Service is at the heart of Dixons Carphone’s long-term ambitions

While positive short-term results may grab the headlines, the real story is how longer-term transformation positions Dixons Carphone for future success

Positive financials are the backdrop
Given the potential pricing and downward margin pressures of BREXIT, investors were pleased at the end of June with Dixons Carphone producing an enviable set of retail results. Much focus was on the impressive growth in profit before tax of 10%, to above £500 million, with 4% increase in like-for-like revenues.

The other bottom line from the CEO: “Customer relationships are everything”
While the top line numbers headline the financial achievement of Sebastian James and team, it is the long-term transformation plans of Dixons Carphone which capture the imagination, and forecast the pillars of future success. Sebastian James highlighted transformation strategies focused on building a long-term future for Dixons Carphone:

• Channel agnostic
• Service as core offer and differentiator
• Transition from ownership to consumption
• Lifetime value relationships

Personalisation for consumption + differentiate services = Lifetime Value
The commentary highlighted the transformation of how service is now a core offering, not just an attach to the sale of a product. Services such as warranty, maintenance, and repair are creating a predictable, profitable revenue stream and a deep ongoing relationship with consumers.

Whilst mobile and phones were highlighted as one of the most challenging categories due to the rise of SIM free phones, James’s commentary emphasised how there is an aggressive plan for both financing and leasing to increase phone replacement.

To differentiate service, Dixons Carphone will roll out same day phone repair services. Plans also indicate a breakthrough 7-day repair promise compared to 28-day market standard. These strategies not only differentiate Dixons Carphone, but create positive lifetime relationships beyond the sale of a handset. A NPS (Net Promoter Score) in the 90s is particularly noteworthy and evidence of positive customer response.

Last year Sebastian James pledged to increase service income from £500mn to £1 billion. We did not hear any specific numbers on the investor call on progress towards this goal. At £1bn, services revenue would represent 10% of today’s revenues, and would outstrip Best Buy currently at 7%. Clearly both national tech retailers are seeing a bright future in services both as a differentiator and profit stream to offset product margin pressures.

Dixons Carphone is well positioned to profit as the “Digital Plumber”
One of the most exciting and innovative long-term developments is Dixons Carphone’s journey to becoming the digital plumber of the nation in its joint venture with SSE, briefly referred to in the presentation. It is all about occupying a place of trust in people’s homes, making life easy for the customer through leveraging the Knowhow expertise of Dixons Carphone and supporting SSE’s 5 million smart-meter customers. If the two companies can make this work, they will have moved the point of sale from the store and the smartphone into the home, a new offline revolution for tech retail.

The store as destination for new technology
There is one area where Dixons Carphone is lagging the market, and that is making the store a destination for experiencing new technology. Given that Oculus Rift and HTC Vive were launched at the end of last year, not enough has been done to create experiences for customers. The price-point of Virtual Reality is evidently beyond the purse of most consumers, but customers are looking to retailers to take a lead in demonstrating this and other new technology such as smart home. We did note, however, that in next year’s plans Dixons Carphone will be introducing a new in store gaming proposition and look forward to seeing what they do for this growing category.

Positive short-term results complimented by strategy with promising trends
Beyond the top line numbers, reaching more than £1 billion in online electrical sales is a significant milestone. The projected 24% average annual growth in home delivery, and one day delivery coming in the next year, Dixons Carphone is strategically positioned i) to capitalise on one of the largest customer bases ii) to be more profitable than a pure play business, with the capability to leverage its personalised “My Account” approach iii) to sustain customer relationships that translate into profitable life time value.

by AS

Is Black Friday dead? A US perspective

Guest blog by Chris Petersen, CEO of IMS, Inc.

Is Black Friday dead, or just rapidly waning? Data indicates the demise of the premier kickoff to holiday shopping in the US. It’s not just about the economy and consumer confidence, although those are key factors. The retail phenomena unfolding right now is about universal changes in consumer behaviour, regardless of socio-economic status.

Black Friday has declined in US retail … will the same trend happen in Europe?
In the not too distant past, stores were the premier focal point of holiday shopping. Black Friday was an event created by bricks and mortar retailers to entice consumers to come shopping on the Friday after US Thanksgiving, which always falls on the 4^th Thursday of November. Since many US customers take off from work on Black Friday, it became the quintessential retailer marketing event to lure shoppers to the stores with “best deals” of the season. The theory was that if shoppers came early to find a deal, they would come back to stores for the rest of their shopping.

Not surprising, the UK and other European retailers adopted Black Friday as a promotional event to kick off the holiday selling season and draw traffic to stores. CONTEXT’s analysis of distribution trends in 2015 was very predictive for UK retail sales spiking for Black Friday. Will the trend continue in 2016?

Black “Friday” — death by a thousand clicks
Increasingly retail stores have been jumping the gun on Black Friday by offering Black Friday sales before the actual Friday. The result in the US is that there is no longer a singular event. Black Friday has suffered scope creep, and it literally has become a “Black Week” of promotions and deals.

