Last week it was announced that two key retailers in the UK – Dixons Retail & Carphone Warehouse would join forces in a £3.8bn ‘merger of equals’.
This new group – to be named Dixons Carphone – would bring the Carphone Warehouse brand into the Dixons Retail family (alongside Curry’s and PC World) as they aim to exploit the ever-growing presence of smartphones in peoples’ lives and the “internet of things”- where household appliances are connected to the internet.
Carphone Warehouse will bring to the merger expertise in smartphones & tablets whilst Dixons will bring the range of electrical appliances to which envisage will be connected in this ‘internet of things’, in the face of more ‘smart’ features being built in to domestic appliances. They will also have a huge base of customer insights from combining their very sizable databases.
With the intention being to create “a leader in European consumer electrical, mobile, connectivity & related services”, OMG have investigated the countries that will see most effects from this merger:
– In terms of country presence, Dixons will add over 500 stores and offers new territories in Scandinavia.
– Last week, they announced they are selling off their Central European brand Electroworld based in the Czech Republic & Slovakia
– They also have a presence in Greece with their Kotsolovos brand
– Nearly half of Carphone store estate (c. 2000 stores) is in the UK & Ireland
– It also has sizeable estate in Spain, Portugal, Netherlands and Germany
– They also currently have a presence in France although they have announced they were exiting from the region
Some critics have suggested Carphone is getting out at the top as the mobile market matures as operators are increasingly taking control of retail operations, indicating they may need this deal more than Dixons does. After all, Dixons has spent the last 30 years running down its high street estate.
Although Dixons will be able to leverage their multi-channel offer – including Click and Collect and Pay and Collect – with these additional central locations, one thing is for sure: Carphone Warehouse’s capabilities & buying in categories like tablets will be significantly enhanced.
As such, we would envisage UK, Eire & Northern Europe will see most in-store retail effects from this merger. They haven’t revealed their plans too much for store closures or restructuring in Europe and seem to have just concentrated on UK & Eire in their PR. Even so, the UK store portfolio seems unlikely to be cut in the shorter term as Curry’s/PC World stores are mainly out-of-town retail parks whereas Carphone Warehouse operations concentrate on high street locations
One plan they have released is the rolling out of a Dixons Carphone outlet in every Curry’s/PC World store to instantly communicate the “seamless offering” of mobile and connectivity without the expense of a huge marketing campaign.
Both companies have significantly improved on customer service as a differentiator in the past few years, with pretty much ubiquitous brand awareness. Dixons have their KnowHow customer support service helping to set up new devices and adding content and Carphone Warehouse currently have a similar GeekSquad service, with both likely to be combined as they will end up occupying each other’s turf.
Not so great news at HQ though as the merger will create £80m in annual cost savings, cuts being made on rents, jobs, marketing budgets and ad spend. Initial reaction has seen a share price drop (8% for CW, 10% for Dixons) despite these publicised reductions in outgoings, with forecasts of “better growth” being met with scepticism – the brick and mortar tech retail sector has not been a ‘growth’ area for some time.
Using their home ground of the UK as an example, it will be interesting to see how such a huge physical presence (equalling Tesco’s on stores) fits into the predicted ‘internet of things’ – ultimately it will be consumers who decide whether this takes off. Alongside the tougher negotiations for HTC, a wider availability of mobile retail points maybe advantageous in the short to medium term.
Read more: uk.reuters.com/uk-dixons-retail-carphone-merger