Best Buy closing UK stores, Comet sold by Kesa, What a week for Dixons :-)

What a week this has been in the electricals retail sector… firstly it was announced that Carphone Warehouse was to shut all 11 Best Buy shops (http://www.bbc.co.uk/news/business-15616445) and then it was announced this morning that Kesa had sold off Comet for £2 to Opcapita (http://www.bbc.co.uk/news/business-15650763). This made me reflect on my time working for Dixons, specifically when I was category planning manager for white goods at Currys. That was 1999. Some things haven’t really changed for the better…

The Currys white goods customer proposition in 1999

Back then we didn’t have a transactional website – in fact a basic Packard Bell desktop PC with a colour monitor, hopeless processor and dial-up modem would set you back a good £1000. People simply didn’t have internet access or computers in their homes.

However, we had an amazing proposition. With an extended range of over 2000 products either on display or visible via in-store catalogues Currys were able to provide a good 150-200 top selling products to take-away right now (and bearing in mind these are high-cube items – bulky – fridges, freezers, washers, dryers, cookers etc) and the rest of the entire 2000 products were available for next day home delivery (within a 4-hour window) if purchased by about 4pm today.

Wow. Just think about that. This was  a market leading proposition. Stores were able to provide the very few customers who came with a van / big estate car with an item to take with them, but more importantly, was able to fulfil a pretty impressive delivery proposition which now is only just being achieved by many so-called “multi-channel” retailers.

How did Currys achieve what was then such a powerful service proposition?

It was all down to the supply chain network infrastructure. Called the LDC network (local distribution centre) Currys ran an amazing 19 smaller warehouses around the UK which were supplemented by 1 (and later a 2nd) national “hub”. I was also responsible for the team which booked a phenomenal 900 truck loads of stock into these 21 locations per week. The LDCs were stock holding locations for the fastest selling products – depending on the storage space and volume they’d carry lineage of between 150 and 250 items. The hub(s) carried back up stock of all of the fast sellers and a full coverage of the long tail of items, the near 2000 lines which made Currys the out and out market leader in choice of product from the consumer perspective.

Every day customers home delivery orders were placed in store and those orders were communicated to the LDC that serviced their post code. Similarly any sales from the store of the carry out stock also was reported to the LDC. This triggered the whole delivery and replenishment cycle and the delivery van’s load and routing for the following morning!

Store sales were replenished next day; customer orders were delivered (if required) next day…. yes, that’s fine if your LDC is in stock of an item – but what happened if it was out of stock or the customer order was not for one of the lines that it carried?

Simple – that was where the hub kicked in. All demand that was unfulfilled by LDC stock triggered a pick from the hub to the LDC. This was cross docked during the night, and to make best used of transport, the empty returning trailer would either bring back damaged stock, obsolete items or collect from supplier.

So, the customer, oblivious to this amazing system, could order any of over 2000 different products from the white goods range and receive it via home delivery the very next day.

Awesome!

So, what went wrong – how come almost 13 years later Currys have gone backwards?

I left Dixons to go to Argos in early 2001 but prior to that talks were already taking place about reducing cost and complexity in the supply chain infrastructure. LCP and Accenture were called in to do complex modelling around the various routes to market and the cost to service those routes. White goods, whilst effective and a market leading proposition, had a very hefty service overhead and relatively low profit margins. Other areas of the supply chain – small domestic appliances shipped from a main national distribution centre and fast-turn items such as cameras were shipped from a “rapid response” distribution centre. When you looked at the entire network and not only at white goods it was apparent that the infrastructure was a bit of a muddle and needed a complete overhaul.

Sadly though in overhauling the network Currys moved away from offering next day delivery. About the same time the transactional websites started to go live and with the growth of online all the attention was centred on how to service internet sales.

I don’t know how many customers moved away from Currys when the proposition was changed, but I do know that fierce online competition and no compelling reason to buy (next day delivery for instance) made Currys a me-too brand along side a new, more diverse competitive set that wasn’t just Comet but now included Amazon, Co-op, Tesco, ASDA etc.

So what’s the moral of the story?

For me the moral of the story, reflecting on the really tough times Dixons have traded through lately, reflecting on what’s happened with Comet and Best Buy, is that when it comes to the crunch the majority of electricals consumers aren’t retailer-loyal. They want a branded item, with features and functions. That’s identifiable. Once the consumer has identified an item the internet (Google) has made it simple to check who sells it, for what price, with what delivery proposition and any other value-added extras.  When you don’t offer anything special then the only thing you can do is compete on price… and that’s a downward spiral where the retailer with the deepest pockets to “buy their customers” is going to be the winner.

It seems that Best Buy and Comet were not that retailer, and, with Dixons reinventing themselves with Dixons Black stores and merging PC World and Currys, the others lost out to the better retailer.

I still hold a special place in my heart for Dixons – I enjoyed working for them all those years ago and learnt so much. I hope this news is just what they needed!