Tag Archives: Retail

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

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Filed under Connectivity, IT Distribution, Market Analysis, PCs, Retail, Retail in CONTEXT, Smart Technology, Tablet PCs

The Facebook Generation are leading new technology adoption

I went on to Facebook in 2008 to check up what people could see about my aspiring 17-year-old daughter who wanted to be a doctor. That was when the deluge started –the year after I joined, Facebook went from 100 million to 300 million members. That same daughter is now 26, and is part of the millennial generation, who surprisingly, at first sight, are dropping behind the younger Generation Z in driving technology adoption. Continue reading

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Is Amazon’s bid for Whole Foods a big blunder, or another brilliant Bezos strategy?

In the past couple of weeks, the news from the United States has been filled with headlines about Amazon’s pending acquisition of Whole Foods.

Amazon’s current bid for Whole Foods is the largest acquisition deal attempted by far. CEO Jeff Bezos is paying a premium price ($13.7bn USD) for a marginally profitable retailer who has not been growing. And the price may go higher if other suitors consider higher offers for Whole Foods in order to block Amazon’s acquisition of a nationwide retail food store chain.

As omnichannel shoppers continue to seek convenience of home delivery, a major obstacle has been the vexing problem of the “last mile” – moving quality fresh food from the warehouse to the customer’s house. Will this be the magic marriage that enables Amazon to leapfrog the competition? Or is Amazon’s move to owning stores a recipe for failure by reaching too far beyond its core business?

In this piece, we explore the pros and cons of the Amazon deal with a perspective by Context’s Global Managing Director Adam Simon, and omnichannel strategist Chris Petersen.

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Reasons why Amazon’s acquisition of Whole Foods is a recipe for failure – Adam Simon

  1. Amazon’s business model is ecommerce, not running stores

Amazon has built a tremendously successful model based upon online ecommerce. It specializes in warehouse, distribution and logistics to deliver items directly to consumers. Aside from a couple of pilot stores, it has no experience, team or systems in place to turn around a chain of 440 bricks and mortar stores with relatively flat growth and marginal profitability. Rather than be saddled with a retailer’s legacy systems and real estate, Amazon would be better off growing its own version. Or it could have acquired a chain with smaller format stores which would have better fitted the click and collect model.

  1. Whole Foods is upscale pricing and not consistent with Amazon’s strength for the masses

The standing cliché is that when people shop at Whole Foods they spend their whole paycheck. By design, Whole Foods offers very unique items and fresh organic foods at premium prices. Amazon is aggressively competing with Walmart in the US who is focused on the mainstream and value pricing. Whole Foods product range and high prices do not offer Amazon a competitive advantage in acquiring stores with broad customer appeal. Whole Foods brand and pricing is also inconsistent with Amazon’s own “Fresh” approach already in market.

  1. Mixing Amazon and Whole Foods cultures are like oil and water

Previous Amazon acquisitions like Zappos were designed to expand categories (shoes and apparel) but were also consistent with and built upon Bezos philosophy of “customer first” and ease of use. It’s not that Whole Foods is anti-customer, but the stores and culture were built around product differentiation and segmentation. The management philosophy and pay scales of Whole Foods are quite different from Bezos’ empire in Seattle.

Why Amazon’s acquisition of Whole Foods is brilliant retail disruption – Chris Petersen

  1. Bezos is investing for 2024 … the play for Whole Foods is not about grocery stores

If you follow Jeff Bezos the CEO of Amazon, he operates with a long-term vision. He has discussed how teams are in the process of planning the first half of 2024 today. Dennis Berman from the Wall Street Journal perhaps best summarized the Whole Foods acquisition:

“Amazon did not just buy Whole Foods grocery stores. It bought 431 upper-income, prime-location distribution nodes for everything it does.”

To underscore the value of an Amazon total integrated play, Whole Foods 440 stores gives Amazon to refrigerated warehouses within 10 miles of the about 80% of the US population. That kind of reach goes a long way of delivering fresh food the last mile to your door.

  1. Whole Foods enables Amazon to rapidly disrupt with its ecosystem

The Whole is greater than the sum of the parts [pun intended] and the parts of the Amazon ecosystem are formidable. Amazon has 100 million Prime members. Imagine what they could offer Prime subscribers in terms of preferred discounts and services in 440 stores. Amazon just announced a $20 version of an Alexa device built for ordering food and getting recipes … a perfect recipe for the Whole Foods concept and persona of fresh and organic.

