It’s all change, once again, for the electricals giant, which has transformed dramatically since the merger of Dixons and Carphone Warehouse three years ago.

Shop Direct boss Alex Baldock is to take over as chief executive of Dixons Carphone, replacing Seb James who is leaving to join Boots.

James was the architect of Dixons Carphone and the transfer of leadership is also likely to result in changes at the retailer, which has faced turbulent conditions in the mobile phone market and had to warn on profits last year.

So what might Baldock do as he bids to take Dixons Carphone on a new stage of its journey?

A new chapter

Under the leadership of James, and John Browett before him, Dixons went through a radical transformation, culminating in the merger with Carphone Warehouse in 2014.

A decade ago, when Browett became chief executive, many felt that the electricals retailer’s days could be numbered. But despite all that has been done, another big shift is now likely under Baldock.

“The relative retail newcomer, whose first appointment in the industry was at the helm of Shop Direct in 2012, has made a name for himself as someone who can transform businesses – and fast”

The relative retail newcomer, whose first appointment in the industry was at the helm of Shop Direct in 2012, has made a name for himself as someone who can transform businesses – and fast.

During his tenure at Shop Direct, Baldock axed the Littlewoods catalogue, shut down the Woolworths website and ploughed investment into the online proposition, launching personalised homepages for flagship brand Very in what was heralded as a retail first. 

His track record at Shop Direct caught the eye of Dixons Carphone chairman Ian Livingston.

Unveiling Baldock’s appointment, Livingston said: “He’s led Shop Direct through one of UK retail’s fastest, most far-reaching and most successful digital transformations, delivering five consecutive years of record financial performance, with strongly rising sales and an almost tenfold increase in profits.

“We wanted Alex for his strategic clarity, relentless execution and his ability to inspire people to get behind him at every step.”

The former banker is clearly game for a challenge but has a big job ahead of him.

A fresh model for mobile

A priority on his agenda is likely to be addressing Dixons Carphone’s mobile phones business.

After playing down issues at its full-year results last June – with industry watchers claiming it “oversold its story” – the retailer issued a profit warning in August.

At December’s interim results, James talked about moving towards a “less capital intensive and simpler model” but did not provide detail.

“The self-confessed ‘geek’ was one of the first UK retail executives to bet big on artificial intelligence and has consistently been at his most enthusiastic in interviews when discussing the technology’s potential to transform retail”

He said he was in the early stages of discussions with network providers, and deputy chief executive and Carphone Warehouse lifer, the highly respected Andrew Harrison, was subsequently redeployed so that he might dedicate all his time to reinvigorating Carphone Warehouse.

As he considers what to do, Baldock is likely to draw upon the type of technological changes that powered the overhaul of Shop Direct.

The self-confessed ‘geek’ was one of the first UK retail executives to bet big on artificial intelligence and has consistently been at his most enthusiastic in interviews when discussing the technology’s potential to transform retail.

A better view of the customer, improved demand forecasting and more personalised relationships with customers might all be on the agenda.

More radical transformation

Baldock’s insatiable appetite for innovation and his expertise in personalisation, big data and pureplay etail may indicate too that significant structural changes could be in store at Dixons Carphone. Digital-first is likely to be the mantra.

Whitman Howard analyst Tony Shiret points to comments made by Livingston about Baldock’s expertise in digital marketing and business transformation. 

“This speaks to the anticipated need to restructure online not just in terms of changing the operating model for selling mobiles but also to a broader move to online in the medium term,” he says. 

“So it would be reasonable to assume that Dunstone and Livingston are thinking maybe more aggressively than the current market view.

“The current discussion re mobiles is referenced to the pattern of payments/receipts around various types of contracts. This is interesting but a sideshow compared with the larger issues of capacity.” 

Shiret also notes that in Dixons Carphone’s most recent update, “electricals gross margin was down and opex seemingly up as the move to lower-margin larger items impacted overall profitability”. 

“This [suggests] that with current market conditions, DC is unable to charge enough to support the higher costs of doing business in areas like large screen TV.

“They will be exploring all the options… the market has changed and there needs to be action”

Analyst

“Again if true, this underlines the need to move to a more sustainable model across areas other than mobile phones.”

Some observers wonder if there could even be a demerger of Dixons and Carphone Warehouse.

“A split is not beyond the realms of possibility,” one analyst says. “The business might be better off just selling mobile phones as it does any other category, particularly as it grows share in sim-only.

“They will be exploring all the options and that certainly is one. It may be seen as a step backwards but the market has changed and there needs to be action.”

Store closures?

Others find it hard to believe that such a course of action might be followed. What does seems likely, however, is store closures.

Although James has reaffirmed that significant store closures are not on the agenda – emphasising the retailer’s dependence on bricks and mortar – Baldock is likely to bring a different perspective to the multichannel business.

Baldock is unlikely to shutter stores before properly familiarising himself with Dixons Carphone’s business and place in the market, but he has not minced his words in the past when it comes to stores being a “distraction”.

When he was crowned the Clarity Retail Leader of the Year at the Retail Week Awards 2017 for his work at Shop Direct, Baldock told Retail Week: “The simple fact of bricks and mortar is that costs are rising faster than sales.

“We’ve got arguably too much space in UK retail and it’s costing more. There’s no easy way out of it so we’re quite happy to stay well clear of that and focus on pureplay.”

Regardless of what the future holds for Dixons Carphone’s store estate under Baldock, the electricals retailer’s incoming boss could be well placed to execute one of James’ ambitions for the business.

A year ago, in an attempt to leverage Dixons Carphone’s unique assets in the war against Amazon, James told Retail Week that he was moving the business in the direction of a membership model.

“James said this week that Dixons Carphone ‘always keeps [its] antennae twitching’ for changes in consumer behaviour, but Baldock’s own antennae may sense a new direction”

Baldock has relevant expertise here because Shop Direct’s laser focus on mining customer data for personalised marketing and product recommendations would play well to the adoption of a membership approach.

Baldock’s knowledge of financial services, from his time as a banker and at Shop Direct, which has a big credit business, is also likely to be useful in building a membership offer.

James said this week that Dixons Carphone “always keeps [its] antennae twitching” for changes in consumer behaviour, but Baldock’s own antennae may sense a new direction.

He will have freedom to create his own leadership team, because there has been a management exodus from Dixons Carphone over recent months.

Chief finance officer Humphrey Singer for instance and Vic Self – the customer director who had been with the business since 2009 – have taken new posts at M&S.

While the changing of the guard on such a scale may prompt anxiety, it also allows Baldock to set out his own roadmap.

The hope will be that a business with consumer digital technology at its heart, and a new boss convinced that technology will transform businesses’ relationships with customers, will make for a powerful combination.