Mobile puts faith in innovation to beat high street collapse

Mobile puts faith in innovation to beat high street collapse

The British high street has been a casualty of the recent financial collapse, with a number of well-known chains closing their doors for the last time. But even by the standards of recent years, the past 12 months have been particularly ferocious, with HMV, Game, Clinton Cards, Blockbuster, Jessops and Comet among those that have fallen into administration.

But what of that high street stalwart, the mobile phone shop? So far it has largely stayed outside the malaise that has descended upon its retail cohorts. Take London’s Oxford Street. There is on average one phone shop every 100m when you walk along Europe’s busiest shopping promenade. In fact, the mobile industry could be blamed in part for the collapse of other businesses. The rise of increasingly sophisticated smartphones touting high quality cameras was bound to damage Jessops, and the ability to use a smart device to stream music through Spotify would have hit bricks and mortar record shops.

So what is going right? Is the mobile sector protected from the rest of the high street or will the same problems eventually turn their attentions to mobile, just further down the line?

Tim Whiting, CEO of Phones 4u group, says it would be misguided to say mobile retailers and operators are immune from the current problems. The continuing squeeze on our wallets and purses affects all our buying decisions. He says the retailer has been protected by several years of ‘heavy investment’ – with a record amount to be invested during 2013 – that has been spent on staff, systems and stores. He says: ‘It’s very sad to see the demise of some well-known retail brand names but I would say that our retail experience is quite unique. We are a served environment on the high street. The fact that we have sold 1.6 million contracts last year and spend on average an hour with every one of those customers demonstrates the difference between our business model and the traditional self select high street model where you walk into a store and take your product up to the counter to pay for it. That, for me, is trying to replicate the online offer in the high street.’

Whiting’s comments are shared by Vodafone UK’s consumer director, Srini Gopalan. The operator’s consumer director says its retail model works almost counter to what has brought a large part of the high street to its knees. Rather than research in store, before going home to buy online at a retailer like Amazon, between 70% and 80% of Vodafone customers research tariffs and handsets online, before going to a branch and deciding which phone they want. He says: ‘Unlike transactional retail, it’s not about the purchase of a single product that you can easily substitute online. It’s much more of a sales-plus experience, especially if you go through the wave of smartphone adoption. Retail has evolved to be not just about selling phones but a wider service proposition. You need to show people how to get the most out of their devices so in our case, it’s things like the Red Box [which transfers data to a new device].’

How to stay ahead

That’s not to say there isn’t worry about what is happening with the rest of the high street. Phones 4u’s Whiting says well-known chains going out of business and leaving a less diverse shopping experience behind is a concern. He says: ‘A lot of our customers spend a lot of time on the high street. It’s a social environment for them as well. Would I like a healthier environment and high street? Of course.’

Some operators are taking the opportunity to make changes to their retail portfolio. EE is shedding 79 stores that trade in close proximity to another, a hangover from the days when Orange and T-Mobile shops went head to head. O2 is stepping up its franchise programme, with almost half of its 450 store strong portfolio becoming franchises by the summer. Both steps will help reduce what can be rather weighty fixed costs in rent and rates.

Operators privately argue that Carphone Warehouse (more than 800 stores) and Phones 4u (681 branches between high street and concessions) are overexposed on the high street and being tied to potentially onerous rents could be costly. It is expected that EE will make further cuts to its retail portfolio, with more than 600 branches continuing to trade after the first wave of closures are completed. Whiting dismisses that Phones 4u is overexposed, pointing out the chain’s intentions to open around 100 branches across concessions and stores this year. He says: ‘Retail space is expensive in the UK. We would all wish it was cheaper but it is not. Therefore we have to evolve a model to ensure productivity and efficiency and to ensure it’s a good investment. We would all wish for a different world but you need to work to focus and make sure it’s successful.’

Vodafone’s Gopalan argues retail space is different for operators. While loathe to use the phrase loss-leader, he admits the thinking around the placement of its 380 stores is more around providing coverage for customers, rather than judging them on a straight profit/loss. He says: ‘The stores are important for differentiation and need to be in the context of the overall margins of the rest of the industry.’ 

Demand for differentiation

If both branches of the retail sector are happy with their stores, are there other ways they could shore up their costs? Much has been made of the experiential mode of mobile retail – how the look and feel of smartphones is critical and why they are a sought after destination. But is there a case that manufacturers could give greater support to retailers for displaying their products in certain parts of the shops? Opinion is split with Gopalan saying: ‘It’s a thin dividing line – our differentiation comes from being objective about the devices that we sell. You can become a hostage to fortune if you think of the estate purely as a merchandise warehouse for manufacturers.’

Interestingly, Phones 4u’s group CEO is a bit more demure. Whiting says: ‘Without us, they don’t have a good route to market. We have a fantastic relationship with manufacturers but we work very hard to do a good job on their behalf. They very much see us as the home of latest technology and the place to launch the best new products. They know our customer segments are looking for new products and we have been tremendously successful in launching them for them in the past.’

Where the two strands of the sector share common ground is how the wider recession puts further pressure on the businesses to innovate. Each of the big players are doing new things to stay ahead – whether it’s Carphone Warehouse’s push on tablets and the Wireless World, or Three revamping its store portfolio. Retail can be incredibly lucrative – just look at Apple earning a staggering $6,000 per square foot during its most recent quarter (according to its own results) – but businesses are working harder than ever before to ensure they do not become the next Jessops. Whiting says: ‘We need to continue to work to differentiate the proposition on the high street away from the experience online...We have to continue to give our customers the experience instore that adds value to them in a way that they can’t get online.’

 

Author: Graeme Neill

Written by Mobile Today
Mobile Today

Comments

Its pretty awful to walk down high streets now and not see the stores that I was once brought up with. I dont think my teenage years would have been t ...
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