  1. A core category of all households and the Prime subscription model is “food”

Half of Walmart’s core business is food and consumables, and it drives more than 100 million customers through its doors every week. It makes perfect sense why Amazon would buy grocery stores as opposed versus another type of retailer. As far as Whole Foods notoriously high prices, Amazon is the world’s best at shrinking supply chain costs and negotiating with suppliers. What better way to launch retail stores than to go after a category that drives weekly traffic and is synonymous with a subscription model augmented by Alexa and Dash reorders.

The future of retail is “hybrid”. Bricks and mortar retailers have been racing to build an online presence. Ecommerce realises the need to build a physical presence to complete the customer experience and establish an outpost for the last mile, especially in categories like food.

Will the Amazon big bet of 13.7 billion USD on grocery stores pay off? Chances are we won’t have to wait 7 years to find out. The “food wars” are already underway and we have a ring side seat.

It’s a great time to be a consumer! A very challenging time to be a retailer bridging both the digital and physical world.

 

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GTDC EMEA Summit – Positive at the midpoint of the year

At the recent GTDC EMEA Summit, the CONTEXT data and team were in evidence as the preliminary results of its annual 2017 ChannelWatch survey were unveiled in a dedicated workshop, and the GTDC Rising Star awards were selected using the CONTEXT data.

There was a real buzz this year with over 175 attendees, a record number of vendors, and senior executives from across the industry. The location was excellent with top class hospitality in the Kempinski Hotel in Vienna.

The conference opened with an upbeat introductory speech from Tim Curran, the CEO of the GTDC. Europe is on the move, growing faster than the US, and with excellent results in Q1 2017. Curran also took the occasion to remind members of the services provided by the GTDC.

We were then treated to a fascinating glimpse into the future by “futurist and humanist” Gerd Leonhard. Bringing together a myriad of ideas about the current technology explosion, he closed off his speech with a slide which really sums up the challenge ahead. Humans can only advance at a linear pace, whereas technology capabilities are advancing exponentially. We need to deal with this so that we don’t become “useless humans” and we must channel the new technology to the benefit of all mankind.

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From GTDC Keynote Presentation by Gerd Leonhard, 13/6/2017 ©

The final session of the morning, before breaking off into workshops and 1-to-1 meetings, was a Distribution panel, hosted by Peter Ward. On the panel were Graeme Watt, formerly CEO of Avnet Europe, now SVP Value at Tech Data; Jeremy Butt, Executive VP of Westcon EMEA; Ilona Weiss, CEO of ABC Data; Eric Nowak, President of Arrow ECS EMEA; Svens Dinsdorfs, CEO of Elko; and Anton Herbst, Head of Strategy at Tarsus.

The discussions were broad-ranging around the future of Distribution, the impact of recent consolidations, and there was a plea from Graeme Watt for vendors to think solutions not products, in order to get the right results for customers. An interesting debate took place about the importance of recruiting and retaining the best talent in the tech industry, a challenging area. One of the panellists said that often when people have been trained up in a specialist area, they are subsequently targeted for recruitment by resellers or vendors. This is definitely the stuff of future discussions for this audience to grapple with and find solutions.

In the CONTEXT workshop the preliminary results of the ChannelWatch survey for 6 out of 17 countries – UK, France, Germany, Spain, Italy and Poland – were presented. A number of questions were asked by attendees at the GTDC conference who were curious to know more. As Andy Dow, Group Marketing Director of Tech Data UK said, “The more deeply you dive, the more you understand that you need to dive even deeper.”

In this year’s ChannelWatch survey we had an overwhelming response of nearly 7,000 resellers, supported by our distributor partners who shared the survey with their reseller clients. The respondents were mainly owners, CEO’s and senior management, covered a broad spectrum of resellers, VAR’s, etailers and retailers, as well as small, medium and large sized companies.

Overall resellers in these countries are confident about 2016 and optimistic about 2017. This has been confirmed by a stellar opening to 2017 with 5% growth in Q1 panel revenues in these countries compared to last year, ranging from 13% growth in Spain to 1% in the UK. The outlying country for optimism is Spain (71% think that 2017 will be better than 2016) and the country with the highest number of doubters is the UK where 20% see 2017 as being worse than 2016.

The preliminary ChannelWatch data supports the encouraging opening talk by Tim Curran, and we look forward to a positive second half of the year.

The full results of the ChannelWatch survey will be made available in the coming weeks.

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by AS

 

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Window Shopping and Shopping on Windows

A running theme over the last few years in business news in the US and elsewhere is the terminal decline of the physical retail store. Many of the big name chains once thought of as bastions of the high street have fallen victim to the online juggernauts, on what seems like a weekly basis. The finger of blame is most often pointed at Amazon, whose profits continue to soar to such extents that some financial analysts are now claiming that their share price is overvalued and based upon forecasted earnings of massive proportions.

