Dixons Carphone’s CEO Seb James has warned the combined Sainsbury’s and Home Retail business that it faces a challenge with its ‘tough model’.
The deal for the supermarket to buy Argos’ owners Home Retail Group for £1.4bn was agreed on Friday. David Tyler, Chairman of Sainsbury's said the combination of the two companies would: ‘Offer a multi-product, multi-channel proposition, with fast delivery networks, which we believe will be very attractive to customers and which will create value to both sets of shareholders.’
‘Fish nor fowl’
Speaking to the media at its last set of financial results Seb James said that the acquisition could prove challenging due to the makeup of the two businesses: ‘I hope it goes well for them. I think in the end it’s actually quite a tough model. You have neither the low cost of a pure play retailer nor do you have the ability to up sell or cross sell of a conversation based retailer like us. So you’re a little bit neither fish nor fowl.
James added that he didn’t view the newly formed entity as one that would rival Dixons Carphone for customers as it targeted a different type of customer: ‘We don’t really do the same thing, our model is very simple, we tend to sell to customers who tend to buy a quality piece of kit. We are not really in the unbranded bottom end of the market, it’s about 10-15% of our business. The vast majority of what we sell is branded high quality goods.
‘People want good value, they don’t necessarily want cheap. Argos operates mainly in the own label area and selling kettles and toasters. It’s the sort of thing that supermarkets actually do quite well.’