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November 3, 1993

VOBIS AGREES NOT TO OPEN STORES IN UK IN RETURN FOR DIXONS AGREEING TO SELL ITS PERSONAL COMPUTERS

By CBR Staff Writer

In a masterly non-aggression pact, Dixons Group Plc, the UK consumer electronics retailer, and Vobis Microcomputer AG, the German computer manufacturer, have cut a deal that goes like this: Vobis will keep its hands off the UK market and will not open any shops. In return Dixons will sell Vobis’s Highscreen range of personal computers. In August (CI No 2,228) Vobis tested the water, giving Dixons a low-end 80486SX machine to sell. Having decided that the UK retailer was not a shark, Vobis is extending the range and has appointed Dixons as its sole UK channel. There was a risk, Theo Lieven, Vobis’s chief executive admits that Dixons would say ‘stay out of the UK and we will sell lots of machines, sometime in the future’, but after the first few months Lieven pronounces himself very happy with the way things are going; Dixon’s Group has sold between 350 and 500 Highscreens in the last week, he says. The Aachen-based company claims to be the largest European personal computer retailer – with a turnover last year of $884.5m, expected to reach $1,120m in 1993, mostly though branch networks of moderately sized shops. Though it has set up in 10 European countries the company has balked at opening in the UK due largely to Dixons – consultants warned it that wherever it decided to open first, the UK retailer would be able to undercut it, by offering special prices at the local store. Both parties looked happy at the announcement and so they should, in one fell swoop they have underwritten Dixon’s position as number one computer retailer and given Vobis a red-carpet entry into the UK. Its a market that Lieven describes as very strange – no, not strange – it’s good – it’s just different. Strange, or different – currently the UK home and small business market appears to be dominated by direct and mail-order channels. The usual batch of research firms show that 50% of personal computer sales in Germany goes into the small office and home office. The same research shows this to be around 18% in France, and even smaller in the UK.

Home users buy over the phone

Lieven says that the researchers are mixing up the channel with the customer – they assume that direct sales are going to corporate customers, whereas in fact, in the UK an inordinate number of home users buy over the phone. It seems that British buying is still dominated by the technical cognoscenti and this, says Lieven, is mirrored by its personal computer press. The UK press, he says, bombard him with the kind of technical questions about MHz, and M-bytes that are largely irrelevant in what is rapidly becoming a consumer market. The consumerisation of the personal computer is something that both Lieven, and Dixon’s deputy chairman, Mark Souhami are very keen on. Souhami points out that only 6% of UK households have MS-DOS or Windows personal computers and compares this to the 30% penetration that type-writers held in their heyday. Though retail accounts for only about 5% to 6% of the total market, this is growing rapidly – Souhami expects it to account for 25% to 35% in the next three years, growing Dixon’s revenue – through its Dixons and Curry’s high-street shops and its PC World Superstores – to UKP1,000m, from its current UKP200m position. Dixons Group’s view is that the market can be segmented – the high-street Dixons gets the first time small business buyer, Curry’s get the home market, while the out-of-town superstore caters for the expert buyer. By contrast, experience leads Lieven believes that the future lies with the superstore , rather than on the high street. This view is based upon Vobis’ new French operation, which, with Spain, appears to have caught a bit of a cold. Vobis followed its normal policy in France, and opened a couple of moderately sized stores in good sites, but this time it seems not to have worked, an indication, Lieven believes that the market is changing people no longer want little stores where they can browse among their own kind. Out goes the hacker, in comes the shopping trolley. Back home, Vobis opened its first superstore som

e time ago. It is a model that will spread says Lieven. And once it spreads, Brits will lose their passion for buying via the phone.

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