Carphone Warehouse 2016 Annual Report Download - page 13

Dixons Carphone plc Annual Report and Accounts 2015/16
Strategic Report
11
The internet has established itself as an important part of the
electrical retail landscape. It supports enhanced product
information as well as price comparability. It is an essential part
of the buying process for customers, particularly for large ticket
discretionary products. However, the expert advice provided
by well-informed sales advisors within stores is highly valued
by customers. Larger retailers, with an integrated multi-channel
offer, with scalable distribution and systems, together with
proven after-sales service and support are increasingly
attractive to customers.
The increase in online penetration provides us with the
opportunity to increase both the range of goods on offer and
the availability of product information. Our multi-channel
approach is well placed to exploit synergies between our
internet sites and stores.
Our reserve&collect service (collect@store in the Nordics),
where customers can order on the internet and collect from a
convenient store, at a time to suit them is proving to be
increasingly attractive to customers. Similarly, our pay&collect
service, where customers can access a wider range of
products than is typically available in their local store for either
home delivery or later collection from the store, is also
increasingly popular.
Innovation brings new products with improved functionality
that drives sales growth. These include 4K Ultra High Definition
(‘HD’) and smart TVs, wearable technology, connected
products for the home such as heating and lighting. Content,
such as social media, apps, digital media and cloud
computing, also help to drive hardware innovation and
replacement. Product sales are driven by structural shifts, such
as analogue to digital and standard format through to Ultra HD
television. In addition, innovation drives new service
requirements, including TV installation, data backup, computer
set up and instructional Showhow teach-ins. In this
increasingly complex world we believe our assisted sales
model is best placed to help customers navigate the market
and to help them choose a complete solution that best meets
their needs.
Many electronic products are predominantly discretionary
purchases. However, increasing penetration of digital
technology in the home drives faster replacement cycles as
these products become less discretionary. The economic
backdrop also determines whether customers trade up or
down. Accordingly, the electronics market tends to grow at a
rate that is at or exceeding the economy during years of
economic growth. While the opposite can be true during a
downturn, this may be influenced by new innovation and an
exciting product cycle.
The rapid innovation cycle may lead to price deflation, but also
drives volumes as products become more affordable and
replacement cycles accelerate. For larger ticket items, the low
frequency of purchases limits the impact of price deflation on
total market sales as consumers typically trade up to higher
specification products. Our ‘Customer Journeys’ are designed
to explain the features and benefits of the latest technology to
customers and help them understand the reasons for trading
up to these newer technologies.
The sale of white goods is underpinned by the replacement
cycle. Due to higher costs of repair, it often makes better
economic sense for consumers to replace white goods outright
rather than to arrange for their repair. The sale of white goods
is also driven by the dynamics of the housing market
as new construction, house sales and refurbishment trigger
new purchases.
Consumer services – Knowhow
Everyday technology, whether smart TVs, computing, mobile
phones or kitchen appliances, is becoming increasingly
complicated with connectivity and inter-operability penetrating
into more and more areas. Families are dependent on this
technology working for an ever-increasing range of
applications such as keeping in touch with friends and family,
entertainment, work, finances and school homework. Keeping
this home technology working and online is increasingly
becoming an essential requirement.
Most homes in markets in which we operate have around ten
connected devices, and this is expected to grow dramatically
over the near term, creating further expected positive demand
for home technology support services.
We believe the market for home technology support to be
already large, worth around £5bn in the UK alone, of which we
estimate to hold a c. 10% share. Despite the significant
demand and a large market, the supply of services is highly
fragmented.
There is a major opportunity to grow our share of these
valuable and growing markets to more closely match our share
of product sales. Our aim is for our Knowhow business to be
the digital leader in technology support.
Importantly we start from a position of real strength; our
services capabilities and operating platform developed to
support our product sales business is already class-leading
and at real scale.
We are already the UK’s leading technology support business
with: over 11m warranty and insurance policies; 700,000
mobile repairs per year; 4.2m home visits per year; 740,000
computer repairs per year; over 100,000 gas installations per
year; more than 600 skilled engineers; and over 1,500 in-store
service colleagues.
We have a leading share in the sale of connected technology
through our significant multi-channel presence with strong
manufacturer and supplier relationships and a ‘cross
ecosystem’ approach in place. We have Europe’s largest tech
and white goods repair capability at Newark with more
technical support agents than any other business providing a
nationwide solution. This is a complex business to replicate.
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