The Dixons Experience

On-line shopping: the Dixons experience Introduction THE DIXONS GROUP IN THE UK Britain is turning into a dot.com nation. By May 2001 10 million homes had connected to the Internet compared with 6 million a year earlier. In addition, many people access the Internet through cyber cafés and The leading high street retailer The UK's largest electrical superstore UK wide leading specialist retailer of The UK's largest computer Provides after-sales service to through access at schools, colleges and universities. In recent years, of consumer electronics phones and communications products superstore chain the Group's customers more and more people (particularly the young) have turned to electronic purchasing. The number is certain to increase. In 1997, Dixons created the first fully looking for new shopping opportunities. largely because they lacked an ex- for excellent products and high quality prices across the whole of Dixons’ transactional on-line service in the UK. Hence, it is highly aware of the impor- isting brand presence and needed to service would quickly turn to the Dixons trading operations in order to maintain a Retailers simply cannot afford to ignore these developments. However, Its two main reasons for doing this were: tance of multi-channel selling, and of create one. Doing so is a long and Internet site rather than spend hours competitive edge for the Group’s 25,000 not all retailers are equally well placed to take advantage of this changing the need to exploit fully those channels expensive haul. surfing the Net. products. • Dixons anticipated the growth in environment for trade. that give greatest value to customers and on-line e-commerce trading Dixons had another advantage too. A which are growing in popularity. By contrast, Dixons already had a stable brand new Internet-only business selling Overcoming This case study looks at why Dixons turned to the Internet, and why for of powerful, well-established brands • Dixons wished to strengthen the visi- To meet the needs of today’s market reinforced by a strong national print consumer electricals has to set up from initial obstacles them it is proving a success. bility of the brand, particularly among place, Dixons has created systems that advertising campaign and a highly visi- scratch and so incurs heavy start-up costs PC and internet users. that are recoverable from only one The Dixons Group is the largest specialist consumer electricals retailer in enable customers to buy at any time, ble portfolio of 1,000 stores. Millions It is not easy to set up and operate an from any place and from anywhere. source: Internet sales. By contrast, an on-line retailing service because there Europe. The Group operates in eleven Western European countries. Its already knew about the Dixons Group If leading brands are to maintain their established company like Dixons is able Dixons concentrates its activities on: and its portfolio of retail outlets and are many costs and difficulties associat- UK retail operations include Dixons, Currys, PC World and The Link. position, they need to be continually to spread many of its Internet set-up ed with this method of selling: products. Almost everyone seeking a brought to the public’s attention. The • selling directly through stores costs over its existing operations. If the new PC, TV or hi-fi was already likely to Internet offered new, powerful opportu- new venture is rather slow initially, the • Delivery to individual homes adds • on-line selling through the web-site call in at Dixons, Currys or PC World nities for publicity and sales. company is sufficiently financially to the cost of running a business either to browse or to buy. For the operation and can eat into profits. In Dixons is forward-thinking. Its con- • tele-sales. strong to give it time to succeed. Selling Dixons Group, therefore, it was an conventional shops the customer sumers are changing all the time and lines can ‘stick’, and tie up cash. obvious and logical step to extend its Because Dixons operates through a travels to buy so the retailer does not Building on information and distribution channels to variety of channels, it is able to transfer have to fund delivery costs that Dixons’ strengths include an on-line presence. stock from one type of outlet to another. would otherwise erode margins. It is This gives it a clear advantage over important, therefore, to be able to In 1999, PC World created a detailed dedicated on-line retailers, who might generate large volumes of sales to Recent events have demonstrated that customer web-site, followed shortly after find that they are stuck with unsold items make the operation worthwhile. selling via the Internet is not a certain by a B2B web-site targeted at business Dixons is well placed to do this when buying patterns move on to next success for all companies. Some Internet customers. In 2000, Currys and The Link because of its scale of operation month’s model. By contrast, Dixons can ventures have collapsed even though added on-line services. and its brand reputation. billions of pounds were spent on trying transfer slow-selling items to another retail outlet such as its high street stores. to build the brands. Examples include: One great advantage for the Group, • Inevitably, some items will be therefore, was that it already had estab- Dixons already had an extensive system returned because consumers find that • Boo.com, an on-line fashion and lished brands that enjoyed high levels of for fulfilling and distributing customer they do not fully meet their require- sports clothes retailer, which failed consumer confidence; these have now orders across the country. The Group has ments. Again, this adds to costs of despite having £12million ploughed been translated into on-line brands which invested heavily in creating a state of the doing business if the on-line seller into creating awareness of it; are also promoted in the Group’s print art on-line fulfilment system that is has to meet the cost of returns. and bricks & mortar advertising, in the integrated with its existing operations. It Dixons has the advantage of a nation- • Webvan, which soaked up £700 in-store point of sale material and even includes price and stock management al network of retail stores, so it is million in an attempt to create a on the carrier bags. The on-line shops are systems that allow instant price and relatively convenient for customers large-scale retailing chain in the USA. fully integrated, in marketing terms, stock checking. It also facilitates move- to return items to their nearest Webvan had to file for bankruptcy. with the Group’s bricks & mortar ment of stock around the various parts of Dixons outlet. When consumers have retail brands so that each channel the organisation to meet customer confidence in the returns facility, Other companies are ‘hanging in there’, reinforces the other. The Group was requirements on a day-to-day basis. The they are more likely to make the but have yet to make a profit. They struggle confident that people who were looking system also enables rapid changes to initial purchase. Glossary of Keywords Reflecting the ating the computer programme, it was able to track the behaviour of people These measures broadly indicate as is the contribution of the site towards essential to anticipate the questions that using the site. Dixons can monitor: how attractive the business is, how effi- increasing levels of brand awareness. in-store experience consumers typically would ask and cient it is in making sales, and how • the Internet provider used by each then to provide the required informa- profitable it is. There are other benefits to Dixons that B2B: Business to business transactions: one business dealing with Dixons already has four powerful browser eg Freeserve, AOL, Demon; tion in a user-friendly form. arise from developing e-commerce. One another through electronic communication. brands in the UK. Indeed, its brands Growing profits depend on moving on • how long browsers spend on the site; is that it provides career opportunities were so strong that it made sense to Brand equity: The "value" that is assumed to be present in a strong Using a system known as SMART, pro- the customer from buying basic or for existing employees who may have leverage the "brand equity" in the grammers working for the Group have • the extent to which they explore the site. or well established brand name and which can be used in launching standard items to more sophisticated an interest in personal development new on-line stores by ensuring that created a database for each individual new products and services. The Group can then build up a picture products with a wider range of features through moving into Dixons’ on-line its on-line facility complemented product. Internet browsers can access of which users of the site are most which may command a premium price activities. Competitive edge: Providing a more attractive offer than rival consumers’ in-store experiences. The this data from home. Equally important, likely to become buyers and can note and yield a higher profit margin. In addi- products, often through lower prices, and/or better value for money. Dixons Group already spends millions shoppers in a traditional shop can also characteristics such as age and sex. tion, selling "add-on" or peripheral of pounds each year on advertising use it to complement the information the E-commerce: Buying and selling through the Internet. Typically, Internet customers tend to be items that complement the main product Conclusion through the press, radio and television. sales assistant provides. younger than those making purchases may add to the profit margin made on the Fulfilment system: Having the automated and integrated Its Internet presence both increases through stores and are more likely to sale, for example blank video tapes to go Being able to buy any time, any place, infrastructure to manage sales, distribution, ordering and delivery the exposure given to its brands behind the scenes.

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