Fair weather for Dixons Carphone

First Comet went, then Carphone Warehouse and now Phones4U – the barometer looks set to “fair” for Dixons Carphone, who are the beneficiaries and possibly the causes of whatever is the opposite of a perfect storm.

The sun has been shining on the mobile phone industry with fat margins and plentiful growth opportunities but the Phones4U demise shows a new reality – of markets with less growth potential, and where the operators cannot afford to dilute their margins as they did before. Phones are being commoditised like PCs and so there are warning signs for all specialist retailers.

The merger logic for Dixons was always clear but never for Carphone Warehouse – were they aware of the operators’ intentions and is this why they opted to go with Dixons?

The current situation is good for Dixons Carphone but here are three things to think about in the longer term:

  • Firstly no retailer should be complacent about relying on the support of any telecom operator – their ability to go it alone is proven with their own retail stores.
  • Second, retailers should be wary of subcontracting out their space to powerful vendors – those who opt for store-in-store like Best Buy in the US and have given acres of space to Samsung and Apple, live with the risk of similar nasty endings to their relationships. Then they would have to find substitute and potentially B vendors to fill all the spaces.
  • Thirdly, the future lies in creating a full-service retail store, so it is vital that Dixons learns from Carphone and maintains a service oriented culture for mobile phone sales. As margins shrink on mobile phones, so the temptation will be to cut down service and that will be a costly error.

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