How do high street consumer electronics stores, such as Dixon


How do Dixons and Tandy add value to the products that they sell, and, in doing so, what benefits are passed on to the consumer? Do high street consumer electronics stores offer better value for money than their mail-order counterparts?

The raw price figures show that, obviously, the high street stores cost more than the mail-order stores, but are the benefits that the high street stores bring worth the extra price?

I took the prices of five types of products, a large stereo, a portable system, a small television, a video recorder, and a computer. The large stereo was an AIWA NSX-V710, the portable system was a Sanyo MCD 278, the small televisions that I chose were not available in both stores, and so I had to choose similar models. The models I chose were the Matsui 14" Remote from Tandy and the Nokia 14" Remote from Dixons. The models were both available from the mail-order supplier, at the same price. The video recorder that I chose to use was an AKAI VSG745, and was in fact available from both stores. The computer was the most difficult part of the system to match, as the Dixons systems came with some added bonuses such as extra multimedia software and Internet capability. I therefore reduced the price of the Dixons machine to account for these differences, by deducting the price that it would cost to upgrade on the Tandy machine. So, to give the Tandy computer Internet capability would cost 150, so that was deducted, and the multimedia software would have cost 50, so that was deducted. The computer specification I aimed to have as a common platform was an Intel Pentium 120MHz machine, with 8MB RAM, a 14" monitor, at least a 1 GB Hard Disk and MPC level 2 capability (i.e. be able to use CD-ROM Multimedia titles). The mail order supplier I chose to match these specifications with was Computer Trading, as they offered a system which was a close match to the Tandy and Dixons ones, while having a low price.
The common factor with all the products is that they are all more expensive than their mail-order price counterparts. This means that the high street stores \'add value\'. Adding value is taking one or more parts or products, combining, changing or adding to them, in such a way that the perceived value of the product is increased by more than the cost of the change. For example you might expect to pay 150 more than the cost of the parts when buying a hi-fi, but the cost of putting the hi-fi together is much less than 150. The price, however, must not be too high, as the customer has to perceive the value of the product to be that at which it is priced for a sale to take place. Within any company there will be some several \'departments\', each adding value in their own particular way.

How much value do Dixons and Tandy add?
The only way in which this question can be answered is by looking at the figures themselves, and how much items cost from Dixons and Tandy as opposed to the mail order companies. The figures that I obtained by looking through the stores and magazines were as follows:


Here we can see that every product is more expensive from the shops than in the mail-order catalogue. You can see that the products cost very much the same from both of the high street stores at roughly 125% of the cost of the mail-order price. This means that the stores make a 25% mark-up on every product that they sell.
The fact that the figures from Tandy and Dixons are very similar show that there is another factor coming into play. This could be one of two things:
The cost of supplying the services to the customer is a high proportion of the added cost, therefore meaning that different margins of profit make little or no difference to the price.
There is competition, and each store is trying to match or beat the other one to attract more custom.


Dixons and Tandy - Adding value in action
Obviously, Dixons and Tandy are very similar in that they do not manufacture anything. However value is added