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Shop Direct outsources contact centres in £430m deal

Serco bounces back from loss of army deal

Shop Direct Group, which owns retail brands including Littlewoods and Very.co.uk, has outsourced its customer contact centres to Serco in a 10-year deal worth £430 million.

The company said it hopes to improve efficiency as a result of Serco's planned investment in technology that will seamlessly integrate online and mobile into customer contact centres.

Mark Newton-Jones, CEO of Shop Direct Group, said: "The ways in which customers are shopping with us, contacting us and servicing their accounts have changed rapidly, drive by revolutionary advances in digital and interactive technology. Unfortunately, this will mean a need for far fewer people to be directly involved in customer contact in the future.

"Serco's expertise, coupled with their investment in technological innovation, will ensure that we have a customer contact programme that is flexible and adaptable for the increasingly online and mobile world that we live in."

Around 75 percent of Shop Direct Group's sales are now online, an increase from just 18 percent five years ago.

Furthermore, social media has overtaken telephone calls as the preferred way for customers to contact the business, with contact via social media rising by more than 1,400 percent over the last year, compared to a 45 percent decrease in phone contact from 24.2 million 2007 to 13.4 million in 2011.

Serco plans to halve the number of UK contact centres from four to two, deliver some of the group's work offshore and 1,800 staff will transfer from Shop Direct to the outsourcer by TUPE agreement. The contact centres proposed for closure, Worcester and Preston, will stay open for at least a year from now while discussions take place.

Serco will begin work on the contract from 1 July, though analysts at TechMarketView have pointed out that the contract actually builds on an existing relationship between Shop Direct and contact centre provider The Listening Company, which was recently bought by Serco.

TechMarketView analyst John O'Brien said: "It is certainly one of the largest IT-enabled BPO (business process outsourcing) deals Serco has won, and will give its new Global Services operation plenty of impetus. Moreover, what it shows us is Serco's financial strength and ability to win megadeals against smaller competition.

"Deals of this size incur high upfront costs, and this precludes smaller and less financially secure players from competing. In this deal, Serco is investing circa £25 million over the next two years as the programme is implemented in stages."

He added: "Along with Serco's other BPO win recently with Freemans Grattan Holdings, it points to an increasing acceptance of BPO among the non-bricks and mortar retailers."

Separately, Serco recently lost out to Capita on a £500 million army recruitment deal.


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