Interview: Dixons Retail

Dixons Retail is in the contradictory position of being the most dominant player in the UK IT retail game without a rival anywhere near its size while simultaneously being considered the underdog against a retailer whose stores don’t even get close to double digits.

From a myopic UK perspective, Best Buy’s operation can barely be said to be on the same level as the hundreds of PC World’s, Currys and Dixons stores spread across the nation. But the hegemony the US retailer has, globally casts a long shadow across arenas it has even a minimal presence in.

High command at PC World and Currys wouldn’t thank us for starting a feature on its brands with immediate reference to its most talked about competitor, but to discuss the two in isolation is increasingly difficult. Most of its activities to date can in some way be seen as counter moves to each other’s strategies. It’s often the way in the tech market whether sitting on the sidelines observing Intel and AMD, Apple and Microsoft, or ATI and Nvidia, the competition is such that to not mention the competitive landscape wouldn’t be telling the whole story.

DON’T MENTION THE WAR

In this context, it’s easy to see the decision to change the group’s name from DSGi to Dixons Retail. Dixons was the primary retail brand during the eighties and early nineties, playing a huge part on the personal computer revolution in this country. The name had such an impact that, in our experience, many still refer to PC World as Dixons to this day. It’s this resonance, this association with its own place in the history of UK computing that the firm is hoping to tap into.

“It’s because of the strength it’s got it’s iconic, it’s a market leader, and because of people’s long memories, everyone still refers to us as Dixons anyway,” says Mark Webb, head of media relations at the firm. “John (Browett, CEO) has cited many times where he’d been off in the Far East, and people would ask him how Dixons is. That’s how we’re known.”

The name change is the latest and most superficial move of the renewal and transformation plan a long-term strategy designed to modernise and increase the profitability of the firm’s huge portfolio. So far, the signs are that it’s certainly achieving a significant streamlining effect profits were up by 61 per cent for the last financial year, though sales in the UK and Ireland were down for a portion of that. Much of this can be attributed to a dramatic, and successful, tightening of operational costs.

“Yes, that would be one of the major contributors, absolutely. We’re really proud of the new stores, the new Currys and PC Worlds, the two-inones, the megastores, all the different formats we’re doing are all great, as is the improving customer service and all the training that goes behind that,” continues Webb. “But just as important in terms of strategy, and one of the five core elements of the renewal and transformation plan, is to reduce costs. We’ve done it in such a way that it always leads to a better deal for the customer anyway. Externally we talk about value, choice and service an awful lot. That’s what matters to us because that’s what matters to customers. Internally, what we talk about is better, easier, cheaper. Sort your processes out, sort your operations out, and by doing that you’ll be able to reduce costs and we can reinvest in the customer. We’ve always had a very large operation, but now we’ve got a very efficient and improving one.”

THE NEW BREED

As well as a tightening of costs behind the scenes, more visibly Dixons has been reformatting a great many of its stores. In terms of revenue, the firm claims a third of its portfolio was transformed by last Christmas, and two thirds will be done by this Christmas.

“We’ve reformatted over 200 stores across the globe,” adds Webb. “Each of those stores gives an average gross profit uplift of 20 per cent, and more. Particularly the megastores and the two-in-one stores they can deliver up to 50 per cent average gross profits uplifts. So, essentially, the ‘renewal and transformation’ plan is delivering.

“While reduced costs are key, so is the new estate. Most of our store openings are from existing estates. So when you’ve got a Currys and PC world next to each other, often we’ll take the wall down, refit it, and that becomes one store. But it very much feels like a new one. Every so often there will be a new store, like in Thurrock. We had an existing Currys store there, but we re-sited into a much larger space, and that’s the Currys megastore which is now 70,000 square foot.”

That very behemoth in Thurrock represents the frontline of the war between it and Best Buy, since that’s where the US firm’s first store landed this year. On the subject of its rival, Dixons’ point remains the same as it always has they are still a long, long way ahead in the UK.

“I think the results speak for themselves. When you’re specifically talking about those locations, those stores and we can only talk about two as they’ve only just opened the third in those areas the stores are two of the best performing stores of the group and they’ve seen a profit uplift since launch. So, customers are voting with their feet.

“While I know those guys have things that they’re shouting about, we’re very happy about our customers and certainly about the range. We’ve got the biggest and best range in the country. As you’d expect when you’ve got the biggest stores as well. Soon you’ll be able to compare three [sites where Dixons and Best Buy directly compete], but right now the only place you can compare is two sites, and there we are benefiting.”

NEW FRONTIERS

While hardware sales are having less and less to do with independent retail, the new technology sectors solidifying themselves in the UK market are having an invigorating effect on Dixon’s armada of stores. The main reason appears to be that while in the past new technology was often first marketed to enthusiasts at a very high cost, which would then drip feed down until the mass market appeal was high enough to warrant a price drop and a more holistic approach, the architects of the tablet and 3D revolutions appear to be targeting the mass market immediately for their new products.

“In that sense, 3D is a slightly different launch to some things you’ve seen in the past,” adds Webb. “It’s already accessible, and we’re seeing that in the sales of 3D. It’s on a relatively low number, but already what we’re seeing makes us so confident, particularly when we’re waiting for the higher levels of content to come through. Customers can have it demonstrated in store, which is great.

“I don’t know about you, but as a consumer I watched it in the cinema, enjoyed it, but didn’t regard myself as somebody that would buy a 3D TV. Then I went and saw it in store and thought ‘oh hold on, this is a great looking TV that shows everything in HD and has all the normal benefits anyway I’m interested.’ There’s a great level of interest already, and high levels of sales on a relatively low number of units that we were first to market with, and we’re excited about Christmas for 3D,” continues Webb.

Tablet PCs, a market that is at this stage overwhelmingly dominated by the iPad, have also provided a significant boost recently. “We were the major national retailer for iPads at launch everyone has been asking us for figures, but I’m afraid all we can say is that we are delighted with sales. Not just in sales, essentially we’ll sell as many as we can get hold of, but also because they’re not so techy. Put it in people’s hand and they love it because it’s so easy to use and so exciting. So what we love about it is the vibe in store.

“We have them operating in store because that’s a play table concept that we have in place anyway, and there’s always people playing around with iPads. There’s a lovely buzz in-store and it’s been fantastic for us, and it makes us very confident that this will be a new category.”

Overall, through a combination of a tighter operation, new stores, new technology to sell, and grabbing the convergence with the mobile industry with both hands (see ‘Strategic Alliance’), Dixon Group’s position looks as strong as it has ever been in recent times and most would agree that it will take more than three stores from Best Buy to topple it market leading position anytime soon.