PCR talks to DSGi's hardware director and spokesman

New world order

DSGi’s group sales grew eight per cent over the Christmas period, beating analyst expectations by some margin. How significant are these results, and would you attribute them to anything other than a Christmas sales hike?

Mark Webb (spokesman):
In terms of significance, it’s the absolute crucial time of the year. The pre-Christmas selling and post-Christmas sales are huge. We have other peaks in the year, particularly back to school, but these results are absolutely crucial to the group. I think an awful lot of analysts were waiting for this as proof of how our renewal and transformation plan was working, or indeed not working. We absolutely confirmed to people that what we were doing is putting DSGi very much on the right track, and that we haven’t been sitting still during the recession.

So, certainly the Christmas period had an impact on the figures, but you’d say they were also evidence of your recovery strategy kicking in?

MW: A Christmas sales hike from the consumer is to be expected, even in a recession. But what impressed people was the clear upturn across the board.

The megastores in your portfolio performed particularly well; are these leading the group in terms of sales, and will you be putting increased focus on these types of stores going forward?

Jeremy Fennel (hardware director): There are eight megastores in the UK now, and they took more than £1 million each week. It’s a fine line – all our formats are working, which is fantastic. We’ve embarked on refitting all our store types. We’ve got Dixons Travel in the airports, Currys Digital on the High Street, Currys superstores and megastores, PC World, and the two-in one stores. The impressive thing is every single format is working.

We have confidently confirmed that we are moving forward with all the formats, to the extent that we had about a third of our store portfolio transformed in time for peak, and that’s in terms of revenue. By next Christmas we will have two thirds of our revenue, in terms of source, transformed. And we have indicated that if anything, we will nudge some more focus on the megastores and the two-in-one formats. These can be either superstores or megastores.

Can you explain the structure of the two-in-one stores?

MW: They were an experiment initially. The first one was in Weybridge – we put a mezzanine floor into an existing Currys store to enable us to move domestic appliances upstairs and keep downstairs for consumer electronic and consumer products. What that allowed us to do was drop the PC World format inside the Currys store, which means more PC hardware, more PC peripherals, more software products, a business centre, a PC clinic, and an increased number of computing sales colleagues.

This attracts a broader customer base in store because you get the Currys customer base as well as PC World’s. This opens up new markets for us, and increases the computing sales tremendously within those stores. We’ve done a few more as a consequence of that, and it looks like we’ll focus on that going into 2010.

So, 2010 will see more store refits?

A lot more. We’ve done a third of the business already, and two thirds will be done by next Christmas.

Any more store openings?

MW: Where it fits really. Thurrock, which is our biggest megastore to date, was a brand new location. Fulham is two stores knocked into one. It’s where it fits the portfolio – but largely the work will be done from our existing portfolio.

You’ve invested a lot of money in advertising in some prime time TV slots. How much has this affected your results and are you planning to continue the campaign into 2010?

MW: We’ve always been relatively busy advertisers. A lot of work has been done recently on asking people to reevaluate the brand. We used to be about price and promotion, but there’s an awful lot more that we’re doing for the customer now. You’ve got the Currys advertising, for example, which has the strap-line ‘We Can Help’. That very much pushes the message that we’re not just about handing you a box with a TV or a computer in it, we’re there to install it, deliver it, to fix it, whatever you want.

Dixons.co.uk had a humorous campaign all about reminding people that it had a great range and great value online.

The retail sector in particular has taken a battering during the last year. Is there room for optimism in 2010, both in terms of DSGi’s business and the technology sector in general?

JF: At best our outlook is probably cautiously optimistic, particularly about the UK. Any new guys coming in are going to have to address the fiscal imbalances. The confidence we have is in what we’re doing. We have set up the business to continue to be able to transform itself, even in the worst of conditions, and we’ll benefit from any potential upturn. So we’re confident in the business, but not so much in the outlook of the economy.

Best Buy has launched a UK website ahead of the store launches in spring, while Best Buy Europe as an entity has today increased its forecasts following a Q3 like-for-like sales hike of 5.5 per cent. DSGi has made the pertinent point in the past that the business isn’t here yet, but many smaller PC stores have expressed concern over the firm’s presence – do you think the presence will change the market, or is concern even warranted at this stage?

JF: It’s not here yet. There are competitors out there already. We’ve got 650 stores with great momentum behind them. We’re focussing on winning and retaining our customer base, and we’re making a really good job of it. The other thing is that we’ve got almost a two-year head start in our transformation programme, so it’s all eyes on that rather than on what other people are doing or might be doing. As long as we’re investing in that and a third of the stores are delivering the results we’ve just seen, we’re extremely confident that doing another third of the stores will deliver us even better results. We are quite comfortable with what we are doing, and we will see what comes.

We’ve heard this week that Tesco has signed a deal with Tribeka to bring software publishing in store, removing the need for box-product. Do think this represents a danger for software sales at retail, or is it something retail should embrace?

MW: It depends on the market. We have got a software business that addresses a lot of business customers, particularly in PC World, who are still shopping for a product that is going to continue in the traditional box and disc package. And then you have gaming, which (certainly for the short term) is going to continue as it is, as a box product bought at retail.

The software market overall, though, is going to go through a huge transformation which is already starting. This is a bit like what the Tribeka products are doing, which enables you to download software. Now, whether you do that in store or whether you do that at home remains to be seen. It does enable you to carry a wider range for the supermarkets than perhaps they would do traditionally. I think where we would benefit there is by having sales colleagues who can actually deliver the customer service that a consumer is looking for when they’re using a product like that. I’m not sure it would be a very good self-service opportunity in a high footfall environment.

The bigger part is what happens further down the line with software, and the fact that as hardware becomes more tailored to customers’ usage, we’ll either be downloading or asking someone in a store environment to help tailor the product to the customer’s needs. That’s where our tech guys and PC clinic come into their own. We are seeing a lot more sales and bookings from customers asking our guys to help them out with what the right software is for their machine.

The Equanet office in Surbiton was recently closed, which was described as an ‘ongoing transformation of B2B operations’. Will there be more streamlining of the operation on the cards, or will they be transformed in some other way in 2010?

MW: The B2B part of the business was more severely impacted by the recession. And that impacts both our in-store B2B sales and Equanet sales. We have a new managing director of the division, Phil Birbeck. I won’t talk in too much detail about his plans, but it is clear that the B2B market is important to us, and will remain so.

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