Data helped bring Dixons back from near-death
Apple has been in the news recently with the CEO of Burberry taking on the role of head of retail stores and online, which was previously held by John Browett who lasted only six months and now heads up Monsoon/Accessorize.
This slightly tarnished the reputation of Browett, which is unfortunate because when you take a close look at what he achieved in his previous role as CEO of Dixons then he has to be applauded for being a catalyst for great change at the company.
It is no exaggeration to say Dixons might now be a tombstone in the retail graveyard along with other retailers whose business models have been threatened and killed by the internet.
You cannot say a share price truly reflects a businesses’ standing – but when you consider that in December 2008 Dixons shares were at 7p while today they stand at around 46p then the business has clearly undergone a great change in its fortunes.
Four years ago under Browett it recognised the need to adapt and its ‘Renewal and Transformation programme’ began – that included closing stores and building up the online proposition. Even today some retailers are still in denial about the need to offload shops.
Changing things at Dixons post-Browett have been continued with Jeremy Fennell, head of e-commerce, who has been a strong advocate of using data. Among many things it has helped the group to cut its prices to better match rival Amazon.
Speaking at the recent Internet Retailing Conference he revealed that 18 months ago the company was 18% more expensive than its online rival – equating to £140 million per year, which was slightly worrying for a company making only £60 million per annum. It has invested £60-70 million to date and is now typically only 4% more expensive than Amazon. Parity is expected over the next few years.
In order that this investment has stacked up – i.e. margins maintained – costs have been taken out through simplifying logistics and integrating the online operation with the stores business.
It has also extended its range online from 11,000 to 20,000 items (drop-shipping from third-parties for many items) and using its data insights to spot fast sellers and bring them into the core range to replace slower lines. New categories such as sewing machines have also been identified from consumers’ product searches.
The result of all this is that online sales are 30% up on last year when they were up 40% and the group as a whole is up 15% this year. This reflects how dramatically different the Dixons business is today and that is down to recognising that the market is changing big-time and doing something radical about it.