1 Annual Report 2013 / 2014
2 Key figures of the SinnerSchrader group 2013/ /2013 change Net revenues 000s 48,601 36, % EBITA 000s 3, % Relation of the EBITA to net revenues (Operating margin) % % Net income attributable to the shareholders of SinnerSchrader AG 000s 1,843 1 > +1,000 % Earnings per share, fully diluted > +1,000 % Cash flows from operating activities 000s 1,517 2, % Employees, full-time equivalents number % change Liquid funds and securities 000s 5,833 5,949 2 % Shareholders equity 000s 14,062 12, % Shareholders equity rate % % Employees, end of period number % Sinnerschrader share price performance 2013/ % XETRA closing prices in % +/ compared to price on (= 100 %) SinneR Schrader DAX 0 % 20 % 09/13 10/13 11/13 12/13 01/14 02/14 03/14 04/14 05/14 06/14 07/14 08/14
3 Annual Report 2013 / 2014
4 #NE XT YEAR! 2015 RETHINK DIGITAL STRATEGY. HOW THE LATEST INNOVATIONS WILL SHAPE MARKETING IN 2015.
6 #in DE X#CONNECTION Everything is connected and things are starting to speak. Brands are creating new uses through the Internet of Things. Page 16 #intro Four paths to the NEXT Experience. How winning brands will be managed in Page 4 #COmmerce Challenge and opportunity meet head-on. Amazon and Apple are turning retailing on its head. Page 8 #CAMPAIGN The key to campaign success is data. But only if you can unlock their value. Page 30 #COnTENT The perfect path to new customers. Brands are carrying content for themselves. Page 24 #OUTRO What s NEXT? Digitalisation is triggering leadership transformation. Page 34
7 #In TR O NEXT Experience By NILS WOLLNY
8 NEXT EXPERIENCE No more marketing routine. Brands need digital user experiences with vision B 5 #INTRO next Experience
9 #INTRO next Experience Digitalisation marches on, changing everything in its path. It impacts on every single individual as well as on society as a whole, on business models and on entire industries. This change sets new challenges for companies as well as opening up new opportunities at the same time... with one prerequisite: an unconditional focus on the user and his or her needs. Services such as UBER or Netflix are showing how it is done. They combine commerce with connection, content and campaign to create an outstanding offering. NILS WOLLNY MANAGING DIRECTOR STRATEGY SINNERSCHRADER D B 6 NEXT GENERATION: I want it all, now Together with the rheingold institute, Sinner- Schrader carried out a qualitative study of young people between the ages of 6 and 29, asking about their digital life. The main finding: no one in this age group can imagine life without the smartphone or the services that come with it. Intensive and masterly interaction with digital technologies is the norm. They distinguish less between online and offline, and more between onscreen and offscreen although this boundary, too, is becoming increasingly blurred. Young people confront the daily torrent of offers and information with an out-andout digital mind-set: quick decisions based on a like or dislike logic, declining anything that does not promise immediate utility. The expectations of the digital experience that a brand can offer are based on its user value and on the criterion of maximum simplicity. Established players like Apple, Google or Facebook set the standards in terms of functionality, look and feel, and design. Everything in the digital space is compared with them. To continue to be perceived as a brand in this context requires focusing on the design of digital experiences. NEXT EXPERIENCE: the four elements of a digital brand Commerce Transactions of goods and services. Companies like Amazon have altered the buying behaviour of people enormously in the last two decades. The next wave of innovations, which will again revolutionise user behaviour, is imminent: mobile payment, intelligent logistics and beacon technology.