It is possible that President Trump may attempt to curtail Amazon’s growth through trust-busting legislation – something which could be motivated by his feud with The Washington Post and its owner/Amazon exec Jeff Bezos – however there is little legal ground to challenge the etailer simply because their business model and disruptive technology offers a better deal for consumers as things currently stand. It’s true that few retailers can take on Amazon based on pure pricing, however there are still assets which Amazon does not yet have: a large high-street presence and refined customer service.

I was speaking to a colleague recently whose wife works as a beauty consultant in London’s West End. She was upset that although their footfall was good and plenty of customers wanted to try out products, very few actually bought anything, and many could be seen price-checking and purchasing on Amazon before they even left the store. Let’s be honest: many of us do this every time we shop. Her general feeling was that they shouldn’t even bother stocking anything in-store. This remark was borne of bitter resignation, but some retailers have done exactly that, using a sophisticated omnichannel model to remove the need for significant store inventory.

There are certain categories where consumers will always want to try products in person, and which if prove unsatisfactory can result in a glut of expensive return logistics. Clothing and fashion is an obvious candidate; US brand Bonobos recently posted a $60m increase in revenue over the past five years, driven by their Guideshop setup. Consumers visit physical stores to see the new lines, try on clothing, then pay to have clothes delivered when and where they wish. The store itself does not hold large stock or inventory. Bonobos’ system challenges the assumption that most consumers want to leave with the product in hand, and has allowed them to reinvest logistical savings in staff training and a high service-level.

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This phenomenon is also seeing green shoots for technology sales, with showroom setups such as London’s Sandbox offering hands-on experience with new categories including VR. Like Bonobos, Sandbox’s function is to give consumers the chance to try room-scale VR, something Context’s 2016 VR consumer survey showed to be a key factor in purchasing VR. At this stage in the category’s lifecycle relatively few consumers have tried room-scale VR, and would therefore be unwilling to part with the daunting initial upfront cost.

These kinds of demonstrations are arguably more important for VR marketing than traditional advertising. VR can be a revelatory experience, but selling it to someone who has never tried it is an uphill struggle. It is also fair to say that many consumers shop online to avoid feeling pressured by a salesperson, and at present very few retailers can offer truly excellent face-to-face customer service. By removing the onus of making the purchase then and there, and potentially allowing for price reductions to compete with Amazon, Bonobos’ solution, or a modified omnichannel setup could be the saviour of the high street, not to mention a huge boom time for the distribution channel and drop shipments.

The art of window-dressing has a long and proud history, once a place of hubris for serious-minded shop attendants and source of satire for comedians, but now the whole store offers a window into (Microsoft) Windows.

by JW

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B2B – a risk for the channel or a missed opportunity for tech retailers?

The recent news about Amazon launching its B2B activity in Europe, starting in Germany, has generated a lot of press coverage. In the US it is reported that in the last two years the number of business customers shopping at Amazon has increased from 200,000 to 400,000, so resellers in Europe are concerned. “Amazon’s B2B challenge is a danger for the Channel,” was the headline on CRN UK’s front page.

So is this news a risk to the channel or in fact a missed opportunity for retailers?

Three years ago CONTEXT ran a conference which highlighted the opportunity of what we named “R2B” short for “Retail-to-Business”. Many retailers from across Europe attended this conference, but very few had the real commitment to make it happen. So will the news of Amazon’s arrival in this space make them wonder if they missed an opportunity? Surely if Amazon, with no stores, no experience of providing human-to-human customer service, and no expertise in business IT, can go for this sector, then the tech retailers can do so also.

Successful retailers in B2B are those who have invested in a service capability. Best Buy and the Geek Squad, DixonsCarphone and Knowhow, the Darty van with “le contrat de confiance” emblazoned on it – these are the retailers that have invested in service. Sebastian James, CEO of DixonsCarphone, said at Retail Week Live in March 2015 “if we don’t invest in the whole chain we risk to become irrelevant”. Some etailers have also managed to create a space in this area – an example is LDLC in France which has set up a nationwide network of resellers who help their business customers to install and maintain their IT equipment.

