DSG International has come a long way under the stewardship of chief executive John Clare, who is stepping down in September after 13 years (MW last week). But his successor John Browett inherits a business facing fierce competition from supermarkets and online retailers and one which has “yet to fire on all cylinders”, according to industry experts.
DSGi, which owns Currys.digital (formerly Dixons) and PC World, operates in 27 countries and employs more than 40,000 people in 1,200 stores and online stores. Although pre-tax profits in the past four years have increased from £270m to £310m, the company has paid the price for problems both at home and abroad.
Recently it has moved its Dixons brand online, withdrawn from the fiercely competitive French market and seen slower than expected growth of its UniEuro brand in Italy.
Failure to adapt
Mike Godliman, retail analyst at Pragma Consulting, believes one of the group’s biggest problems has been its failure to adapt to a changing retail environment. “It hasn’t anticipated the market as well as it has in the past, and the move to a digital offer was very slow and several years behind,” he says.
Clare had a reputation for predicting trends and in the 1980s Dixons was a cornerstone of the British high street. But today Dixons is a purely online brand – with the exception of some duty free stores in UK airports.
Godliman does not think axing such a well-known brand from the high street was the right move and questions its place on the Web. “I’m sceptical whether it’s a good online brand,” he says. “You have to ask yourself whether consumers want to go to Dixons online or Amazon. Amazon has good prices and there’s a cachet around the brand that you don’t have around Dixons.”
Loss of presence
DSGi has always had a reputation for operating on tight margins and was unlikely to move online until the Web was making a profit, according to Godliman. The consequence of this has been a loss of presence to its competitors. “The retail world has changed hugely in the past ten years,” adds Godliman. “For many years online didn’t make any money and from 1997 until recently Amazon was losing money.”
Alastair Lockhart, senior retail analyst at Verdict, says although the company is in a strong position in the UK and has become a truly European retailer, it has been caught out by the increasing competition from supermarkets such as Tesco and Asda. He adds: “The market generally is a lot more aggressive.” Lockhart even predicts that in ten years “DSGi will not have much high street presence”.
Browett, presently on gardening leave having left his role as operations development director at Tesco, will face several key challenges if he is to bolster DSGi’s growth and safeguard its place in the new-look electrical retailer environment.
He needs to get the Italian operations on an even keel and will have to decide what to do about Russia, says one industry source. In December, the company can exercise an option to buy a 10% stake in Eldorado, Russia’s largest electrical retailer.
The group has historically expanded through acquisitions but this strategy could soon be coming to an end, believes Lockhart. “One of the issues it will face is that the market for acquisitions is drying up,” he adds. “It needs to move the model on and that will be a challenge.”