Dixons Carphone stockpiles in bid to beat Brexit
When Mark Delaney took over Carphone Warehouse it was on its knees. Three years later it is focused on growth, he tells Michael Cogley
ELECTRONICS retailer Dixons Carphone Ireland has increased its stockpiling capacity by seven times over as part of its preparations for Brexit. The company’s Irish arm, which was on the brink of collapse three years ago, has also targeted a 43pc increase in revenue to €400m by 2022, according to managing director Mark Delaney.
“My vision for the business is that we change our Currys PC World stores and our Carphone Warehouse stores into technology playgrounds,” Delaney told the Sunday Independent. “We’ve got to get our customers to spend more with us. Credit will help us do that, our online proposition will help get more share of their wallet by being more convenient.”
Delaney said the company has five weeks’ worth of goods stockpiled in its new distribution centre in Ballymount in west Dublin, five times more than it normally holds held. “Depending on what variety of Brexit ends up being served to us, we’ve planned for a hard Brexit from day one. So we increased our distribution centre — we moved to a distribution centre seven times the size of the old one,” he said.
“We needed it because if we were going to be closed off from the UK for any length of time that meant delays for our customers receiving product.”
The Dubliner also revealed that the company had struck deals with all of its major suppliers to route products through mainland Europe “should it be required”.
Since taking over three years ago, Delaney has overseen a swing from a €7m loss to a €4.6m profit. The turnaround in fortunes was in large part due to a dramatic reduction in the number of stores it had across the country.
“We began looking at property costs. We had 27 Currys and PC World stores, they were not the amalgamated versions we have now, but rather two separate entities.
“It just didn’t make sense to have your product range spread around over two sites. So we consolidated those down to 16 stores and introduced a Carphone Warehouse mobile into those stores.”
THREE years ago the futures of the Carphone Warehouse and Currys PC World brands in Ireland were under real threat.
The businesses, owned by the Dixons group, were haemorrhaging cash and in 2016 booked a €7m loss. The group’s top brass had “conversations” around the prospects of the business and whether or not it was worth the hassle to keep it alive.
It was around this time the company started talking to former Three sales chief and Brown Thomas marketing director Mark Delaney.
“The business was pretty much on its knees,” Delaney says in the company’s headquarters in Santry, north Dublin.
“My mandate was to turn it around. We had great colleagues everywhere, but no real plan or strategy for the business. So I went away and looked at the company for six weeks, then reported back to the board and said ‘Here’s my plan’, and they bought into it.”
That decision proved fruitful after Delaney’s plan led to a swing into a €4.6m profit, thanks to the removal of what seemed an obvious drag on the business - it had too many stores.
“The first year was all about stopping the bleeding, which meant stripping out any costs that weren’t customer or colleague enhancing,” he says.
“We began looking at property costs. We had 27 Currys and PC World stores, they were not the amalgamated versions we have now but rather two separate entities.
“We had that dotted around the country, so we had to consolidate those stores. It just didn’t make sense to have your product range spread around over two sites. So we consolidated those down to 16 stores and introduced a Carphone Warehouse mobile into those stores so we had all our brands under one roof.”
He closed physical stores but managed to maintain headcount, bringing the group’s brands to a single location. Delaney is happy that the wounds have been fully cauterised and instead he is now focused on growth, something that was unthinkable before he arrived.
His big target is to drive up the company’s revenues. He thinks that within the next three years Dixons Carphone revenue will top €400m, a sizeable jump on the €278m it banked last year.
“My vision for the business is that we change our Currys PC World stores and our Carphone Warehouse stores into technology playgrounds,” says Delaney, from Howth, Co Dublin.
“Customers can come in, feel absolutely no pressure, and can play with our toys. See drones being operated, have a cappuccino made by a trained barista, play to your heart’s content in our gaming bunkers — but be met with expertise and impartial advice.”
This move to keep customers in-store longer plays into his short-term revenue targets: the longer they’re in, the more they’ll spend.
Technology as an industry is not without its challenges, not least from online sales.
But Delaney feels that his top-selling store, the company’s website, is more than equipped to deal with huge growth over the next 18 months.
