Page 2: Building on Dixons' strengths
Recent events have demonstrated that selling via the Internet is not a certain success for all companies. Some Internet ventures have collapsed even though billions of pounds were spent on trying to build the brands. Examples include:
- Boo.com, an on-line fashion and sports clothes retailer, which failed despite having £12million ploughed into creating awareness of it.
- Webvan, which soaked up £700 million in an attempt to create a large-scale retailing chain in the USA. Webvan had to file for bankruptcy.
Other companies are ‘hanging in there’, but have yet to make a profit. They struggle largely because they lacked an existing brand presence and needed to create one. Doing so is a long and expensive haul. By contrast, Dixons already had a stable of powerful, well-established brands reinforced by a strong national print advertising campaign and a highly visible portfolio of 1,000 stores. Millions already knew about the Dixons Group and its portfolio of retail outlets and products. Almost everyone seeking a new PC, TV or hi-fi was already likely to call in at Dixons, Currys or PC World either to browse or to buy. For the Dixons Group, therefore, it was an obvious and logical step to extend its information and distribution channels to include an on-line presence. In 1999, PC World created a detailed customer web-site, followed shortly after by a B2B web-site targeted at business customers. In 2000, Currys and The Link added on-line services.
One great advantage for the Group, therefore, was that it already had established brands that enjoyed high levels of consumer confidence; these have now been translated into on-line brands which are also promoted in the Group’s print and bricks & mortar advertising, in the in-store point of sale material and even on the carrier bags. The on-line shops are fully integrated, in marketing terms, with the Group’s bricks & mortar retail brands so that each channel reinforces the other. The Group was confident that people who were looking for excellent products and high quality service would quickly turn to the Dixons Internet site rather than spend hours surfing the Net.
Dixons had another advantage too. A brand new Internet-only business selling consumer electricals has to set up from scratch and so incurs heavy start-up costs that are recoverable from only one source: Internet sales. By contrast, an established company like Dixons is able to spread many of its Internet set-up costs over its existing operations. If the new venture is rather slow initially, the company is sufficiently financially strong to give it time to succeed. Selling lines can ‘stick’, and tie up cash. Because Dixons operates through a variety of channels, it is able to transfer stock from one type of outlet to another. This gives it a clear advantage over dedicated on-line retailers, who might find that they are stuck with unsold items when buying patterns move on to next month’s model. By contrast, Dixons can transfer slow-selling items to another retail outlet such as its high street stores.
Dixons already had an extensive system for fulfilling and distributing customer orders across the country. The Group has invested heavily in creating a state of the art on-line fulfilment system that is integrated with its existing operations. It includes price and stock management systems that allow instant price and stock checking. It also facilitates movement of stock around the various parts of the organisation to meet customer requirements on a day-to-day basis. The system also enables rapid changes to prices across the whole of Dixons’ trading operations in order to maintain a competitive edge for the Group’s 25,000 products.