More importantly, consumers don’t see Black Friday as just “stores” any more. Amazon and other online retailers have creatively capitalised on “Black Friday” by offering daily online deals across an entire week, or more. This has created a new trend for “Cyber Monday” which is the first Monday after the traditional Black Friday. In the US, workplace productivity actually drops on Cyber Monday as people at work scramble to get better deals on stuff they didn’t buy or couldn’t get on Black Friday. Cyber Monday is projected to be the single largest volume day of the entire holiday shopping season.

Did the same trend happen in the UK and other countries? Compared to the US, the UK has a higher % of sales occurring online, especially for technology. Many of the UK promotional ads in 2016 now in fact show the Black 5 days of deals: Thursday, Friday, Saturday, Sunday and Cyber Monday.

The net result is that today’s consumer is an empowered consumer. They are not bound by place or time of event. This translates into a much diminished effect of single retailer store events like Black Friday.

Large retailers have privately confided that Black Friday needed to “die”. The traditional approach of cramming all deals into a single day dramatically lowers prices and margin. It would be healthier for both if retailers and consumers could evaluate offers and spread shopping over a period of time. In fact, that is how today’s omnichannel shoppers are already behaving – shopping multiple days in multiple ways.

So what happened in the UK for 2016?
Were Black Friday sales up again this year? Or, did consumers shift more of their shopping purchases to Cyber Monday? How much of their Christmas budget have they spent? The final store sales numbers won’t be tallied for a couple of weeks.

However, CONTEXT is conducting consumer pulse survey right now. We are asking consumers when they shopped, and how much they purchased on Black Friday and Cyber Monday. It will be interesting to see how much they expect yet to spend in the rest of holiday season.

 

Windows 10 Pro adoption beginning to rise

Thirteen months after its launch, adoption of Microsoft’s Windows 10 operating system is slowly beginning to increase amongst business users. By August, Windows 10 Pro (excluding the Windows 7/Windows 10 downgrade version) made up 24% of Windows Business PC sales in Western European distribution, up six percentage points compared to July. Whilst adoption in the first half of the year had largely been driven by the Windows 7/Windows 10 Pro downgrade version, July and August were the first months to see the share for “pure” Windows 10 Pro sales grow faster month-on-month than share for the downgrade version, albeit from a much smaller base. The share of Windows 10 Pro was up from 16% in June to 18% in July and 24% in August, while Windows 7/Windows 10 Pro moved from 65.5% in June to 66% in July, followed by a drop to 64% in August. Combined adoption rates for the two versions increased from 81% to 88% over the period.

The rise in Windows 10 Pro share, though moderate for the time being, is good news for the PC industry, which is looking at Windows 10 refreshes as the next larger growth driver in commercial PC sales. Certainly, some of the recent rise in adoption might be driven by the fee that we hear is being applied to the downgrade version, which is likely to cause budget-conscious buyers to move faster to “pure” Windows 10. But anecdotal evidence suggests that there is also a more “genuine” rise in interest for the new operating system, particularly within the small- and medium-sized business segment, as companies are slowly beginning to make the move from testing to deployment. In terms of volume growth, the business segment does indeed see a positive development: Windows Business PCs across our Western European panel were up by +7% year-on-year in the first two months of Q316, and while it would be taking things too far to say that this was entirely down to Windows 10, the new OS certainly did play a role.

Comparing adoption rates of Microsoft’s latest version of Windows to its most successful predecessor, Windows 7, the “pure” Windows 10 still has a long way to go to catch up. The 24% share of Windows 10 Pro that we’re seeing now, thirteen months after its launch date, compares to an adoption rate of 77% for the “pure” Windows 7 version at the same time after launch in October 2009. Things look better however when comparing the two OS’s combined shares of “pure” and downgrade versions: Windows 10’s 88% share in August this year is not that far off from the 98% held by the combined Windows 7 and Windows 7/XP versions in November 2010.

It will be interesting to see if the first few signs of an increase in Windows 10 sales will translate into a more significant growth trend over the next few months. Expectations are for the commercial segment to start refreshes in earnest at the beginning of 2017, with larger enterprises transitioning over the course of the next two years. We will be monitoring this closely.

by MCP

Positive steps in e-health

For years we have heard that ICT will allow us to achieve the paperless office. Even so, it seems that a lot of paper is still used today; we print all sorts of items, from boarding passes to books. We might have embraced emails, chat and other forms of e-communication, but we still use and produce a lot of paper.

It seems that one area that has been working this way is the health sector. Notes taken by doctors and nurses are recorded in (paper) files that are shared with others when necessary, and prescriptions are handwritten and passed on to pharmacies for patients to collect their medication. One of such cases was highlighted during a keynote at a recent HP eHospital event.

The Cambridge University Hospitals (CUH) NHS Foundation Trust needed to upgrade their aging IT infrastructure and equipment and went to tender. But instead of just modernising some of their hardware, they decided to overhaul their whole system, including the processes that everyone had been trained to carry out. In doing so, they have not only embraced new and modern devices, but completely transformed the way they work and, in the process, made data available to the relevant people in real time, with less scope for error.