10 Connection connecting the physical and virtual worlds. Products such as the Apple Watch or Google Glass are raising the opportunities for wearables to a new level. At the same time, technologies like beacons and NFC are bringing about new types of services. In addition, private 3D printers are creating entirely new product categories. Content material which is of great interest to the user. Traditional advertising campaigns leave the NEXT GENERATION baffled. At the same time the auction models of the network giants are reducing the effectiveness of marketing spend. And aggregators are becoming the gatekeepers for digital offerings. For brands, therefore, developing a content strategy that offers genuine added value to the user is essential for survival. Campaign communication between a brand and its public. Campaigns are currently undergoing a twofold evolution: a change that is both systemic and contentbased. Thanks to new technologies, the distribution side of campaigns and content has become more effective, with message and content becoming both personalisable and adaptable in real time. A well-conceived and integrated NEXT EXPERIENCE can combine these four elements into a novel and convincing offering. Services like UBER and Netflix are already transforming the transportation and entertainment industries respectively, using: connection (vehicle tracking via smartphone or device-agnostic distribution), content (liberalisation of the travel business or Netflix own programs) and campaigns (affiliate marketing or social media) to create outstanding commercial propositions. NEXT AGENCY: The agency for a new age Developing such outstanding offerings and overseeing their realisation is only possible with a new type of agency: one that assists companies to keep pace with the speed of technologies and users because this is what they do themselves. One that analyses people s behaviour, gets to the bottom of it, and is in a position to alter it with its ideas. One that thinks in terms of holistically conceived, living systems, which are designed to grow and constantly change. SinnerSchrader interfaces with technology, people and brands, developing and implementing products and services that add value, and always with the user at heart. As the initiator of the international conference NEXT, we have been influencing digital trends for years. We fuse creative ideas and technology to develop solutions that make our clients successful. That is our claim. That s what makes us the NEXT AGENCY. B 7 Nils Wollny is Managing Director Strategy at Sinner- Schrader. Working and thinking usercentrically, he helps companies in diverse sectors to accelerate innovation and digitalisation. #INTRO next Experience
11 #co mm erce THE Amazon challenge by Olaf Kolbrück Mobile Payment by Meike Schreiber
12 the Amazon CHALLENGE What Amazon s dominant position means for costumers and marketers B 9 W When Amazon chief Jeff Bezos stopped off with friends at Mount Rushmore in 2001, he was himself something of a tourist attraction not as the CEO of a company that was powerful even back then but as the guy from the Taco bell TV ads, at the time for cheese tortillas. Perhaps Bezos has harboured an ambivalent relationship with advertising since then. For years Amazon ran a mile from TV spots. Before the digital giant did eventually book TV time for the #commerce AMAZON Challenge
13 DOES SHOPPING EXHAUST YOU? E-COMMERCE GLOBALLY to % 8 1 % 2,043* 2,345* IN SHOPS ONLINE 2,000 YES NO 1,500* 1,500 1,058 1,763* MOBILE COMMERCE 2011/2014 People using mobile devices to shop online 1,248 23% 57% 1,000 77% 43% 500 NO USAGE USAGE 2.66 BILLION IN BILLION IN 2000 PARCEL VOLUME IN GERMANY FROM 2000 TO * PROGNOSIS TURNOVER IN BILLION US-DOLLARS AMAZON.COM TURNOVER FROM 2007 TO BILLION US-DOLLARS 1ST QUARTER 2007 BILLION US-DOLLARS 3RD QUARTER 2014 sources: emarketer (2), bevh, boniversum, BIEK, KE Consult, Amazon, DHL-Studie Einkaufen 4.0 B 10
14 Our biggest search competitor IS Amazon. Eric Schmidt Executive Chairman Google B 11 Kindle reader, Bezos viewed classical advertising as a sign of weakness: Advertising is the price you pay for having an unremarkable product or service. In future he would make the advertising industry pay. In all probability the ad men didn t even notice what was facing them. One person who did grasp its significance is Google CEO Eric Schmidt: Our biggest search competitor is Amazon. After all, one in every three product searches is already carried out in Amazon and not in Google. That means fewer clicks and fewer AdWords dollars for Google. But it s not all about search. With the exception of Eric Schmidt, the rest of the world still sees Amazon above all as an online sales platform, as a quasimonopolist even, which looks to gain ever more market share with little thought for profit. With good reason: almost every second e-book in Germany is bought following recommendations from