Carphone Warehouse 2015 Annual Report Download - page 10

Dixons Carphone plc Annual Report and Accounts 2014/15
Strategic report
Our markets
8
Electrical products, and in particular ‘brown goods’, 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
electrical market tends to grow at a rate which 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 products.
The rapid innovation cycle may lead to price deflation in ‘brown
goods’ and computing, but also drive volume 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.
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. We benefit from
long established and widely recognised brands. 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.
Technology and the digitised world increasingly embed
themselves into our customers’ lives through social media,
online gaming, watching movies on the move, sharing pictures
with others, backing up files in the cloud or controlling energy
efficiency. The latest technology allows our customers to do
all this and more with tablets, Smart TVs and apps. The
ecosystems behind the current digital revolution are simplifying
our customers’ lives. Customers come to us not just for the
enabling technology, but to find a solution.
Developments in mobile broadband technology will continue to
transform lives and current industry developments suggest that
everyday objects will increasingly be connected to the internet,
in an ‘Internet of Things’. The 'Internet of Things' means that
people can manage home security or heating, or domestic
electronics through their smartphones. This phenomenon will
not only drive mobile data growth, but also machine-to-
machine data growth. With smartphones at the heart of this
evolution we believe that the Group is well placed.
Selling connected devices requires a range of experience and
processes that many retailers find impossible to emulate. It can
be an expensive, complicated and difficult process. The Group
combines the connectivity and product expertise of the two
former businesses at a crucial stepping-stone in the
development of the ‘Internet of Things’.
Connected World Services aims to leverage the specialist
skills, operating processes and technology of the business to
provide services to third parties looking to develop their own
connected world solutions. CWS already provides managed
services to a number of businesses and is actively exploring
further opportunities. Connected retailing has become one of
the five areas of expertise, along with services and support,
technology platform, product solutions and MVNO.