Carphone Warehouse and Dixons yesterday revealed they are in early stage talks over a merger. Retail Week takes a look at the benefits for Dixons.

Customer service

The key similarity between both retail giants is that their core strategies fundamentally focus on service. Carphone’s Connected World service, which echoes Dixons’ Knowhow, would bring an authority to Dixons’ limited mobile phone offering and ensure smooth cross selling between Carphone and Dixons’ products which are connected to the internet.

Carphone last year invested £10m in a new supported sales service with bespoke software for staff using iPads which Dixons will be pleased to introduce to its stores.

Greater access to the mobile phone market

Dixons has been underexposed to the booming market for the latest smartphones which customers typically replace every one to two years, as opposed to its larger electricals which are replaced far less frequently.

Independent retail analyst Nick Bubb believes Dixons’ Seb James has not been satisfied with the existing 153-store shop-in-shop tie-up with Phones4U, due to expire next year, believing Dixons should partner with the market leader in assisted sales of mobile phones.

Investec analyst Kate Calvert says: “Mobile technology is becoming the centre of people’s lives and this is a category where Dixons has limited UK exposure. We see limited cost savings potential, but believe there are likely to be best practise and store rationalisation opportunities.”

Cost savings

There are clear synergies between the two electricals specialists and it has been estimated in the City that a merger could bring cost savings of up to £270m. The new business, which could have a market capitalisation of £3.5bn, would be able to leverage efficiencies in sourcing across Europe.

Complementary store estates

Dixons’ estate is primarily out-of-town while Carphone Warehouse has a strong high street presence so a potential deal would not necessarily lead to a raft of store closures. Moreover, the opportunity for Dixons to offer a click-and-collect service through Carphone Warehouse’s in-town stores will attract Dixons’ which has multichannel at the heart of its offer.