Amazon. Amazon has more than 40 percent share of the entire book market (this, too, is only like reading tea leaves). In 2013 its turnover in books, music, electronics and clothing in Germany totalled 7.7 billion. One in four euros spent in Germany on e-commerce is pocketed by Amazon. And Bazos is doing his utmost to ensure customers stay with him. He is building a digital conglomerate that includes: clearly subsidised Kindles, its own publishing programme for authors, a digital library with an all you can read flat rate, content suppliers with their own TV productions for its Instant Video play station and the Fire TV in-house TV set-top box. The purchase of the Washington Post fits into the overall picture too, strengthening the content offering for the Kindle. The purchase of Twitch, a YouTube for gamers, ensures yet more content and new sales leverage. And then there s the Fire Phone To date it hasn t been a big sales hit. Nor does it have to be. Bezos takes a long term view of the smartphone. It not only triggers the sale of more digital content, above all it hoovers up data: with a single touch of a button the user activates the purchase-feature and can buy products, music and videos taken by its camera and/or microphone. In this way the mobile phone turns the world into a showroom, and Amazon is not only positioned right at the start of the sales process, but makes even Google search in part superfluous. Why bother typing into a search engine when a simple photo will do? There s more: Amazon saves photos taken with the Firefly feature to improve the functioning of its system. Through additional GPS data, local information and other metadata the company learns more about the user: where they shop, what they do in their free time, what interests them apart from shopping and maybe what they have kept hidden from Amazon up to now. For example, say you take a picture of your child with the recognition tool. Amazon can use this for precise product recommendations and more impactful advertising. So while Google can only tell advertisers what users are searching for and clicking on, Amazon can tell them what they are actually buying, where and how often they are buying it, and increasingly and more #commerce AMAZON Challenge
15 #commerce AMAZON Challenge How to deal with amazon # Exploit presentation options such as product descriptions, product images, videos. # utilise Amazon advertising packages such as the Brand Store to expand your own channels. # offer only certain product lines on Amazon. # Strengthen and/or diversify through other sales channels. # Sell private labels and new products initially through your own channels only. precisely with an ever closer eye on the Customer Journey why they are buying it. Amazon has only really been a competitor for Schmidt since the company has been accused of going after more advertising spend and utilising its data goldmine to this end. Amazon already wants to start its own display advertising network in 2015 and to place advertising space similar to AdWords. Firstly the advertising will appear on its own website, and then later also on other publishers sites. In doing so Amazon is entering into direct competition with Google. And not just Google. The targeting goldmine impacts equally on marketers, technology providers and agencies. If Amazon starts to peddle its own personalisation algorithm and its data power, it will make these service providers superfluous to some extent. It is not just a case of Amazon being able to achieve outstanding conversion rates due to its data and its reach. With each single click Amazon enhances its know-how to improve its own products, its own content and its own services. B 12 There is a lesson in how this online giant deals with its partners: if the data shows that a new product is selling particularly well in a seller s marketplace, that is often a cue for Amazon to sell it directly undercutting all other prices in the process. If a consumer goods manufacturer comes to enjoy double-digit market share on Amazon, Amazon puts on a real squeeze for rebates and new terms, as book publishers in particular have found out, with corresponding impact on sales too. For Amazon is interested above all in low prices and cross-subsidisation of the manufacturer s and trader s advertising monies suits that goal perfectly. Charges (effectively tolls ) could work one day to the detriment of these brands, if Amazon were to support predatory pricing with marketing monies, to force through its own brands against the competition, for example. Or to undercut in the trader s marketplace. Ultimately, Amazon can always be cheaper, because it alone can avoid the Amazon charge. Olaf Kolbrück is founder and director of specialist e-commerce portal etailment.de and author of the book Erfolgsfaktor Online-Marketing. From 2000 to 2013 he was a reporter with HORIZONT magazine, with responsibility for internet and e-business.
