Annual Report 2010 - CDON Group

CDON Group AB
Annual Report report 2010
Industry and market risks
Market trend for e-commerce
The market for e-commerce is undergoing change. In the Nordic countries, the average annual
growth of the e-commerce market was 18 per cent between 2004 and 2009. In 2009 the
e-commerce market in Sweden constituted 3.7 per cent of total retail sales, compared with 1.2
per cent in 2003, according to the Swedish Retail Institute (HUI). There are no assurances that the
e-commerce market will continue to show the same positive trend, or that the products the CDON
Group sells benefit from positive market developments.
Seasonal variations
In the Entertainment segment, which is heavily dependent on Christmas shopping, the CDON
Group is exposed to large seasonal variations and a large portion of sales occurs during Q4. The
Fashion segment also exhibits seasonal variations, where the second and fourth quarters are the
strongest as summer and winter clothing exhibit the largest sales. Seasonal variations are
relatively small in the Sports & Health segment.
Fashion trends
In the Fashion segment, CDON Group is also exposed to fluctuations in trends and fashion, as well
as consumer preferences regarding design, quality, and price. If CDON Group misjudges consumer
preferences and does not succeed in selling its products, this may lead to excess inventory of
certain products and price cuts.
Operational risks
Disturbances or inadequacies in CDON Group’s IT and control systems
CDON Group’s operations are highly dependent on reliable IT and control systems that are well
suited for CDON Group operations. The CDON Group has made significant investments in
sophisticated IT and control systems, including an integrated logistic system that automatically
manages and forwards orders to its distribution centres. Maintenance, upgrades, and support of
these systems are ongoing. However, despite this it cannot be ruled out that systems could suffer
from operational disturbances or interruptions. Such disturbances or longer interruptions to
CDON Group’s IT and control systems would lead to significant operational disturbances, and
lower confidence in the CDON Group, with adverse effect on its competitive strength and market
position as a result.
Distribution
CDON Group depends on a number of warehouses that are associated with the Company’s
internet stores. If a warehouse for some reason should be destroyed or close, or if its equipment
should be seriously damaged, the Company might not be able to deliver the products to its
customers. Under such circumstances, and to the extent the CDON Group cannot quickly and
cost-effectively find an alternate warehouse or repair the warehouse in question or its equipment,
this may have a considerable adverse effect on the Company’s operations. The CDON Group has
insurance policies for property and production stoppages for amounts that the Company has
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