Exclusive with Dixons CEO: ”Everywhere we open a Megastore – Media Markt becomes fantastically unprofitable”

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Scandinavia is the jewel in the crown of Dixons’ group.
We got an exclusive interview with CEO Sebastian James about the market, Nordic vs the UK and the fight against Media Mark in Sweden.
“Everywhere we open a Megastore – Media Markt becomes fantastically unprofitable”, says Sebastian James.

Sebastian James has just made a presentation about the new knowhow-concept in front of a lot of UK:s top retailers. Afterwards, only tv is allowed for interviews, but after telling we want to discuss Scandinavia he changes.
Sum up the Scandinavian market!
”We are market leader in everyone of these markets. That’s really helpful. Sweden is the toughest, no question. But everywhere we have pressure on price and everywhere we have to be competitive. Denmark and Finland is pretty much the same when it comes to competition. Norway has been a relatively uncompetitive market, but I think Expert will definitely be more competitive. We are quite looking forward to it”, he says.
”I need to have my team match fit when a strong competitor comes, so I’m keen to have a little fight now to get the team fit.”
How much do you control your Scandinavian operations from the UK?
”Well I have a philosophy that it’s no point trying to do someone elses job as well as your own. Jaan Ivar Semlitsch (CEO of Elkjøp Group) has a lot of autonomi. What we’ll try to achieve the next few years is that we have the best business model shared, and that means: Something happening in Scandinavia will happen in the UK – and when something happens in the UK it will happen in Scandinavia”, Sebastian James says and adds that the the Nordic market is gonna teach the UK market how to deal with telephones.
A few years ago Dixons hade quite a problem. Did the Scandinavian market save you?
“Sure. Definitely. The Scandinavian market continued to make profits all the way through our difficult times in the UK. This year it’s gonna be much closer – and next year…well we now have two fantastic groups, the UK and irish business and the Scandiavian business. Both are growing and they share the vision of the future.”
”I think that their ability to explain the benefits of the better products is unparallelled. We’ve been learning in the UK from what they’ve been doing and also in Greece and Italy. I am going to do something new, which we’ve never done before – I am going to swap two store managers between Norway and UK. And when they come back I want them to tell everything that was better about where you went.”
He counts Sweden as the most competitive market mostly because of the battle between Media Markt and Elgiganten.
”Sweden is a very aggressive market and we are having fun with it. The difference between us and Media Markt is that we make money and they don’t.”
You have been very careful opening new stores?
”We will have a Megastore in every location where Media Markt has a store. We currently have a half of them covered next to each other. And we know that when we do that the Media Markt store becomes fantastically unprofitable.”
”Media Markt withdrew their plans in Sweden and stopped their plans in Norway because of that.”
Is the 30 day-try-and return guarantee in Sweden exceptional?
“Yes it is exceptional because it is incredibly expensive. It depends on what the margin structure is like. It is possible in Norway where we have a better margin structure, but it is not possible everywhere. It depends on the price since. So computers that have a storage device is useless if it’s been used by the costumer. They can load anything on to it, like viruses, so it needs a complete refurbishing.”
”But we don’t generally get things back on the whole.”
Would you get more back in the UK?
”Probably. Probably…”
”In the Scandinavian culture, which I really enjoy being a part of getting to know it better, I think people are more direct. If they borrow a product it is to have a look at it and see if it’s something to buy. Here I can imagine people would borrow it just to see the big game and then return it the next day.
An official secret behind the Scandinavian operations is the supply chain.
”Scandinavia is very cost efficient and have very high store density. But compared to other Scandinavian players we have a single supply chain which is an advantage. Our Jönköping warehouse gives us the ability to serve all our four markets which is extremely efficient.”
“Two years ago there was a heatwave in Finland – and people were desperate for fans. And because we had all our fans for the whole Scandinavia stocked in Jönköping. We were the only one who had fans in Finland. We sold half a million fans in Finland in one week! Because we were able to consolidate our demand.”
Norway and Sweden are the core Scandinavian markets, but the progress in Denmark and Finland is also exceptional.
“Denmark has been a fantastic story for us. We taught the customer the benefits of the big store where you can see the full range. And the customers have overwhelmingly chosen that format over the small shops which means we’ve been growing with double digits for three or four years now. So we are now the market leader by miles and we are not at all worried about Expert or anybody else in Denmark – so it is a great story.”
”In Finland we built the business from nothing. Irmeli Rytkönen who runs the business in Finland is a sort of mother to the whole business. She is very calm – and the market is very calm, so it is a different culture again. That business has done really well building the market from nothing to market leader in very short time – seven years.
Sweden, Norway and Denmark is similar, but Finland is definitely different. Different atmosphere and different type of commercial activity.
But here is no Scandinavian market I am unhappy with.
What about Pixmania? They did not do so well…
“You can say that again! It’s a very tough time in Pixmania because it’s a single channel player in one category – and they also did a lot of mistakes.”
“But my view is that single channel – in electrical retailing – is not a succesful model. But Pixmania has a few good pieces and we will think of how to use these pieces more intelligent.”
Since Pixmania has half of it’s turnover in France Sebastian James does not really count it for Sweden.
What about Electroworld then, are you cannibalising on your own sales with it?
“A little bit. I am not sure where that will go. I think we ultimately need to be a multichannel retailer. But it’s sometimes interesting to get customer information that comes from a pure player – and it’s very small.”
It’s a destructive player and it helps us to fight particular players in the market. But it’s really more about customer information”