16 Mobile Payment When your smartphone becomes your wallet B 13 W When Apple chief Tim Cook revealed the iphone 6 in autumn 2014, one new feature in particular caused lively debate especially among the brand s aficionados: the Apple Pay mobile payment function. Cook announced presumptuously: Apple Pay will forever change the way we buy. Time will tell. Owners of the new iphone have only been able to pay with it since october 2014 and so far only at 220,000 contact points in the US. At its heart is Near Field Communications (NFC) technology, which transmits data by a radio signal from mobile phone to a station. For security, users must identify themselves by fingerprint. In Europe, where NFC technology is actually more widespread than in the United States, the service is expected to be available to iphone users from 2015, by which time wearers of the Apple Watch in the US will also be able to use it. One thing is clear: paying is getting easier. A new technical revolution is around the corner. With the introduction of itunes, Apple has already proven that people s purchasing behaviour can be radically altered. For each Apple-Pay transaction of 100 dollars, the Americans pocket a 15 cent charge from participating banks and card providers which Apple claims makes it cheaper than other payment methods. #commerce mobile payment
17 #commerce mobile payment Up to now no technology has been able to establish itself on the mass market. The latest push from Apple with various credit card providers could change this in the medium term, however, wrote Deutsche Bank in a study of the FinTech sector. The trend is clear: in 2013 the volume of cashless payments globally rose by 9.4% to 366 billion transactions, compared to According to the latest Payment Report by consultancy firm Capgemini, this was due to the strong growth in emerging markets as well as increased use of credit and debit cards, especially in electronic and mobile payments. With more and more people using tablets and smartphones, the lines between online and mobile payments are becoming increasingly blurred, according to Capgemini. The consultancy anticipates an increase in mobile payments worldwide of around 60% per year from 2011 to For online payments, on the other hand, Capgemini has forecast a yearly rise of only 16% over the same period. Even in Germany, long a mecca for notes and coins, many more people are likely to pay without cash in the near future. Annual growth of mobile payments from 2011 to % B 14 The auditing and consulting firm PwC estimates that the 176,000 end users in Germany who currently pay by mobile will rise to 11 million by And Apple isn t necessarily the trailblazer. Many start-ups, banks and mobile phone operators already offer mobile payment options. And even the Ebay subsidiary PayPal is currently testing an app for mobile payments in Germany. However, thus far, no system has established itself. At present only 40,000 of the more than 740,000 payment terminals in Germany can communicate with mobile devices or special cards. That may change: MasterCard recently compelled all its German retail partners to convert their terminals to NFC technology by 2018 at the latest. A survey by the EHI Retail Institute of 55 retailers with a total of 58,300 outlets found that 81 per cent want to upgrade their cashier systems. But what about the banks, whose core business is, after all, payments? For the time being they are relieved that Apple continues to cooperate with them. The German Sparkassen (savings banks), for example, have already announced that they Shops planning to adjust to mobile payment by % source: EHI RETAIL INSTITUTE
18 Most of our spending right now happens offline, and that s starting to shift. All of our payments are moving online. John Collison CEO OF THE PAYMENT START-UP STRIPE wish to work together with Apple. As a payment is only completed when the customer s account has been debited. The cake has not yet been divided up, contends Deutsche Bank in its latest FinTech study. Banks will not give up the commissions that go along with payments without a fight. Nor should they: experts at Deutsche Bank believe that, in the current test phase, the traditional finance providers have the opportunity to play a part in formulating digital payment solutions. In marketing departments, too, especially those of manufacturers of consumer goods, experts are musing over how Apple Pay will influence purchase decisions. The widely held view is that opportunities lie in particular with Apple s Passbook app for loyalty programmes, which in all probability will be linked to its payment system. Marketing decision-makers need to ensure that users can easily deposit their loyalty programmes or coupons with the app. The app can then advise the customer how many points their current purchase is worth or automatically pay for a product with the appropriate coupon. B 15 Anneke Neuhaus, marketing expert at the Frankfurt University of Applied Sciences, says: Marketing decision-makers need to ask what benefits the customer can draw from it. Further information on the product can be provided via smartphone, for example. In the case of higher value products, why not offer an explanatory video or an alternative model in a different price category? The customer can acquaint himself or herself with the product or take advantage of a discount scheme or bonus points by using the payment function. Moreover, manufacturers will understand their customers better and utilise this insight for product development or for improving communications. The opportunity to interact with the customer this way can lead to some displacement in the market, but equally to a genuine win-win, says Neuhaus. The delicate issue surrounding data protection raised by the NSA affair remains. At Apple they are at least attuned to the sensitivities of Europeans in particular. Apple doesn t know what you have bought, where you bought it, or how much you have paid for it, swore the management at the reveal of Apple Pay. Meike schreiber Meike Schreiber is a Frankfurt-based journalist who has been reporting for many years on the banking sector. She founded the journalist agency SchreiberDohms along with Heinz-Roger Dohms. Both write for Capital, manager magazin online and DIE ZEIT, among other titles. #commerce mobile payment
