PC retail faces up to online realities

The computer retail industry got a relative shock to the system last month. The DSG Group – owner of the Dixons, PC World and Currys chain of electronics stores – announced that it was closing its Dixons chain of high street stores in the UK and moving the brand and the operation online. Currys Digital take overs as the group’s high street brand for consumers. Web shoppers are now serviced online by Dixons. So far, its decision does no affect DSG’s business in Ireland where it maintains a high street store strategy.

We spoke to Declan Ronayne, general manager of the DSG Group in Ireland. He told us that its high street business in Ireland is going well depite tightening margins on the products they sell. DSG opened six new stores in the last year and Ronayne told us that its high street business in Ireland had grown over 40% year on year.

 

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Rising rents
So the DGS Group seems to be in a very rosy state in Ireland. But will it be able to sustain this prosperous position into the future? Perhaps not, for one of the principal reasons why the Dixons stores were moved online in the UK was because high street rents are rising rapidly, and that businesses operating off higher margin structures – pharmacies and clothes retailers – are much better positioned than electronics retailers to take prime locations in the most attractive shopping centres and high streets.

The situation is mirrored here. Rising rates in Dublin, Cork, Limerick and Galway present a challenge for the DSG Group in Ireland, whereas Power City may own its own stores, DSG rents its premises and faces a daunting situation where rents are rising by 25% year on year in some prime locations. With shrinking margins and rising rates, DSG may well be forced to offer its own branded web store in Ireland too. But for the moment, Ronayne believes that the Irish consumer is in a different place to their British counterpart. “The Irish customer likes to come into the store and kick the tyres so to speak. Bricks & mortar stores are still an important part of the purchasing process.” DSG does have a newly acquired online arm that can service Irish consumers but it is not branded as Currys, PC World or Dixons as of yet.  Last month, it took over pan-European e-commerce platform Pixmania.com and a localised version of the site is available for the Irish market.

Comment from Cantec
Maurice Muldoon who operates a regional competitor to DSG called Cantec, believes that the consumers should have the choice of shopping online or in-store with an Irish retailer who concentrates on serving the locality. “If a customer comes into the shop, they should be able to buy a certain type of product and call on the expertise of in-store staff. But they shouldn’t be able to come in, avail of the expertise of our staff and then shop online anyway. That’s wrong. We want to be able to push customers to the Web to buy a different sort of product to what they will find in the store. There they can buy a commodity but not the advice.”

Cantec is expanding rapidly, based on a strategy of serving the local towns. It has eight stores in Carlow, Navan, Cavan, Athlone, Mullingar and Maynooth. Muldoon also has plans to open a further three to four in 2007. Muldoon said that “he would rather have 1000 square feet premises in a high retail area than a 5000 square feet premises in a premium city-based shopping centre where rising rates and tightening margins would continually threaten the viability of the business.” 

Broadband barriers
Muldoon bemoans the lack of broadband in Ireland, especially the rural areas and sees it as a major inhibitor to online shopping and to the purchase of PCs and networking equipment. He also wants to see more e-commerce voucher services being made available for Irish consumers who are too cautious to use their credit cards online for fear their details are stolen while being transmitted.

It seems that with the continuing expansion of both DSG and Cantec bricks and mortar stores, real world computer retail will remain strong in Ireland for the considerable future. Slowly but surely, online alternatives will grow in acceptance and these high street behemoths will need to have compelling online offerings in place when web shopping reaches a critical mass.

* Harvey Norman and Compustore brand owner Iqon Technologies were approached for comment but were unable to meet our press deadline.

DSG Group

www.cantec.ie