Thinking big

How is Dixons reacting to the threat of Tesco?

Can you imagine making £4m every single hour? That's almost £67,000 per minute, which even by IT standards is pretty good going. It's staggering that a company that started with a 'stack 'em high, sell 'em cheap' mentality is now the biggest retailer in Britain.

Tesco took a look at its business a few years back and decided to stack 'em even higher and sell 'em even cheaper. It moved from the high street to out-of-town superstores, where rents were cheaper and logistics for customers were better. And it never looked back.

The announcement last week that The Dixons Group is to shut almost a third of its Dixons stores made me wonder: is the electrical retailer feeling the pinch from the likes of Tesco and its rivals, which have all started encroaching on the electrical sector, or is it merely emulating the supermarket's successful strategy?

When you think about it, the fact that over 20 per cent of Tesco's revenues come from non-food-related goods is quite alarming. The retailer already sells LCD flat panels and hand-helds - how long before it wakes up and smells the PCs and pre-packaged software?

Surely UK supermarkets must have cast a roving eye over their European counterparts and seen that on the continent supermarkets have been making good money from selling basic PCs for years.

So is Dixons looking over its shoulder at this imminent threat or has it decided that big is better? The firm has been saying for months that it is looking to open 'XL' superstores this year and expand its offerings.

And it's already been revealed that the retailer is looking to buy Micro Warehouse UK to add to its PC World Business stores.

But does all this add up to a threat to the channel? Research has shown that many smaller VARs feel intimidated by PC World Business and other big stores, especially when it comes to serving SMEs.

But even the smallest VAR has one huge differentiator when competing with retail giants: a level of service and aftercare that big players cannot offer. Concentrating on these two factors will help the channel Davids win out over the retail Goliaths.