19 #co nn ect ion Internet of things by Peter Bihr Beacons by Axel Averdung Mobile connections by Laurent Burdin
20 internet o f things INTERNET OF THINGS B 17 # c onne c tion Connecting things for fun and profit
21 #connection internet of things I If everyday objects could talk, what would they say? That is the question we should ask ourselves when thinking about the opportunities offered by the Internet of Things, or IoT for short. The IoT is what you get by connecting physical objects TVs, cargo containers, bracelets, coffee makers, cars or thermostats to the internet: A connected world, studded with sensors, permanently exchanging data with both machines and humans. And it is one of the most influential trends in technology we have seen since the advent of the consumer internet itself. How can IoT be beneficial in the context of marketing? Data and deep engagement Over the last few years, we have witnessed a wide range of experiments around the IoT. Many of the more widely known ones were driven by advertising. To name one well-respected example, Budweiser built a big red light that connected to the web and checked a feed for ice hockey results. Whenever the user s favorite team scored a goal, the light would flash, and a loud horn would sound. It was a cute, well-executed and playful way to engage with fans around a topic they were passionate about. Hundreds of these lamps were sold as these fans paid money for an advertisement in their living rooms. As advertising ideas go, this one was very smart. And it just scratched the surface of what is possible. B 18 The IoT allows for a much deeper engagement and has the advantage of allowing us to collect and analyse data to build services that are valuable to both the audience as well as marketers. Two areas offer particularly huge opportunities for fast movers who overcome the (sometimes thorny) challenge of balancing value-add versus data collection creepiness : Wearable technology and connected driving. Wonderful Wearables What happens if you strap a smart watch to your wrist or place a fitness tracker in your pocket? By putting on wearable technology (Wearables for short) you allow a computer complete with sensors and internet connectivity into your life. Most of us don t think much about it, after all we carry a connected computer almost constantly anyway: Our smartphone. As sensors and chips get both smaller and cheaper, Wearables evolve. Rather than bulky smart watches, we see stylish accessories: Jewellery and fashion are increasingly connected, too. A ring that subtly notifies you of a text message from your spouse? New York startup Ringly has created one. Clothing that tracks your vital signs? Look no further than the sports bras and running shirts that San Francisco-based Sensilk is currently developing. What today may sound like gadgets for early adopters will be a normal part of life within just a few years. If we build services today that are so good, valuable or interesting that users let them into their everyday lives, it allows for huge engagement opportunities.
22 Crowdshaping With new technologies at hand, data captured from people in the physical world can be used to reshape experiences. Wearable bracelets like the Lightwave, an invention by Silicon Valley technologist Rana June, can measure physical engagement and energy levels of the people wearing them like in this case allowing the DJ to play with the information and to show the most active dancers on a leader board. This kind of innovation cannot only be applied to performances, it can also reshape the way we shop. Just imagine, for example, advertisements that adjust in real-time to the emotions of a TV-audience or in-store offers reshaped by the energy level of the shopping crowd. Connected driving Along with data, cars move into the cloud or rather, the cloud moves into the car. Automobiles become another media surface, another interface. As cars owned or shared get connected to the internet, the car stops being a mere means of transportation. By combining navigational data (where you are now and where you want to go), intentional information (your calendar knows where you want to go, why and with whom) and external data sources (weather, traffic, event information) we have a treasure trove of data points to work with. We can build true context-aware services. This could range from subtle reminders to more complex offerings. Two examples: Shopping reminders: Your fridge says that you need milk. We are passing by a supermarket with milk on offer in two minutes. Do you want me to recalculate your route? Media recommendations: Based on current traffic information, your drive is estimated to last about 28 minutes. Should I read you a few chapters of your audio book? The key: respecting privacy The key to success is, as always, to be sensible. With the tools provided by the Internet of Things, companies are tempted to collect as much data as possible just to be safe: Collect first, analyse later. In Germany, more than anywhere, consumers are highly sensitive to data collection and the implications for their privacy. As such, we will see consumers reward those companies who find the best balance between marketing that offers added value based on data analytics on the one side and respect for privacy on the other. Don t be a creep, and consumers might allow you into their lives. If they do, both sides will benefit. B 19 peter bihr Peter Bihr is the founder of The Waving Cat, where he explores the impact of emerging technologies and helps apply the insights of innovators through consulting and conferences like Things- Con and NEXT Berlin. #connection internet of things
