How Do Dixons and Tandy Add Value To The Products They Sell?How do Dixons and Tandy add value to the products that they sell, and, in doingso, what benefits are passed on to the consumer? Do high street consumerelectronics stores offer better value for money than their mail-ordercounterparts?The raw price figures show that, obviously, the high street stores cost morethan the mail-order stores, but are the benefits that the high street storesbring 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 anAIWA NSX-V710, the portable system was a Sanyo MCD 278, the small televisionsthat I chose were not available in both stores, and so I had to choose similarmodels. The models I chose were the Matsui 14″ Remote from Tandy and the Nokia14″ Remote from Dixons. The models were both available from the mail-ordersupplier, at the same price.
The video recorder that I chose to use was an AKAIVSG745, and was in fact available from both stores. The computer was the mostdifficult part of the system to match, as the Dixons systems came with someadded bonuses such as extra multimedia software and Internet capability. Itherefore reduced the price of the Dixons machine to account for thesedifferences, by deducting the price that it would cost to upgrade on the Tandymachine. So, to give the Tandy computer Internet capability would cost 150, sothat was deducted, and the multimedia software would have cost 50, so that wasdeducted. The computer specification I aimed to have as a common platform was anIntel Pentium 120MHz machine, with 8MB RAM, a 14″ monitor, at least a 1 GB HardDisk 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 ComputerTrading, as they offered a system which was a close match to the Tandy andDixons ones, while having a low price. The common factor with all the productsis 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 oneor more parts or products, combining, changing or adding to them, in such a waythat the perceived value of the product is increased by more than the cost ofthe change. For example you might expect to pay 150 more than the cost of theparts when buying a hi-fi, but the cost of putting the hi-fi together is muchless than 150.
The price, however, must not be too high, as the customer has toperceive the value of the product to be that at which it is priced for a sale totake place. Within any company there will be some several ‘departments’, eachadding 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 figuresthemselves, and how much items cost from Dixons and Tandy as opposed to the mailorder companies. The figures that I obtained by looking through the stores andmagazines were as follows:Here we can see that every product is more expensive from the shops than in themail-order catalogue. You can see that the products cost very much the same fromboth of the high street stores at roughly 125% of the cost of the mail-orderprice.
This means that the stores make a 25% mark-up on every product that theysell. The fact that the figures from Tandy and Dixons are very similar show thatthere is another factor coming into play. This could be one of two things: Thecost of supplying the services to the customer is a high proportion of the addedcost, therefore meaning that different margins of profit make little or nodifference to the price. There is competition, and each store is trying to matchor beat the other one to attract more custom.Dixons and Tandy – Adding value in actionObviously, Dixons and Tandy are very similar in that they do not manufactureanything.
However value is added in several ways, as a perception from thecustomer: The products are available instantly, they can be bought and takenstraight out of the shop, as opposed to having to wait for delivery The productshave financing deals available, such as 0% APR (Annual Percentage Rate) on aloan. For example this would mean that you get the product delivered, but pay bymonthly instalments over two years. The products from Tandy, valued at 299 orover, come with a free Sky satellite system. You can try a product before youbuy it.You receive sales and after sales support, and advice is not really given overthe phone.
Also the shop is close to the home, so it is easy to get the productrepaired or serviced. Free gifts are often supplied, or complementary productsdiscounted when a product is purchased. There is a range of products availablebecause the people who would order from a mail order catalogue are likely toknow what they want, whereas those who go into a shop may need advice on whichproduct is best for them. If we split these perceptions into categories, we cansee that each perception is a product of different type of adding value: Points1, 5 & 7 are because of the company moving all the products into one place,ready for sale. Points 2, 3, 4 & 6 are because of the company’s marketingstrategy and how the sell the products. This should therefore show where thevalue is added.
In theory, this would show that value was added mainly inmarketing, then in relocating the products. Also, shop staff will have to bepaid, so some value would be added there.ConclusionFrom the evidence shown, we can state that high street stores, such as Dixonsand Tandy add value in two main ways.
These two ways are ‘convenience options’and Marketing. Of these two, Marketing is approximately twice the size ofConsolidation. Therefore we can say that Dixons and Tandy add value primarilythrough ‘convenience options’ and marketing. Also, in answer to the question’are the benefits that the high street stores bring worth the extra price?’ wecan say that, apart from quicker delivery and financing options available, allof the services given are pre-sales services.
This means in theory you could gointo a Dixons or Tandy, receive advice from them, then buy the product from amail-order company. Thus the answer to this question is probably ‘no’, in mostcases.