Dixons in pounds 10m mail order move

Dixons Group, Britain's biggest electrical retailer, has bought DN Computer Services for pounds 9.7m in order to boost its sales to small and medium-sized businesses.

DNCS is a mail order business, specialising in the supply of computers and computer related products to the business market.

Dixons plans to integrate it with the 32-strong PC World stores chain, which already makes 15 per cent of its sales to businesses.

The acquisition will be financed by a mixture of loan notes and cash, Dixons said.

John Clare, Dixons chief executive, says: "We see it as an opportunity to develop the business-to-business market, which is a pounds 4bn market. It's still very fragmented, but growing as fast as sales to individuals - around 30 to 40 per cent a year."

He added that a flick through any computer magazine showed the huge number of companies trying to sell PCs to businesses.

Dixons will not be trying to compete with companies like IBM, Dell and Compaq which sell direct to larger businesses, he added. The average business order through PC World would be about pounds 1,000/pounds 2,000.

As for further acquisitions, Mr Clare said he "wouldn't rule that out - that would come some way further down the road. This deal cost more than PC World, which we bought in 1993 when it had just four stores." DNCS employs 130 staff and is based in Heywood, near Manchester. Mr Clare says Dixons will retain the Heywood office and take on more staff. "This is all about growing the business." he says. "We're buying into their skill base. There may be efficiencies on the buying side."

DNCS publishes a mail order catalogue covering 5,000 product lines, including computers, printers, software, peripherals, consumables and related services.

The catalogue is supported by a telesales and account management team. Through its PC World stores Dixons has already established a base of business customers, but does not have the infrastructure to supply businesses after the initial purchase, says Mr Clare. "That's where DNCS will come in."

DNCS will provide the database management, systems and marketing skills of a catalogue operation, complementing PC World's existing position and offering additional distribution channels for reaching the business customer, he added.

The deal comes at a time when mail order selling is growing strongly. Burton has bought the Inspirations catalgoue business thi year. More recently it paid pounds 19m for Racing Green, the clothing retailer with a strong mail order business.

Though electrical retailing is a cut-throat market, Dixons has been enjoying strong growth. It recorded pre tax profits of pounds 132.5m last year.