It’s no secret that the high street is dying, but mobile retail is so far managing to weather the storm. While other industries are closing shops, some mobile operators are aggressively increasing their retail footprints, with others implementing significant refurbishments to stores. This has seen expansion across the board - more recently with Vodafone announcing plans to open 150 new stores.
The mobile retail industry isn’t like other markets, which have seen in-store sales decline as consumers go online. A smartphone - often bought alongside a 24-month contract - is a big and complex purchase, and consumers want to touch and feel the device before committing.
But the market is still a tough one. Mobile retail is under constant pressure: it has to transform to meet the needs of its customers. This is resulting in a change in the way stores are presented, in the way products are sold, and the customer experience is viewed.
The mobile industry’s resilience on the high street is borne out of getting close to customers by explaining smartphones, says Kester Mann, principal analyst, operators, at CSS Insight. ‘A lot of people go to stores not just to buy, but to get help with their phones.’
Online vs in-store
Mobile customers tend to research online and buy a contract in-store. This is partly why - according to Marc Allera, EE’s chief commercial officer - mobile retail continues to succeed. ‘If you look at most categories, things are going online. But for mobile customers, omni-channel is really important. Customers want to be able to research online, but they also like to go into a store to get advice from the experts.’
Across the industry, the consensus is the same. ‘We know a lot of customers do research online, but prefer to continue the transaction within stores - and we make sure that shops reflect that,’ Martin Roberts, head of retail and online, at Vodafone, tells Mobile.
Graham Stapleton, CEO, UK and Ireland, Carphone Warehouse agrees, saying: ‘Of those customers who are in the market for a new handset, over half want to talk to someone face-to-face and a similar number want to be able to touch and feel a handset prior to purchase.’
They both play a part in the buying process, so online and in-store channels are given equal significance by most mobile retailers. Customer experience has always been important - and the web has forced brands to be better, says Ben Padley, marketing director, Phones 4u. He adds: ‘We are trying to marry the customer journey, both online and offline.’
Betting on direct channels
But at the same time, the mobile operators’ relationship with indirect retail looks uncertain. Carphone Warehouse is poised to merge with electronics retailer Dixons in a £3.6bn deal, as the firms pin their hopes on the connected home.
However, in parallel O2 and Three have pulled out of Phones 4u and EE recently revealed it was reviewing its indirect strategy - including its relationship with Carphone Warehouse.
This growing trend is seeing operators focused on the direct channel, rather than partners such as Carphone Warehouse and Phones 4u. It has happened for a number of reasons, says Mann: ‘Operators are able to avoid fees with third parties as well as foster relationships with customers.
‘Also, as the purchase is complicated, operators want the opportunity to work with subscribers,’ Mann says. ‘Ultimately this is driven by pressures such as regulation, decline of voice and the economy.’
It used to look very different. Operators once embraced indirect retail as an alternative method of getting products to market. This was wise at the time. But not any more,
says Mann: ‘If they are able to cut costs, they will. From an operator point of view there are alternative routes to market - and shop rental is an expensive business.’
The operators have remained tight-lipped about their indirect strategies - and the results of EE’s recent review are yet to be seen (see box). Mobile operator Three - which pulled out of Phones 4u in 2012 - has ‘very clear principles’ that drive its third-party strategy, the firm’s director of retail Jacqueline Kelleher tells Mobile. ‘We’ll work with partners but they need to compare well with the brand experience and economics of our own retail business while offering incremental sales. My job is to set that bar high and to really ensure we deliver for our customers.’
In the past, mobile brands missed out by not presenting products in the way consumers are interested in buying them, says Peter Wood, CEO at digital print technology firm IDT Systems. As a result, mobile retail has evolved to allow better interaction with goods.
As operators continue to reinvent the look of their shops, one of the biggest challenges is to change perceptions, says Bridget Lea, general manager, O2 stores. ‘Mobile technology is evolving at an increasing pace, with a greater range of devices and services,’ she says. ‘Yet many shoppers still have an image of a traditional mobile phone store and aren’t always confident that they will receive the best advice to help them buy the technology that suits their needs.’
This is why shops are becoming experience led, rather than sales led, says Lea. ‘The industry has come a long way since the days of replica phones stuck to in-store shelving, but there is still a way to go,’ she adds.
Products themselves are also diversifying, as operators bet on the data required by wearables and the connected home to offset declining voice revenues. This could see continued evolution in the way products are presented to customers.
Change could be dramatic. Mann predicts that in western Europe, the number of shops on the high street will actually fall due to consolidation and a focus on out of town retail outlets: ‘This could look like the Apple model, with more opportunity to showcase and demo,’ he suggests.
The way mobile phones are sold on the high street is changing. But even the retailers themselves admit, the mobile market is still too complex for customers to understand: ‘You’ve got the volatility of change and complexity around tariffs and contracts,’ says Padley. ‘Also, there are so many ways to buy. For many customers it’s a difficult experience and we want it to be seamless. But I think for a lot of people it’s a challenge.’
Is EE pulling out of Carphone?
EE’s review of its indirect strategy has led to speculation that the operator could terminate its relationship with Carphone Warehouse. EE’s chief commercial officer, Marc Allera, tells Mobile: ‘We’ve kicked off a review of indirect distribution; we’re working through this and will be concluding it in the near future [over the summer].
‘We’ve been consistent in saying indirect is important and we do believe there will always be a role - that’s why we are doing our review. Where indirect fits into that will reflect the changing landscape today.’
Vodafone explains retail expansion
Vodafone carried out extensive research based on wanting to expand into areas where it did not have a retail presence, Martin Roberts, head of retail and online, Vodafone, tells Mobile.
In April, Vodafone unveiled a £100m boost with plans to open 150 shops over the next financial year. The operator is on target, having opened 22 stores in the last few months.
‘We have worked extensively with customers to find out what store design should be like and we have introduced our new global concept design in the new stores,’ Roberts says. ‘We wouldn’t be investing £100m if we didn’t think there is an opportunity to connect with customers that we aren’t connecting with.’