DSG International, the recently rechristened Dixons Group, is to jettison the Dixons high street chain, bringing the curtain down on 75 years of retail history.
In a first for a British retailer, the group is moving the chain into cyberspace where it will attempt to take on the giants of the online retail world such as Amazon. All 190 existing Dixons high street stores will be rebranded Currys.digital, expanding the Currys estate to 550 outlets.
The move is the culmination of a three-year quandary for DSG about the future of the Dixons chain, which started life as a single photographic studio in Southend in 1930. Rising fixed costs such as rent and rates and competition from supermarket groups and internet-based rivals have massacred the group's UK profit margin, prompting its decision to shut a third of its Dixons estate two years ago.
John Clare, the chief executive, said he aimed to make Dixons the No 1 electrical retailer on the Web "over time". He denied Dixons' high street exit was a demotion for the chain that gave the group its name. "This gives the brand a new lease of life. It is repositioning itself into the growth sector of the market," he said.
Dixons' existing e-commerce arm, which was started in 1997, has grown its annual sales by 50 per cent in the past four years. DSG does not break out the proportion of sales and profits generated online but they are very small in relation to the group.
The City gave its tentative endorsement to the plan, marking shares in DSG 1.75p higher at 186.25p. DSG said it would cost £7m to rebrand the Dixons stores as Currys.digital and the conversion process would begin next month. It will reap £3m in annual cost savings, about 1 per cent of its pre-tax profits, largely from combining the Currys and Dixons marketing budgets. Mr Clare ruled out the prospect of any job losses.
Analysts predicted a wave of further high street store closures, not least because there are 13 towns in which the two chains overlap. Some analysts also queried how Currys would manage sufficiently to boost the profitability of the existing Dixons estate. Christian Koefoed-Nielsen, at Panmure Gordon, said: "The underlying cost pressures are not going to change just because they change the name of the stores."
Mr Clare said he would improve the performance of the high street estate, which includes 73 Currys outlets, by making 4,000 new product lines available. "We'll give people more things to buy. That's our best defence against some of the inflationary costs we face." Currys has been part of the group since 1984.
Most of Currys' products, including many of its smaller household appliances, are higher-margin than the new technology goods sold at Dixons. "I think they can put a more family-friendly offer into the Dixons high street stores on the back of the Currys brand," Mr Koefoed-Nielsen said.
Lord Kalms, who transformed the group from a single store into Europe's biggest electrical retailer in his 54-year tenure, has given the plan his blessing. Mr Clare said: "If anything, he believes it puts Dixons in an exciting place, looking forward and growing again. He thinks it brings Dixons back to its roots of being able to offer better value and deals."
Brand experts expressed some scepticism about the attraction of offering a one-stop Web-based shop. Stuart Whitwell, the managing director of Intangible Business, a brand-evaluation consultancy, said: "It's an interesting test to see if an online play can make it on its own because I believe retailers need a multichannel strategy to make a brand work."
The Dixons brand will live on in Ireland, in airport duty-free stores and in the form of a no-frills out-of-town outlet called Dixons Warehouse. So far only one of the discount stores has been opened but more are in the pipeline.
DSG, which also owns The Link and PC World in the UK, has stepped up its European expansion drive recently. It has an option to buy the Russian chain Eldorado, which would catapult it into one of the world's fastest-growing retail markets.
Rise and fall of a household name
1930 Charles Kalms opens the first Dixons photographic studio at 32 High Street, Southend.
1937 The business is incorporated as a private company with a share capital of £100.
1950 Dixons sells simple cameras and accessories.
1977 The first Walkman makes it into the stores.
1978 The first video recorder goes on sale at £798.75.
1984 The Curry family sells out to Dixons.
1993 It spots growing demand for personal computers and buys Vision Technology Group, which owned four PC World stores.
1994 John Clare becomes chief executive. Opens The Link chain and the first Dixons duty-free stores.
1997 Dixons Online is launched, selling the first electrical goods on the Web.
2004 Shuts one-third of its UK high street estate.
2005 Changes its name to DSG International.Reuse content