Today we have seen Dixons Carphone announce that its pre-tax profits are up 17% to £447m and its revenues in UK & Ireland have grown by 6%. It seems to be a shining light of hope in an otherwise rather dark retail environment.
Over the last few months we have seen some very notable retail failures with Austin Reed and BHS both going into administration. But, as many an analyst will tell you, these are just the tip of the iceberg.
The numbers speak for themselves. By May 2016, 14 retailers had gone out of business at a cost of 989 stores and over 20,000 employees. The British Retail Consortium predicts it won’t stop there with a further 900,000 job losses likely by 2020.
All this in the context of increasing household disposable incomes and before the doomsayers forecast Brexit apocalypse. It seems a strange dichotomy that with more money in our pockets the high street should be faltering so badly.
So what are the key components that have allowed Dixons Carphone to continue to grow whilst others struggle?
In my opinion there are some fundamentals that all retailers need to address if they are going to survive the harsh environment on the high street, and Dixons Carphone has identified them and run a strategy accordingly
- Know your customer. Insight is critical.
Firstly retailers must accept that the British consumer is changing and changing at a much faster rate than we have ever seen.
Customers are ever more demanding and expect levels of service and response that would have been considered a premium experience only a few years ago. Our ‘always on’ society means that there is an expectation to have fast delivery, high stock availability, tremendous customer service, immediate response to social media comments and at a rock bottom price. So far so obvious!
But it is also clear that consumer behavior and attitudes are radically different in specific customer segments. Millennials, a key target for organisations like Dixon’s Carphone have very different needs, and are drawn to very different brands to older customers.
To succeed retailers need to understand exactly who their brand appeals to, what segments they can serve well, and importantly build a retail experience that really resonates with those target segments.
- An experience tailored to the audience
Which brings me to my second point. The experience. The Internet clearly plays an enormous role for many customers from researching their purchase to influencing the final buying decision.
It allows easy price comparisons, reviews from users and the ability to research in depth technical detail (for those segments who like that sort of thing) far beyond the information you could ever get in a store. For a long time now there has been a belief that the internet will eventually be the death of high street shopping and one can assume with Virtual Reality stores becoming, well a reality, those dire predictions will continue.
But shopping is still considered by many to be a leisure activity and for all the benefits of the Internet it doesn’t allow you to touch, use, taste or try your purchase before you make the decision. And this year we’ve heard from retailers like ASOS who struggle to contain stock and margins, blaming customers for buying too many things and crippling their P&L because they can’t cope with the resulting returns they get when things don’t fit properly.
But no matter how good the web experience is, it makes far less of a statement about what the retailer brand stands for and how you can really enjoy engaging with that brand then a physical presence. This is the role of the high street.
Dixons Carphone has understood this and has a clear strategy to continue to develop its retail experience to work in harmony with its online channel, making stores showrooms and playgrounds rather than simple places to transact business.
- A winning vision that addresses the segment
And the final ingredient that all retailers must have if they wish to succeed, and which appears to have been sadly lacking at BHS and Austin Reed, is a clearly described vision of what they want to achieve and the strategies that will deliver that vision. It’s a fundamental of business – understand what you do, how you should do it and above all WHY you do it.
The vision therefore needs to be far more than a pithy mission statement written on the wall, or an 80-page slide deck that the leadership team has discussed in depth. It needs to be something that is clearly communicated from the boardroom all the way to the shop floor and every single member of the team must understand what the company wants to achieve for its customers and how each individual will assist with delivering that vision.
Dixons Carphone is one of the clients I have had the pleasure of working with over the last two years and I have seen very clear evidence of a strongly communicated and executed strategy.
But I have also helped start-ups and grocers with their strategy, segmentation and go to market plans and irrespective of the market the key fundamentals of success are the same. Those that do succeed are driven by a common goal, built on insight and a close connection with what the customer wants. It’s not lip service in these organisations, it is an ethos.
Dixon Carphone has succeeded where others have failed using a recipe that is no real secret. It’s simply applied and stayed true to the ingredients needed to design a strategy around people. And those that want to emulate the same success, and ride the rollercoaster that is retail today, should take note, before it is too late.
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