If a retailer is keen to take on Amazon in the B2B area here are the 5 key steps to follow:

  1. Identification and targeting of business customers through the use of CRM and intelligent sales activity – for example, every time a customer asks for a VAT invoice, this is a sure sign that they are a business; or when they purchase more than 2 of any machine, this should be a sign. Human interaction with the customer is important, as well as the posing of key questions online. On Staples website, the very first action is to identify yourself as a business or as a normal customer
  2. Curation of business SKU’s – with the support of vendors, retail is a way of targeting incremental sales from small businesses of less than 25 seats. But it is necessary to have the right products, which are not always made available to retailers. You can buy a Lenovo Thinkpad for a B2B customer on PCWorldbusinessonline, at Amazon.co.uk, at LDLC but not at Fnac, Darty, El Corte Ingles or even Media Saturn.
  3. Category management to drive out the optimal product mix – the business SKU is part of an ecosystem – understanding the upselling opportunities to meet the full needs of the business customer is a key element of success. R2B market data is a vital support for retailers by showing top selling products and typical market baskets.
  4. Service at every stage – the business customer needs service in store, online, at the point of installation and support in maintaining equipment in a functioning state. This is the most demanding element of the proposition in terms of investment. Recently, I asked the CEO of a retailer in the Middle East if he was concerned about Amazon’s purchase of Souk.com, and he said “No! We will differentiate ourselves through our service offering.”
  5. Financing of small businesses – this is a key activity which helps SMB to survive and grow. Healthy credit terms and even loans help small and medium businesses to expand without fear of cashflow shortage.

It is not too late for retailers to enter into this space, and capture a market which is at risk from the ever-innovative and expanding Leviathan which is Amazon.

by AS

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TCG Retail Summit – Top Themes for Future Retail Success

Guest blog by Chris Petersen, IMS

The TCG Summit represents a very unique gathering of top European Executives from across Europe. This year’s TCG summit, which was held at the end of March in Berlin, was particularly noteworthy in terms of the dominant recurring themes for future retail success, not only for technology, but all categories of retail. Even though the audience was primarily technology retailer and vendor leaders, innovations highlighted were less about the application of technology in the retail store, and much more about adapting to the most disruptive force in retail today – the omnichannel consumer.

Omnichannel is the New Normal
The underlying theme present in most of the presentations and panel discussions was omnichannel.   The TCG Summit in fact kicked off with Christophe Biget’s presentation focused on “innovation throughout the customer’s journey”.   From “walking in the customers shoes” to “customer centricity”, thought leaders were squarely focused on today’s consumer as a driving force of change in today’s retail.

If anyone had any doubts about omnichannel, it was key topic in almost every presentation and follow up panel discussion. The consensus in many discussions seemed to be that retailing is now moving beyond “omnichannel”.

“Experience is your product”
A top theme of both the presentations and panel discussions was focus on the customer experience as a key differentiator.   Jeffrey Sears from the Modernist group perhaps captured it best with his concept that “your [retailer] experience is your product”.   For traditional bricks and mortar retailers, the DNA now required is creating exceptional store experience as the new differentiator producing disruptive results. Despite all of the disruption from omnichannel, no one was predicting the demise of the retail store anytime soon. Many of the discussion panelists called out the need for new levels of partnership between vendors and retailers to “bring products to life”, particularly in stores.

Indeed, smart home products were frequently mentioned as the “poster child” for requiring hands on customer experience in store.   Smart home products are the growth category of the future that technology retailers are poised to lose … IF retailers don’t deliver an exceptional experience that connects products to the consumer’s life style.

Engagement – Yes we can!
The other underlying theme for future retail success is that retailers must develop internal DNA focused on customer engagement.   In the product centric past, it was enough to build stores, run ads and wait for consumers to come shop.   In today’s omnichannel world, consumers are very proactive and in control of their journey.   To be successful, retailers must focus on innovative ways to move from a passive display to proactive ways to engage customers where they are and how they want to purchase.

Perhaps the highlight presentation of the TCG 2017 Summit was from Nilesh Khalkho, CEO of Sharaf DG. Khalkho provided an amazing visual journey of Sharaf DG’s mantra of “Growing through Differentiation” in an omnichannel environment.   This journey included numerous examples of how retailers, especially technology retailers, will survive and prosper by truly differentiating on customer experience, engagement, and service.   The Sharaf DG story was a highlight that became a “Yes we Can!” rallying cry for what is possible in transforming technology retailing.

The Bottom Line – Results still Count
It is one thing for an executive team to say they are transforming to omnichannel, it is quite another to be able to execute omni-presence, experience and service 24/7/365.   There were a number of speakers and commentaries on the tremendous investments required to be able to create the experience and engagement demanded by today’s consumers.ETCG-Flashback-2017-43-2

As Adam Simon from CONTEXT highlighted, investors in tech retail are still looking for a return on their investment.   But achieving that return will require more than fiscal, operational expertise.   The successes, and the future of technology retail will require innovation on how to leverage talent in new ways that generate connected, customer relationships based upon a differentiated customer experience.

The bottom line for the future retail success – future success will not depend upon the sales transactions made today, but rather upon the customer relationships earned through engagement and services that will generate customer lifetime value.

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