Tesco electricals are burning bright

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Things might be looking up for Dixons as it reports improving performance, but now that Best Buy is out of the picture and Comet has been sold, perhaps it should be looking towards Tesco as the real competition in the electricals market.

Dixons’ results today (24 November) at least show progress, which is a far cry from the demise of Best Buy, and the sale of Comet after a drawn out spell of underperformance.

But a closer look at Tesco’s operations in the market make me think that Dixons’ real enemy is the supermarket moving into its space.

Tesco’s aim is to be seen as a “credible” electricals retailer, not just a supermarket that sells some tech products, and it has been steadily ramping up its presence in the sector. It is launching a marketing blitz to push its specialist service as well as a raft of services to rival the specialists in a bid to attract shoppers.

It has improved its range and while a year ago, it wasn’t even able to sell iPads, it now sells more than 3,000 of the tablets every week. Tesco also sells 60% of the Amazon Kindles in the UK that aren’t sold directly on Amazon.co.uk.

It has also introduced a six-month interest free credit option for electricals products so that cash strapped customers can still get their hands on the latest tech without pushing themselves into the red.

Ian Ditcham, category director for Tesco’s electricals division, says that since it was introduced, 60% of the iPads it sells are bought on the credit offer, meaning Tesco shoppers can purchase an iPad2 outright for £65 a month over six months.

Tesco now offers a trade-in service, which offers customers up to 25% of the value of old electricals in the form of cash, as gift cards, or Clubcard points, that can be spent against new electricals, or general Tesco shopping. More than 5,000 customers have traded in old tech gadgets since it launched less than a month ago.

It’s investing £12m this year alone in its Tech Team – a 1,000 strong team of fully trained in-store tech specialists, and £4m in its in-store displays for TVs and gadgets. It is also trialling new augmented reality technology in an effort to expand the information it can give shoppers about items it stocks without taking up more floor space.

It is running a series of TV ads promoting its Tech Team, a mega-deal on a 3D TV and Blu-Ray player, and one will follow to promote its recently introduced six-month interest free credit option.

These initiatives and gradual investment in electricals have boosted sales and seen Tesco’s return rate fall to 4%, down from 12% four years ago.
Dixons is clearly already aware that it needs to change and is taking huge and successful steps to improve its business, but so is Tesco, and it’s already a bigger threat than Best Buy ever was.

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