23 #connection beacons BEACONS The invisible keys to new services S Software Is Eating The World explained the entrepreneur, investor and developer Marc Andreessen in a famous essay of How come? one may ask: Sure, doesn t the physical world still consist mainly of atoms, even if bits are taking over in the digital sphere? Part of the answer lies in beacons (or ibeacons, as Apple calls them), which connect the physical and digital worlds. Beacons are nothing more than small transmitters with low energy consumption and limited local reach. Mobile phones, for example, can receive and react to their signals. It is thanks to beacons that an app knows the location of its user and can offer him or her a relevant user experience B 20 in that context. Among the earliest adopters are retailers no surprise that Apple quickly equipped its own stores and upgraded the Apple Store app accordingly. But the possibilities go well beyond the retail space. Interactive museum guides converse with visitors via beacons, explaining all about the latest exhibitions. In the US, fans inside baseball stadiums receive background information on the game that is taking place. The ticket inspector on the train makes his presence known to the railway app via a beacon, as a result of which the app on the passenger s smartphone automatically displays his or her digital ticket. All kinds of new interfaces can be created. In place of cumbersome ATMs, as we know them, bank customers can avail themselves of an elegant app which, thanks to beacons, knows which customer is at the ATM. After a minimum of interaction the machine dispenses the desired amount. The scope for innovative services is practically limitless. But here, too, success will depend on how well the user s requirements are considered and how the content and user experience is suited to the location and context. For marketers, beacons become valuable, when indiviual interactions with the brand or its products are beautifully designed to create real benefits for the consumers. The most important thing is to stay relevant: If it isn t relevant, the user will ignore it. Creativity, too, is called for. After all, to just send out pushy messages flagging the latest special offers is to ignore the opportunities which beacons provide. Dr. Axel Averdung is Head of Strategy at SinnerSchrader und developes innovative solutions for digital products and services.
24 Mobile connections Dawn of a magical times B 21 T The watch on your wrist has long stopped ticking. Instead, you can talk to it, read the news on it, or pay for a coffee with it. It s likely, in the coming year, that every early adopter will wear one, and so get to experience all the wonder of mobile connectivity: new technologies, new applications and new customers. With the smartwatch and other innovations, the Age of Connected Devices is dawning. So what will the world be like, when everything is connected with everything else? And what consequences will that bring for the mobile sector? #connection mobile connections
25 #connection mobile connections A torrent sweeping through the sector Experts are predicting that the number of connected devices will increase one hundred fold within the next five years. The mobile sector will become the mobile connectivity sector. Everyone will be affected developers, start-ups, agencies, providers of mobile products, marketers and big brands. A look at Berlin, where the mobile sector in Germany is particularly wellrepresented, reveals the magnitude of the upheaval that is currently taking place. The technological revolution Behind this trend are three technological drivers: the devices, the connectivity and the cloud. Every few months the device manufacturers introduce new features such as mobile payment or smart objects more memory, more performance, more screen. The connectivity options are also becoming greater: mobile communications, Wi-Fi, NFC, Bluetooth Low Energy and proprietary in-car connectivity such as CarPlay or Android Auto. Behind them lie the cloud services, which gather and analyse all the data. Working wonders with everyday stuff! Coffee lovers, for example, can connect via an app with the Espresso machine in the coffee shop, which then brews the desired coffee. Payment for the cappuccino then takes place automatically with the smartphone. This is already a reality at TopBrewer in Copenhagen. It s child s play for the customer and extremely time-saving for the coffee shop. Powering the market Consumers are ready. And so are electrical retailers: MediaMarkt recently created a large department for digital wristbands and smartwatches and wants to expand it further. Remember the headphone market? Small and unexciting only three years ago, it now features lots of interesting products and retailers offer a large range of them. It will be the same with Connected Devices. B 22 From mobile marketing to connectivity strategy in 6 steps today: 1. Dedicate far greater resources to managing mobile assets (app and web). 2. raise activity levels to achieve greater frequency and higher numbers of app downloads. 3. Improve those neglected mobile web portals. tomorrow: 4. Create a user case related to a device (e.g. smartwatch). 5. Connect web applications with the physical world (e.g. in stores). 6. Develop your own proprietary connected device.