“We’ve got to get our customers to spend more with us. Credit will help us do that, our online proposition will help get more share of their wallet by being more convenient. Our web offering will be truly omnichannel,” he says.
Having just navigated one of the more difficult job introductions, Delaney has also implemented plans for a hard Brexit.
“One thing we miss here is the divisiveness of it in the UK. There are households completely divided on Brexit and it’s been quite divisive a subject not just at a governmental level but also at a household level,” he says.
“Depending on what variety of Brexit ends up being served to us, we’ve planned for a hard Brexit from day one. So we increased our distribution centre — we moved to a distribution centre that was seven times the size of the old one.
“We needed it because if we were going to be closed off from the UK for any length of time that meant delays for our customers receiving product.”
That distribution centre, situated in Bal
lymount in West Dublin, holds five weeks’ worth of stock, which is about five times more than the company would normally hold.
“In addition, we’ve done deals with all of our main suppliers so that they can supply us from mainland Europe should it be required,” Delaney says. “Our major suppliers are confident they have alternative arrangements for us. You’ll see a lot more coming through sealed, bonded containers through the UK.”
Another headache for the ex-Arnotts trading chief was the inheritance of ID, Carphone’s own mobile network.
Delaney said there were some obvious problems with the logic behind a company that had trading agreements with all the country’s major networks selling a network of its own.
“I inherited ID and the business plan for it was quite ambitious, the reality was we had 45,000 customers after one year, which was really good growth.
“But if you look at Tesco Mobile, it’s taken them 12 years to get to 400,000,” he says.
“For us to break even as a network we needed to get to that level. That meant that we would be taking customers from some other network. Networks who are partners of ours in our Carphone business.
“So it was a trade-off and I decided it was the wrong thing for us to be involved in.”
Delaney also revealed that he had unsuccessfully attempted to sell the network before the decision was taken to liquidate ID in April 2018.
The 53-year old has had a varied career that began when he left school and began selling printers in Dublin 2, a job he said that made “good sense” to leave a year later.
Following that he entered the luxury retailer Brown Thomas, where he worked his way up the ranks to become group operations director in 1996.
This was shortly followed by his “proverbial Sol Campbell move” to Arnotts, owned separately at the time.
His time at Carphone is far from his first foray into the mobile business — he was at the heart of Three’s mega move to acquire O2 in 2014.
“I had my own business at the time, providing interim management services and Three retained me to oversee their integration,” he recalls.
“I took on the role as head of sales, then a week later I was head of online. A few months later, I was head of operations because so many people were changing. So anyone that left I got their role.”
Delaney recalls them being two “very different companies with different cultures” and described his time there as “quite fun but quite intense”.
The smartphone business has changed substantially since then, with the market hitting something of a curb.
Samsung and Apple were forced into issuing low guidances for their flagship Galaxy and iPhone ranges as a new consumer cycle began to take hold. People were beginning to hold onto their handsets for three years rather than two. A problem when you’re in the business of selling phones.
“People are holding onto their phones longer, but the reason that is because technology has slowed down,” he says.
“The iPhone was launched 11 years ago and it innovated from the original iPhone but it kind of slowed down since the 6, while competitors have innovated quite quickly.”
That marketplace is now more competitive than ever before, especially with the establishment of Huawei as a major player in the premium market, thanks to its new P30 Pro.
Delaney’s plan to break €400m in revenues doesn’t depend on further footprint, instead he’s more likely to invest in staff and the development of an improved online offering.
Despite the turnaround of the company’s Irish fortunes, his UK counterparts are demanding more, “they always push for more”.
“Their reward for our performance is to give us more to do. Personally, it keeps me interested. It’s a great business. I came here in January 2016 and I’ve enjoyed every minute of it. The team here is a great bunch of people,” Delaney says.
“It’s a lonely enough job, particularly when you come into a business tasked with turning it around. There’s always going to be a degree of resistance, scepticism. It’s a hard journey to get people to believe in the long-term vision when there’s challenges in the short-term.”
Delaney’s vision of his store’s future is one of a more relevant retail offering which benefits from a lower cost base. One that will put the consumer experience at the forefront of its battle against online.
‘The business was pretty much on its knees. My mandate was to turn it around’