

B2B Sales Reps /

Account

Managers

Traditional

Media

Store Team

Members

Internet Call Centre

Team Members

Apps

Digital

Media

Ch

ann

el Ag

no

stic Cu

stom

er En

gag

emen

t

Our competitive advantage

– anywhere, anyhow, anytime

Officeworks’ every channel strategy is there are no

channels

The line between shopping online and in-store is no longer a

line at all, it has simply become shopping

From channel driven to customer driven experiences

Traditional

media

Store team

members

Digital

media

Internet

Apps

Social

media

B2B sales

reps/account

managers

Call centre

team members

Stores

Online Phone

/fax

Customer First Approach

- Anywhere, Anyhow, Anytime

• Seamless customer experience –

‘making it easy’

• Innovating as an every-channel

retailer

• Extending our reach

We make complex things simple by making sure every

experience is useful, easy and engaging

MAKES TAX TIME

Engaging EMAIL RECEIPT

Easy PRINTED RECEIPT

Useful

Innovating as an every channel retailer

• Expanded offer across categories

• International and Private brands

• Shift from functional to inspirational ranging -

Adding “want to need”.

• Market leading Print & Copy offer

• 3D printing

• Products to services eg: Mailman

Extending our reach

• New store formats

• eBay store

• Business Specialists

– In store

– Over the phone

– On the road

37

1 Penfold Research, Office Products market update Report, 2015 2 Officeworks estimate.

Addressable

market

>$50bn2

• Technology

• Advanced Print & Copy services

• Other business services

• Commercial furniture

• Print & Copy services

Total office products market1

$11.9bn

FY08 – FY14

CAGR

(1.3)%

FY14 – FY16F

CAGR

0.4%

Core office

products

market

$6.5bn

• Writing instruments

• Paper, pads & books

• Labels, envelopes &

mailroom

• Computer

consumables &

accessories

• Presentation products

• Business machines

• General office supplies

• Filing products

(2.6)% (2.0)%

Non-core

office products

market

$5.4bn

• Kitchen supplies

• Cleaning & janitorial

• Office furniture

• Printing services

• Promotional products

• Work wear

• Packaging supplies

0.4%

3.3%

Office Supplies Industry Market Size & Growth

Revenue Earnings before interest & tax

Transaction growth Return on capital

Is it working?

1.3 1.4 1.5 1.5 1.5 1.6 1.7

0.9

0.0

0.5

1.0

1.5

2.0

FY09 FY10 FY11 FY12 FY13 FY14 FY15 1H FY16

$bn

4.4% 0.7% 1.6% 4.6%

8.0%

8.8%

FY09-15 CAGR: 4.6%

+9.1%

65 74 80 85 93

103 118

59

0.0

20.0

40.0

60.0

80.0

100.0

120.0


$bn

8.4% 6.5%

9.0% 10.8%

13.2%

14.5%

FY09-15 CAGR: 10.4%

+17.9%

5.7 6.3 6.7 7.1 8.1

9.4 11.4

12.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0


%

43bp 36bp 103bp

130bp

58bp

202bp

111bp

11.5 13.2

11.0

6.3 7.0 8.4

6.3

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

FY10 FY11 FY12 FY13 FY14 FY15 1H FY16

%

FY09-15 CAGR: 9.5%

(226)bp

(472)bp

70bp

169bp

140bp

Does the customer care?

No longer about “Bricks” or “Clicks”… it’s simply about shopping

Must deliver a seamless shopping experience

• Anywhere, Anyhow, Anytime

• Be simple & clear – for customers & your team

• Inspirational & differentiated products & services

• Assist customers to achieve their goals

If you can understand & implement a seamless shopping

experience across all channels, you will succeed

Summary Wrapping Up

Big ideas. Lowest prices.

44

Mark Ward, Officeworks

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