The £3.8bn merger of Dixons and Carphone Warehouse is one of the biggest recent deals in UK retail. But its true significance doesn’t lie in its size.
Instead, it is the technology that is owned, used and sold by the companies that is driving the reasoning behind the merger.
The merged company, called Dixons Carphone, will, according to its owners, “create a leader in European consumer electricals, mobiles, connectivity and related services.”
One of the key aims will be to make the most of the internet of things, which Dixons and Carphone Warehouse both clearly believe is well on its way.
The retailers said: “Ever-increasing data speeds and a broadening range of connected electrical devices will, we believe, enhance revenue streams for the combined group.”
The internet of things, which is the development of everyday objects such as thermostats and fridges which are connected to the internet, is still at an early stage. It is, in fact, a trend that is by no means taken as a certainty by many people – fridges that order your shopping for you sound a little too far-fetched for some.
Dixons Carphone is quite clear on the matter, however. “The consumer electronics and mobile phone retail landscapes have evolved significantly over the last few years.
“In particular, the growth of smartphones, tablets and speed of internet access both in and out of the home, together with an increasing number of connected devices, are altering the way people live their lives, communicate and use technology.”
Dixons chief executive Seb James said today: “What might seem outlandish today will be absolutely ubiquitous in a few years.”
The merger statement adds that this change in the way people live will create “a significant new opportunity for retailers to provide a broader range of products, connectivity, services and solutions to customers.”
The deal will help the pair provide this because the internet of things won’t just be all about the products on offer.
Dominique Guinard, founder of internet of things company Evrythng, says there are other benefits: “How do you actually connect smart devices and appliances to the internet and the web in a seamless manner when you don’t manage a network? This merger, between a company that has strong ties with device manufacturers and a company that has strong ties with network operators, surely facilitates this step.”
But Maani Safa, vice-president of innovation and creative at mobile agency Somo, points out that Dixons Carphone wont make the internet of things happen by itself. “The idea of bringing a connected consumer experience to the mainstream is fantastic but my one concern is that this is something that has to happen down at manufacturer level.
“Dixons Warehouse can try to put everything in place but if the manufacturers aren’t making the products, it’s going to be incredibly difficult, unless they have partnerships in place.”
Presumably, however, this is something the two retailers have discussed carefully with manufacturers – and the assumption is that this big step by a high profile retailer will be something that the likes of Samsung, which has been pushing the likes of its Galaxy Smartwatch for years, will welcome with open arms.
Ultimately the only people who will decide whether the internet of things will take off is consumers. If they don’t like the idea of their thermostats monitoring their home’s temperature or their fridge watching what they eat, the trend will not advance.
But the real advantage this deal brings Dixons and Carphone is the ability to move quickly when needed – the retailer has everything it needs to move fast, as consumer behaviour evolves, and become whatever form of digital retailer shoppers want it to be.
As Sir Charles Dunstone said today: “If you only have stores selling mobile handsets or only have stores selling fridges that talk but have no idea how to connect then you’re missing the point for customers. We want to anticipate the needs of customers who live in a connected world.”
Carphone Warehouse and electricals giant Dixons unveil merger deal
- Currently reading
Analysis: Why the Internet of Things is the most important thing about the Dixons Carphone merger