Is DSGi’s bid for salvation ‘too little too late’?

CurrysIt would be no exaggeration to call DSGi, formerly Dixons, a pale shadow of its former self, cowed by the brutal cutbacks in con-sumer spending. After contending with increasing pressure from Tesco and Argos and e-retailers including Amazon, last week it announced yet another initiative to stop the rot that has led to two profit warnings so far this year: “Value, choice and service”.

The electrical retailer, led by new chief executive John Browett, a former Tesco executive who took over from John Clare five months ago, has promised to increase focus on customer service and make the business “unrecognisable” within three years. And as Browett sets about investing in improved service, he has also started dismantling Clare’s European empire by undertaking a full-scale review of the loss-making businesses in Spain and central Europe.

The announcement also comes barely a week after the world’s larg-est consumer electronics retailer BestBuy signed a £1bn deal with Carphone Warehouse which presages its move into the UK.

Browett’s initiative has been criticised as “too little too late”. Planet Retail analyst Kate Stevens says: “There is too much emphasis on cutting costs and slashing jobs and store numbers, and not enough on reinventing itself. If DSGi wants to be a market leader, it should be leading the market. That the announced store closures are less than were predicted suggests that the company truly is hanging on by the skin of its teeth. The announcement simply highlights DSGi’s overall weakness.

“It also comes at rather an unfortunate time. What once could have been a springboard to further improvements now simply appears as a knee-jerk reaction to BestBuy.”

Not a response to BestBuy

However, a DSGi spokesman denies that its reassessment is a direct response to the BestBuy deal. “BestBuy’s entry to Europe is a bit of a validation of what we have been doing and our chief executive also feels that it is an opportunity to galvanise our business and the electricals market,” he says.

He characterises plans for the UK market as “reinvesting the cost-cuts” into sprucing up the image of both PC World and Currys stores. An estimated 12 “new” Currys are expected to be rolled out before Christmas, with better trained staff and more product choices. More than 70 high street shops are being closed, and there is also talk of testing a “big-box” store to include both Currys and PC World under one roof this autumn.

DSGi is also keen to build up Dixons, which was turned into a pure online retailer two years ago. “Our belief is that multichannel is the way to success and we are working hard to engage with our customers in our stores and online,” adds the spokesman.

Experts say reinvention is nothing new to DSGi. The business has been trying to reinvent itself since the late Nineties when the brand became dogged by bad press relating to the sale of extended warranties. It has already faced a disastrous defeat in the US and seems to be continually battling with falling sales and shrinking margins.

Price promotion

“PC World is an appaling brand; is dreadfully misconceived and the business has been obsessed with competition from the internet and promoting price,” says Richard Perks of Mintel. “The business has been responding to its problems like an accountant would and has lost sight of customers and merchandise, but now Browett has recognised that he needs to address the problems as a retailer should.”

Offers of an improved range of goods, introduction of new store formats and closure of poorly located stores and the development of multi-channel retailing could be a long drawn-out affair for DSGi. But at least it is not giving in without a fight.



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