store closures and DSG's future

Currys - Reprinted with permission from DSG internationalToday the BBC have a news article on there site talking about the closure of 77 of the stores as there leases run out over the next 5 years. The stores used to be Dixon's before that brand abandoned there high street presence in favour of a web only operation.

Up until the beginning of the year I was working at PC World where I spent 2 and a half years working as a customer advisor for what initially started as a summer job, despite not expecting to be working there for long I stuck with it over the last few years of my uni course just working at weekends. I found the job interesting and it gave me an insight into how a large company works, I only really ended up leaving due to a change in management.

While I was working at PC World there was concern about the future of the company, during my time The Link retail stores closed down and they moved to an online presence only then shortly after than the Dixon's stores changed to This last change left DSG with a lot of locations with both a Currys store and a store, they should have really taken the opportunity then to remove these duplicates rather than to try and support both of them up until now, they should have taken one big negative hit with the press and markets rather than stretch it out.

The market for electrical items has changed significantly over the past few years, more and more people are buying online and becoming more and more tech savvy, this is presenting problems for and PC World because sales staff rely on the naivety of the buying public. When dealing with customers years ago the sales staff would tell them what they wanted, so in addition to buying the camera, computer or other electrical item they would also go away with a selection of accessories such as a case, cable, printer, batteries, software, etc... It was these accessories that made the sale profitable, the base product is generally very competitive in price and as such makes very little profit in a retail store, certainly not enough to support the general operations, this is why the accessories were and still are so essential. When I was working in the store the target was an additional £60 on top of a camera purchase and £100 on top of a computer, these would be high margin items adding £30 and £50 respectively of profit to the sale, generally a lot more than was made on the main item. Towards the end of my time there this was becoming more and more difficult as customers realised they didn't need these bits or they already had them. And of course the other profit making item was the extend support agreement but that is a topic for another time.

Anyway, as I was saying the customer was becoming smarter and not purchasing these items which I image is why DSG took 2 brands out of the high street into a purely online operation where the sale of just the main item can support the operations of the brand.
So far this hasn't happened for Currys and PC World, this is because of the type of items being sold. In Currys they generally sell large items like fridges, washing machines and ovens which people like to look at and measure to make sure it will fit in there house, they are also not very glamorous items so don't suffer from a huge amount of competition as people aren't as interested in selling them. In PC World the computer is the item keeping the store alive, but barely, a computer is still seen as a large purchase by many and people like to spend time looking at the different machines and talking to people about them. As time goes on more people will become comfortable with these purchases and be happy to take them online although I wouldn't expect to loose the computer on the high street for a long time. As I alluded to the PC is no longer enough to keep a store in business that is why PC World has spread into anything and everything, at a conference I was at for the store one of the speakers (PC World management) said there wasn't anything they wouldn't consider selling, and this can be seen by the changing product lines. PC World tried selling stationary in a fairly big way (an attempt to compete with Staples) but this only lasted for a short period before they scrapped the idea, they then started with TVs this range has now expanded and become a significant range for the store.

While I was working at PC World I had to complete a financial analysis of a company for a university course, with the permission of the store manager I analysed several years of store financial data, whilst I am obviously not going to post it here it did reveal an interesting trend. Over the 2 years I covered the stores profits remained fairly constant although the turnover was increasing, this shows that the store was having to sell an increasing amount of stock just to keep profits level. I don't know if this was indicative of the whole chain or just a poorly performing store but it clearly wasn't a sustainable situation.

The next few years will be an interesting time for DSG and the other electrical retailers; I don't expect much to happen to DSG, they have been expanding significantly into Europe so are in a better position to survive the changing consumer buying patterns but they will need to be quicker at adapting if they are going to be around in the long term.