Comment: Dixons could find 2014 much tougher to build market share

Dixons’ first half results have brought to a close a calendar year in which the company has scaled back across Europe, yet continued to grow in its core markets as it invested in its multichannel approach.

With like-for-like growth of 9% in the six months to 31 October, 2013, including 12% growth in the final quarter, the UK has been a considerable source of stability and optimism in a year where its Southern European and online pureplay business, Pixmania, have been a lead weight on the company’s performance.

As the retailer approaches Christmas, it is set to be one of the biggest beneficiaries on the high street from the continued high demand for tablets and the resurgent games industry, thanks to the new Xbox One and Sony PS4. In addition, its growing reputation for informing and assisting shoppers through its Knowhow and Showhow services are helping to continue the service-led improvements that were started by John Browett, and contributed to an outstanding year for Dixons.

However, it would have been harder to not have had an exceptional 2013. With Comet’s decline throughout 2012 and final closure by the end of that year, Dixons has been up against comparatives that included its biggest competitor, and, though to a lesser extent, also included Game at full strength.

The retailer’s biggest challenge is coming up in 2014, where it will have to rely on its internal improvements to ensure it outperforms Verdict’s forecasted 3.3% growth in the electricals market.

New store trials in the Bluewater shopping centre and in Aylesbury show the retailer isn’t sitting on its laurels; however, it must act quickly in getting these store designs rolled out across the group. With plans to consolidate the UK & Ireland store estate to below 400, down from the current level of 527, it must ensure these have appealing and interactive shopping environments, to get the most out of their potential.

Though Dixons’ appetite for international growth has seemingly waned over the last two years, the retailer should not be underestimated once economic conditions improve. Sebastian James has clearly set out a strategy of focusing on markets in which Dixons has a leading position; however, there are little long term growth prospects in the more mature markets, so if it does look for international expansion, we would expect it to be outside Europe, possibly through the less risky partnership route.

With so much investment in improving its multi-channel approach and making its pricing competitive with online pureplays, Dixons may surprise some with a growing market share in 2014. However, its biggest obstacle will be Amazon.

With a reputation for relentlessly lowering prices, and a clear strategy for improving the convenience of ordering through Amazon Lockers, Collect+ and quick delivery slots, Amazon will continue its relentless rise in 2014. Dixons has become more price competitive with Amazon, but may need to act more aggressively to stop Amazon from taking market share in the long term.

Matthew Rubin is a retail analyst at Verdict