In retail, the hero of today can so easily become the casualty of tomorrow. However, the merger of Dixons and Best Buy could be a win-win if it’s able to deliver better customer service and lower prices to consumers, via a multi-channel bricks and mortar alternative to pure play internet retailers.
Bigger retailers mean stronger retailer power, therefore vendors and distributors can expect tougher negotiations with a company which would dominate the High Street for technology. But this is the price they have to pay if they want to retain showrooms across the country to demonstrate their latest tech products. Rival retailers like Phones4U will find it harder to compete.
The merger could be good news for the UK SMB community. Dixons reckons that 1.2 million SMBs, 50% of the total number in the UK, shop in their stores. A synergy between the strong customer relations skills of the Carphone Warehouse Group, and the will of Dixons to service the needs of SMB through the Knowhow brand would be a good thing.
Although no merger is easy there are encouraging signs of good relations between relative newcomers Seb James and Andrew Harrison. The guidance and experience of Charles Dunstone as Chairman will also be crucial to the success of the joint company. But the combined group will have to manage carefully the cost savings which have been publicised by some commentators as a motivator for the merger.
In the end, this whole deal is about the smartphone, which is the future of mobile computing and will play a pivotal role in the emerging Internet of Things. Dixons will be the big beneficiary as it has fallen behind in this area since it sold The Link in 2006. Dixons has to be a big player there if it wants to be the leading tech retailer, and will gain enormously from CPW’s market leading position.
Neither have a great record outside of the UK so they will need to develop a clear European strategy for where they want to be in 5 or 10 years’ time. The combined group would be in a very strong position to grow through acquisition, and there are a number of vulnerable retailers out there, so let’s watch this space.