All personnel have access to IT equipment and hence access to data hosted in datacentres and in the cloud, making the viewing and recording of information easier through handheld or desktop interfaces or the use of bring-your-own devices (BYOD).

This not only reduces the risks of for example misreading a handwritten prescription, but it also means the clinician can select a suitable alternative medication if a particular item is not in stock at the campus pharmacy – or highlight an inventory issue, prioritising the restocking of certain products. Apps have been created that work together with a software solution to enable people to view and record relevant information according to tiered levels – without any of the data being stored locally.

The Trust is building an online portal that will allow in- and outpatients to review their health stats and upload their own data (from personal health-trackers, smart devices or good old-fashioned measurements), which can then be reviewed by the clinicians at their next follow-up meeting, whether in-person on-site or via video link.

This NHS user at least is very happy to hear about the progress made by CUH, and welcomes the steps that have been taken to embrace this modern approach to healthcare. Now, can we please roll this out to other hospital trusts as well?

by MK

Tablet PC sales: growth opportunities for retailers

Last week at PCR Bootcamp CONTEXT hosted a panel of experts to debate the future of tablets.

Despite the recent decline in sales of tablets, the panel was universally optimistic about their potential in enterprise. “There is a huge opportunity in B2B verticals and in process improvement” said Phil Northam, head of Knox customisation at Samsung. “We can customise any Android system, we launched this program in April last year and we have significantly grown our revenues.”

Rodric Yates, Mobility Business Development Leader at IBM added “we are just scratching the surface.” But different skills and expectations are necessary “don’t start by trying to sell a tablet – the first thing is to understand what customers need” said Matt Birch, Channel Sales Manager for Intel. “The sell cycle is longer, it is critical to ensure that the device recommended is right for the customer otherwise the opportunity will be lost and the customer will give up on tablet… the OS, the form factor, the app ecosystem or even something as simple as the screen size all have to be right or else they will lie gathering dust on the shelves and people go back to their old devices.”

We heard about many different use cases for tablets – in education, hospitals, fieldwork and a fascinating case of airline entertainment systems from Phil Northam. “We had to take the wifi drivers out and the popup which says ‘don’t turn the volume up as it can damage your ears’. The result was a customised tablet giving an improved customer experience, and a lower cost solution with less weight in the aeroplane and hence massive fuel savings.”

“When you identify the solution it creates stickiness with the customer,” said Matt Birch. All of this is music to the ears of resellers and retailers who asked questions about whether this could be applied to smaller clients. “Come and talk to us” said Phil Northam.

Rodric Yates pursued the theme of listening “we have been accused of throwing technology over the wall, and not consulting the end user to ensure they get value. Listen to the users and build for them what they need not what they want. Don’t replicate the design you get on a laptop and make sure when you are designing that you use the context and capabilities of smartphone or tablet. Put power into the hands of people combining a beautiful front-end with back-end analytics.”

“For a fieldworker you can create an application which answers the question ‘where is my job, do I have the right tools, if I am struggling what are the manuals I need to refer to, can I tap into expertise using social media?’ – in this way you bring all the power together so that you can get the job done.”

In hospitals to avoid the paper flying about, you can answer the question ‘where are the patients, and the beds?’ and bring the right experience for symptoms and contra-indications – you can bring systems together to see the patient as one. Then you can organise who does what and when.

Perhaps we should end with an optimistic note on consumer tablets which still represent the lion’s share of sales “There is still a consumer demand but customers are only able to get some of their computing needs from a tablet so we believe there is a great opportunity for 2 in 1 and also Windows 10.” said Matt Birch.

Is business usage of Tablets growing?

by Adam Simon, Global Managing Director, Retail Business Development

Business usage of Tablets is expected to increase. With Tablet sales to consumers recently in decline across mature markets, and replacement cycles proving longer than expected, commercial usage is widely considered the next opportunity for Tablet growth.

In the course of last year, a number of vendors have launched Tablets dedicated for use in office environments or targeted at vertical industries such as retail, health and education. And consumer-targeted Tablets, in particular the iPad, have also been used by businesses. During Apple’s last quarterly earnings call, Tim Cook spoke of the importance of business sales of tablets – cynics will say that he would say that, having experienced an 18% YOY downturn in tablet sales, so he has to paint a rosy picture. But recent CONTEXT data supports the assertion of a growing importance of Tablets in business environments.

In Q414, for the top 5 Western European markets combined, distributor Tablet sales into business channels increased Y/Y while sales into retail declined. Sure, business-channel growth came from a small base, particularly in the corporate reseller segment, and multiple retail was still by far the dominating channel with a 69% share. But this was down from last year’s 73%, while business channel share increased.

And while Apple remains the dominating vendor for Tablet sales to corporate resellers, Windows has finally begun to make an impact on the segment. Windows-based Tablets accounted for 11.4% of Tablet sales to the corporate reseller channel in Q414, compared to only 4.5% a year ago.

It looks like Tim Cook is right, and there is a growing market for business tablets. The next big leaps will be when the IBM business apps which are being developed in collaboration with Apple, as well as the launch of Windows 10 later on this year, start to make an impact. CONTEXT will be tracking those trends closely.