Chinese e-commerce giant JD.com has confirmed its interest in bidding for UK and Nordics consumer electricals retailer Currys. With the business formerly known as Dixons Carphone listed on the exchange, this was doubtless a statutory requirement, but the formalization of its interest was certainly revealing for anyone that has tracked Jingdong’s evolution over the past decade.
Here at Retail IQ, we have been carefully charting the renewed focus on European markets by China’s e-commerce giants, most notably in a blog published in June last year that set out why the likes of JD and Alibaba are exploring the region in a bid to unlock new growth as domestic growth headroom diminishes. Now, as the M&A environment heats up in the aftermath of Covid, these moves are being ramped up.
JD has written its European shopping wishlist and a leading electricals player is very much at the top. The interest in Currys may not be its first indication of forcing its way into this space. In November last year, rumours were circulating that the online player was mulling a play for pan-European operator Ceconomy, owner of the MediaMarktSaturn banners. That story faded almost as soon as it arose, but subsequent events suggest there may have been more than a kernel of truth to that thread.
A UK high street mainstay of many years’ standing, Currys has endured a turbulent few years, marked by restructuring, management changes and a pivot towards omnichannel and becoming a tech-enabled business. Notably, it survived the advent of online, led by Amazon and AO.com, that decimated the UK physical retail electricals sector in the late 90s/early 2000s.
However, an ill-judged merger with Carphone Warehouse in an attempt to keep pace with the mobile telecoms boom, plus less-than-successful overseas expansion were errors from which the business has never fully recovered. Over time, Currys has hived off several of its failing European ventures, but the pandemic left it extremely vulnerable after enduring extended periods of closed stores. Its most recent H1 figures revealed significant operating losses, making it a prime candidate for acquisition.
JD.com is not the only suitor keen on taking on its 870+ European estate. This morning, Currys informed the market it had turned down a proposal from Barnes & Noble owner Eliot Advisors, valuing the company at ~GBP700 million. Sources said to be privy to the JD.com offer say the Chinese platform would best the Eliot offer, raising the prospect of a new bidding war gripping the UK retail market, one that might set JD on an entirely new growth trajectory.
Kantar’s point of view:
Consumer electronics is a particular area of expertise for JD.com. For many years, tech and gadgets was its bread-and-butter, and consequently it has many years’ experience in the field and works with practically all name global brands, plus numerous Chinese manufacturers. It owns partial or whole holdings in some of its home market’s biggest CE specialists, like Five Star and Gome, so is no stranger to physical chain operations.
That said, assuming control of as prominent a UK operator as Currys would still be a quantum leap for JD. Its due diligence would probably centre on the chain’s recent embrace of omnichannel as making it a good fit for its vision of future retail. It may well envision bringing its innovative automated Ochama concept to the market from its Netherlands base. Certainly, any JD-led iteration of Currys would be very much tech-driven, with the ultimate goal being to significantly develop its ecommerce offer, potentially building it out as a marketplace that could showcase the many China brands with which JD already partners.
Some may question whether distance may preclude JD being able to operate efficiently in the UK. It should be noted that it has been steadily building out its European logistics infrastructure for several years now, and already possesses warehousing in Britain. A recent alliance with Evri means all the required elements are in place to begin a meaningful tilt at European expansion.
Although we suspect Ceconomy may have been its original preferred target, given the scale of the German operator’s European reach, Currys may well be an acceptable second choice. It still has strong brand recognition in its home market and some presence on the continent, primarily in the Nordics. For JD, it could represent a stepping-off point for more ambitious expansion, and, given the often-precarious state of many electricals specialists across Europe, Currys may not be the only retailer in JD’s sights.
