Carphone Warehouse 2016 Annual Report Download - page 12

Dixons Carphone plc Annual Report and Accounts 2015/16
Strategic Report
Our markets
10
Our markets
Mobile phone and connectivity and consumer electronics
are Dixons Carphone’s core retail markets, but increasingly
the Group is growing beyond these product markets by
1) industrialising its existing services infrastructure and
expanding its offerings to focus on consumer services in the
home, and 2) continuing to expand its rapidly growing
business-to-business operations via the Connected World
Services division.
Mobile phone connectivity
Dixons Carphone is the only nationwide independent mobile
phone retailer. The Group is uniquely placed to offer impartial
advice over the vast array of network, handset and operating
platform propositions available in the market.
This market is also served by MNOs, with whom the Group has
long and well-established relationships, as well as independent
and generalist retailers. The MNOs will offer propositions for
their own networks, whilst independent and generalist retailers
will provide a greater variety of propositions on one or multiple
networks. Furthermore there are online-only retailers providing
a variety of these services.
This market is also served by MVNOs as well as a relatively
small number of global manufacturers supplying goods to
local, regional, national and international MNOs/MVNOs
and retailers.
In recent years there have been significant changes in the
landscape of mobile phone distribution. In the UK we have
seen a major market withdrawal with the exit of Phones 4u
and the acquisition of the EE network by BT. During this period
the Group has managed to gain significant market share
particularly in the post-pay segment.
The sophistication of mobile phones continues to grow rapidly,
from simple mobile devices to sophisticated hardware with
advanced functionality. There is a wide choice of operating
platforms and network options for customers, which makes
the Group’s expert and impartial advice, simplified by the
tablet based tool, Pin Point, particularly relevant.
MNOs continue to see increasing levels of data usage, a trend
which will continue as customers migrate to new tariffs that
include 4G access as standard. As MNOs continue to roll out
their 4G networks, quality and speeds improve, facilitating
much faster downloads and providing levels of performance
comparable to many Wi-Fi networks, enabling a much better
platform for streaming, in particular for video content.
To benefit from 4G services, customers need 4G-enabled
devices and as 4G network coverage improves, there is an
incentive for customers to upgrade their contracts, providing
a stimulus to the replacement cycle increasing the penetration
of 4G devices and tariff uplifts. After several years of
downward pressure on ARPU, increased data usage provides
an exciting opportunity.
The internet plays an important part of customers' purchasing
journey for mobile, with the majority of customers researching
online before making a purchase. However, online sales have
remained relatively flat in the UK at c. 20% of sales for a
number of years. The complexity of the mobile-buying decision
means that customers continue to value the advice available
within stores. This preference to touch and feel products prior
to purchasing has restricted the penetration for mobile online
sales. Elsewhere, in markets that are less mature than the UK,
the proportion of online sales continues to grow and
represents between 4% and 11% of total retail sales.
The mobile market has remained robust during periods of
reduced economic activity and whilst mobile phones might be
considered discretionary purchases, the reality is that mobile
phone contracts are considered an essential element of
people’s lives.
Consumer electronics
The consumer electronics retail market can be split between
specialist electrical retailers, such as Dixons Carphone, and
general retailers which sell electronic goods as part of a wider
offering. The market can also be broken down into two distinct
distribution channels: ‘assisted’ and ‘unassisted’. In the
assisted channel, specialist retailers, such as Dixons
Carphone, help customers through the buying process in the
form of product advice, add-on services, delivery and
installation. The unassisted channel, which includes single
channel internet retailers as well as general retailers, tends not
to offer all of these services.
Specialist electrical retailers are the predominant destination
for customers in the European consumer electronics market.
Buying groups, general merchants and independents also have
a retail presence through stores and / or online. The market is
served by a relatively small number of global manufacturers
supplying goods to local, regional, national and international
electrical retailers.
We are one of the largest specialist electrical retailing and
services companies in Europe with leading market shares in
the UK, Ireland, the Nordic region and Greece. In each of our
markets there are varying numbers of specialist retailers who
compete in the assisted market. While we do compete against
general retailers, this is usually limited to certain lower price
categories as these retailers do not offer the full range of
products, assisted sale or the other services we are able
to provide.
We have seen some significant shifts in capacity in many of
our markets in recent years with some mass merchandisers
reducing space for electronic products, some single channel
internet operators de-emphasising certain segments, as well
as some specialists exiting the market. These shifts have
helped us to gain market share and it underpins our view that
a strong service led multi-channel operation satisfies both
customer and supplier needs while delivering a sustainable
business as customer shopping habits continue to evolve. We
believe further consolidation will occur in some of our markets.
00_DC 2016 Annual Report.pdf 10 11/07/2016 18:34