Bertelsmann extends its leading position in the worldwide distribution of media products

The DirectGroup Bertelsmann is integrating its direct-to-customer businesses. BOL and the clubs – both leading companies in their industries - are undergoing realignment in Europe and Asia. DirectGroup is thus impelling its evolution into the world’s leading Community venture with 55 million media customers.

Bertelsmann is in all relevant markets the market leader in the economically successful club business. The turnaround has been achieved. Disregarding extraordinary expenditure (IT investments), operative breakeven will be reached in fiscal year 2002. At this time, the DirectGroup will contribute an eight-digit figure to Bertelsmann AG results.
Following its 1999 launch, BOL went directly to being Europe’s No. 2 in media e-commerce. For the current business year, DEM 180m in revenues are expected. Now, the valuable skills from the two businesses are being united: on the one hand, BOL’s e-commerce know-how, on the other hand, the clubs’ expertise in direct marketing and professional program selection.

„As an integrated multi-channel provider, the DirectGroup is in excellent shape. We will now continue the step-by-step development of our businesses into true community-based ventures. In so doing, we rely on: the resolute extension of special offers based on the US model, the use of innovative marketing tools, the application of modern technologies like file sharing and mobile as well as the interweaving with existing communities,” explains Dr. Klaus Eierhoff, Bertelsmann AG Board Member and CEO of DirectGroup Bertelsmann
Andreas Schmidt, President and CEO of Bertelsmann eCommerce Group: “Headed by Stuart Goldfarb, the BOL organization has been adapted to conditions of the market place. Consolidation has been successfully completed – BOL.com is in good shape. BOL.com has been resolutely positioned as the media and entertainment shop on the Internet. Instead of extending its product range to garden furniture, charcoal ovens, diet pills and cars, BOL.com has focused on the distribution of media products like music and books. In doing so, it has chosen a business model different from the general store concept of its competitors – beyond economic success. With clubs and BOL.com united, Bertelsmann now offers its customers the most attractive media shop worldwide.”

Added value for customers and an improved earnings situation
By integrating its direct-to-customer businesses - and hence its online and offline distribution paths - Bertelsmann is acting earlier than other companies to adjust to a changed customer behavior characterized by the combined use of different paths for obtaining information on, and buying, media products. DirectGroup’s multi-channel approach is tailored to this hybrid customer behavior. It strives to offer the entire range of media products from a single source. This makes possible a comprehensive service to the customer while exploiting the economic potential of all distribution paths.

Buying behavior is becoming increasingly varied, ranging from Internet and phone orders or written catalog orders down to purchases from personal sales representatives in stores. BOL will be available to club members as an added service on the respective club sites, so that they will be able to select and order from the entire range of books available on the open market, in addition to the attractively priced products that have been chosen especially for them. Meanwhile, at this interface to the new “media community,” BOL customers are made aware of the clubs’ special media offerings.

BOL.com and media communities become powerful new unit
The new powerful unit comprised of BOL.com and the media communities is expected to considerably enhance DirectGroup’s position on the Internet. Already, the clubs’ worldwide e-commerce revenues account for up to 10 percent of total turnover – and the numbers are rising. As many as one-third of all new customers (Bookspan, USA) are currently being added via the Internet, which is evolving into a significant channel for the clubs’ future growth. Together, our book clubs in the US are the No. 2 online book retailer by number of unique visitors. This applies in particular for the special-interest clubs and their websites.
This year, the clubs’ e-commerce revenue amounts to approximately 150m DEM. In coming years, DirectGroup expects significant growth in this sector. The established online brand BOL.com will contribute to this by being tightly interwoven with the clubs’ Internet sites.

Diversified integration measures depending on local market conditions
The specific course of integration depends on the market environment, the market potential, past performance, especially in the back end, and the efficiency of BOL.com’s local IT infrastructure. In many countries, BOL.com has achieved a leading market position; the company is No.1 in the Netherlands, Switzerland, Spain, Italy, Finland and Sweden.
This has resulted in the following integration measures: in Germany, the Netherlands, Sweden, Finland and Great Britain, BOL.com will be integrated into the local club businesses as a separate Profit Center – as has already been done in China in December 2000. Local management will report to their respective regional head – Wulf Böttger (Central and Eastern Europe), Marc-Oliver Sommer (Western and Southern Europe) or Ekkehard Rathgeber (Asia) and, in the case of Great Britain, to BCA’s Managing Director Christian Friege.

BOL’s site for Switzerland will be managed from Germany. In Italy, BOL’s organization will be completely integrated into that of Mondolibri. BOL’s Denmark and Norway branches will be closed. Talks are still underway with our partners regarding BOL in France and Japan.

BeMusic as a successful model for integration
In terms of revenue and customers, DirectGroup is already one of the world’s leading multi-channel players among media companies; its book clubs– which offer their media products to customers via catalogs, Internet, shops or personal sales assistants – make Bertelsmann the global market leader and also the No. 1 in all regional markets. In the music distribution sector, integration has already been achieved just recently: BeMusic, the world’s largest music distribution venture (sales of more than 1.5bn DEM, 17 million customers, and a combined 60% of all Unique Visitors in music retailing) was created under the leadership of Andreas Schmidt. The partnership with Napster connects Bertelsmann’s businesses with the world’s largest music community of some 60 million users. Once the subscription model has been introduced in July 2001, a cross-marketing approach involving the worldwide clubs would be conceivable.