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Paranoia at Dixons: one high street giant’s key to beat the web

Against all odds, Dixons survived as other major retailers collapsed. As Simon neville reports, fear keeps its management on its toes

Last Christmas saw a bloodbath on the high street for traditional retailers struggling to get to grips with the evolving face of the British retail scene as the internet came of age as the destination of choice for festive shoppers.

Blockbuster, Comet, Jessops and HMV all collapsed, leaving tens of thousands of staff without a job and traditional shopping streets and malls looking decidedly depleted.

All four traded in the low-margin, highly competitive area of electronics or technology and the casual observer could be forgiven for thinking that any remaining rival is likely to be top of the critical list this year.

But they would be wrong, or certainly in the case of PC World and Curry’s owner Dixons, which is set to see sales jump by up to 9 per cent in today’s interim results. Shares hit a five year high last night and are no doubt likely to rise further today.

However, the chief executive, Sebastian James, will be the first to admit the firm has struggled for several years to stay relevant and despite winning 30 per cent of Comet’s former customers when it went bust, he remains cautious. Speaking recently to the Independent, he said: “All shops that aren’t totally paranoid are doomed. We are totally paranoid all the time and we always panic that tomorrow is going to be the Armageddon. I think you see that in stores that have been successful, so we definitely can’t rest on our laurels.”

Analysts have suggested HMV did just that after the collapse of its rivals including Game, Virgin Megastores, Tower Records and Zavvi, along with WH Smith leaving the music and DVD market.

Apple came along with its iTunes store and digital downloads, leaving HMV eating its dust, while the supermarkets undercut the company on DVDs and the once-proud music store went bust.

Mr James recognises the comparisons and realises he must keep evolving the stores to keep up, but he added: “There is a fundamental difference between us and HMV and that is that you can’t download a printer, whereas HMV’s market simply evaporated because they were selling something that no longer had an physical presence.”

But how can a company like Dixons really compete with loss-making Amazon when it has such huge overheads such as rents and business rates?

Mr James has an answer: “If you want to buy something that costs a month’s salary, you want to make sure you’ve bought the right product... and it’s set up properly and you’ve got the right stuff [to go with it.]  Amazon might be extremely clinically efficient at taking your order online and shipping it to your house, but we match on price and can demonstrate it with someone really nice to show you how it works.” The problem for Dixons is, while staff might be “really nice” the general perception is one of incompetence and dreadful customer service – something Mr James readily admits.

He said: “Historically we were hopeless. When you look at our Which? Report we still come bottom or near bottom because we’ve a 30 year legacy of being a low service business and the customer rightly doesn’t forgive you for a while, so when customers come in and get good service their overriding emotion is one of surprise.”

Two years ago customer satisfaction sat at a lowly 44 per cent, now it is up to 83 per cent, and improving, but Mr James readily admits it will take at least five years to truly change people’s perceptions of the company.

But the biggest issue for Dixons is keeping up with new technology and products – with Mr James pointing out three years ago tablet computers barely existed and now they are set to be one of the biggest Christmas sellers.

Store ps are helping, with a new concept store opening last month in Aylesbury seeing double digit growth.

Lastly, all the fixtures are on wheels, meaning the store can be remodelled overnight, so should the country’s love affair with cooking come to an end, the mixers may no longer take pride of place by the entrance. Either way, Dixons still has some way to go if it is to challenge its online competitors and remain a high street force to be reckoned with.

Dixons by Numbers

9% The amount sales have jumped

30% Ex-Comet customers won