- 3 Jan 08, 12:03 GMT
I was packing for my trip to the Consumer Electronics Show in Las Vegas - the annual celebration of gadget gluttony – when news came through of the disaster at DSG. Shares in Europe’s biggest electrical retailer - owner of Currys, PC World, and Dixons.co.uk - plunged this morning after it issued a profits warning.
The firm blames poor sales of laptops and heavy discounting of flat screen televisions for its problems. So does this mean that consumers are losing interest in the latest kit? Should I be cancelling my trip to Vegas? Well, what do you think I’m going to say?
Consumers are anything but bored with gadgets - from games consoles to flat screen TVs to laptops, sales are booming. But DSG’s woes are due to long-term changes in the way we shop. Remember the days when anyone wanting a new television or a computer would pop into a Dixons or a PC World, knowing little or nothing about the technology, seek advice from a spotty salesman, and walk out with both the product and a pretty pricey extended warranty and a few accessories? Well we have all moved on.
One veteran analyst put it like this to me: “PC World has always been predicated on the unintelligent consumer. As people get more knowledgeable, that approach becomes less relevant.”
To be fair, DSG has moved on, ditching the Dixons name on the high street in favour of Currys Digital, closing many of its stores and putting far more effort into its online operation. It’s also launched a technical support team called The Tech Guys, in an attempt to provide the kind of end-to-end service it thinks the modern electronics consumer is seeking. The trouble is, the margins online are slimmer than on the high street and shoppers are less likely to buy those extended warranties that used to be the bedrock of Dixons’ profits.
I have been looking back at the firm’s share price over the last eight years and remembering the heady days of March 2000 when, under its original Dixons brand, the business was firmly lodged in the FTSE 100 - the index of Britain’s most valuable companies. And even higher up that index was Freeserve, the free internet service, launched by Dixons’ boss Sir Stanley Kalms in 1998, then floated within months at the height of dotcom mania.
Back then, it looked as though the old dog had learned new tricks, transforming itself into a hot new digital property. But after the dotcom bubble burst, Dixons seemed to decide the online revolution had passed and it could go back to the real world of the high street.
Meanwhile, from Dell to Amazon to Tesco.com, the online retailers kept on growing – and offering keener prices to an increasingly knowledgeable public. The move to flat screen televisions has bolstered DSG’s profits in recent years but now prices are plunging, down by around 35% over the last year.
A new man has just taken over as CEO at Dixons Store Group, and as the man who got Tesco.com off the ground John Browett seems ideally suited to change the focus of the business. My friendly analyst isn’t so sure - “he must have been blinded by the size of the cheque to take on that job.”
Mr Browett has sent a team of top executives to Las Vegas to try to spot what will be the hottest gadgets to win customers back to his stores next Christmas. I am sure the appetite for the latest kit - from ultra mobile PCs to laser TVs - has not been sated. But DSG may find that canny consumers inspect the gadgets in its stores - then head online in search of a better price.
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