Dixons Carphone credits increased marketing spend for ‘barnstorming’ sales
Dixons Carphone has reported “barnstorming” sales in its first full results since the merger between Carphone Warehouse and Dixons Retail as a focus on improving customer service, increasing marketing spend and the demise of rival Phones4u helped boost its performance.
Like-for-like sales at its UK and Ireland business were up 11% in the second quarter, helping its sales in the first half to 6% growth. Across the wider business revenue was up 5% while profit before tax rose 30%
Speaking on a call this morning (17 December) following its results announcement, Dixons Carphone group CEO Sebastian James said the company has spent more on marketing for Phones 4u and increased staff numbers to ensure they “don’t lose customers that come in and want to be served by someone”. He said this has led to an uptick in customer satisfaction year-on-year.
“Our net promoter scores are radically better. This is not surprising. We have a much nicer environment, clearer proposition, better-trained workforce,” he said.
The focus on customer service has also led to an increase in referral rates into Carphone Warehouse with James saying referral rates are seven times higher than they were when it had Phones 4 u areas in its stores. That, he added, is a reflection of the “full integration” between the two businesses, which is already a year ahead of schedule.
“This shows that our colleagues are thinking of us as one team, that is a massive change,” he said.
Dixons Carphone’s strong performance means it has increased its market share over the half, with James saying it has taken share from everyone from independent retailers to the supermarkets and multichannel competitors. However, he admitted that Carphone Warehouse is not performing as strongly among 18 and 19 year olds and so is looking at changing its marketing mix to focus more on social media to boost its share.
“We have to talk to 18 and 19 year old in a different way. We have to talk to them in social media. We are identifying where we can be strong against that customer group and seeing share increase over time,” he said.
Neil Saunders, analyst at Conlumino, says while Dixons Carphone’s sales were helped by an improving economy and the demise of Phones 4 U it has also been boosted by its Knowhow support service and multichannel capabilities, which have helped it “hold its own” against online rivals such as Amazon and AO.com. James said Dixons Carphone’s prices are “within 1%” of Amazon and it is looking to expand services such as free delivery to ensure it remains competitive.
“Overall, we believe that Dixons Carphone is well placed to take advantage of improving market conditions. However, there is no doubt that the marketplace is becoming more competitive as rivals start to bridge the electricals-telecoms divide. A focus on customer service, keen pricing and continued innovation and consolidation will be critical for Dixons Carphone in the years ahead,” adds Saunders.