ANALYSIS: What does the future hold for Dixons Carphone?

PCR explains what Dixons Carphone’s plans are and what the future holds…
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Two of the UK’s biggest technology chains hope to merge, with a focus on connected devices and services to pull in recurring revenues. PCR explains what Dixons Carphone’s plans are and what the future holds…

UK tech giants Dixons Retail and Carphone Warehouse have confirmed they plan to merge, in a deal worth £3.8bn.

The newly formed group – Dixons Carphone – will be split equally between shareholders of both firms, and is billed as “a new retailer for the digital age”.

Dixons Carphone plans to focus heavily on offering Internet of Things (IoT) products and other connected devices, such as home automation solutions, as well as improving customer support services.

Carphone Warehouse currently has 2,000 outlets across Europe, with around 800 in the UK and Ireland. Dixons has 943 stores across Europe – over 500 in the UK and Ireland – but plans to reduce its European store count to 830.

Dixons Carphone will eventually be led from a single UK head office, with Currys and PC World and Carphone Warehouse continuing to operate separately for the time being.

As part of the deal, Carphone Warehouse will acquire all of the shares in Dixons.

Dixons Retail Group boss Sebastian James – who leads Currys and PC World – will become CEO of Dixons Carphone. Carphone Warehouse CEO Andrew Harrison will be deputy CEO.

“We have the incredible capabilities, assets and people needed to pull us into pole position in the connected market,” said Harrison.

“What might seem outlandish today will become ubiquitous in the next few years,” agreed James.

“Simply selling electrical goods [without connectivity or service] is missing the point for customers.

“The ability to take what we have built in electrical retailing and add the profound expertise of Carphone Warehouse in connectivity would make us a leading force in retailing for a connected world.”

Harrison compared the firm’s prospective customer service to that of a roadside recovery company.

“We have the opportunity to stand alongside The AA as a firm for when your connected world goes down,” he stated.

In its proposal of the merger, Dixons added: “We plan to build on our well-established KnowHow and Geek Squad services to extend support beyond the point of sale and across the entire range of connected and electrical products.

“Through an end-to-end service proposition including product set-up, delivery, ongoing support and insurance, as well as repairs, accessories and recycling, [we will] extend our relationship with customers to drive lifetime value opportunities and recurring revenue.”

The deal comes alongside Dixon’s latest financial results, which revealed that sales rose three per cent during 2013 and forecasted annual profit to be between £150 and £160m. The merger is expected to save £80m in annual operating costs.

Carphone Warehouse said that it expects the number of new job roles to increase by approximately four per cent following the merger. Dixons Retail anticipates it will cut two per cent of its workforce.

However, some industry figures were unconvinced that the new partnership will provide an engaging enough experience for consumers.

Patrick O’Brien, lead retail analyst at Verdict, claimed the focus on connected devices and customer support was nothing but a “futuristic sheen” to cover up a “cost-cutting exercise”.

“This does not mean that it is a bad idea,” O’Brien continued.

“Lower costs mean more flexibility to react to changes in the business environment and, more importantly, more clout to fight the likes of Amazon on pricing.”

Anthony Lay, owner of reseller AML Midlands, added: “As a business move the merger of the two companies is a good idea, but the focus of the firms is becoming more and more murky.

“Modern day retailers are becoming jacks of all trades and masters of none. Small retailers should concentrate on what they do best and keep at it – such as added service and support.”

While Dixons Carphone might be outlining its future in connectivity and customer support, indies believe there will still be room in the market for the smaller reseller and retailer.

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