Independent’s day: Dixons-Carphone v Phones 4u

Independent’s day: Dixons-Carphone v Phones 4u

There are now only two major independent retailers left in the UK market slugging it out for supremacy: Carphone Warehouse and Phones 4u. Undoubtedly, Carphone’s merger with Dixons has strengthened the company’s position, but rival Phones 4u has been quick to respond – announcing that they, too, were looking at a number of potential partnerships. Mobile has taken a number of key areas to see how the two giants stack up.


Buying power

Combining two of the biggest retailers in the country is always going to give the new company buying power, the question is how the firm leverages it. In theory the new proposition should be able to negotiate exclusive deals on the hottest new products. With the networks wielding as much power as they now do with direct services it will be interesting to see quite how the new company uses this.

Phones 4u
The challenge for Phones 4u will be to secure major partnerships that remain strong in the face of this new proposition. Having now lost several networks, the relationships that the company has with other major players in the mobile market become even more important.



Merging two large businesses together is a process fraught with potential difficulties. Strong leadership will be required from the upper management at Dixons-Carphone to ensure that as the two companies are combined, the firm isn’t preoccupied with the merger at the expense of business. Dixons-Carphone has said previously that 850 redundancies are expected in operational and support roles at head offices, which will be an immediate major test for the partnership of Seb James and Andrew Harrison in their CEO and deputy CEO roles.

Phones 4u
This is a critical time for Phones 4u and the fact the firm has changed its CEO once again only adds to the complexity of the challenge ahead. New boss David Kassler’s lack of mobile experience could be seen as a positive as he’ll bring a new perspective to the business, but he will also have to overcome the barrier of having fewer long-term relationships with key industry players. The independent retailer has had a somewhat turbulent recent history in terms of leadership following Mary Grant’s decision to leave the post after 18 months for personal reasons. So the company must be hoping that Kassler can be relied upon to provide some presence and stability in the months to come.


Network power and franchising

Over the last few years the growing retail power that the networks wield has been one that has grown and grown. You only have to compare where mobiles are sold in the high street now compared to a few years back to see how things have changed. There were rumours in June that EE was set to pull out of Carphone stores, but these were denied as the network completes a consumer distribution review. Three, of course, isn’t sold in either Carphone or Phones 4u.

In a climate of such uncertainty it’s little wonder that much of the talk from Carphone Warehouse has centred on how strong the retailer believes its partnerships with the networks are. The invasion of the high street by manufacturers has also presented opportunities for Carphone to white label its services and there are murmurings about other franchising opportunities within the network stores. This could be critical - to understand quite how important the franchising side of the business is you only have to look to how the discussions about a merger started, as deputy CEO Andrew Harrison explains: ‘This all began with a conversation between Carphone Warehouse and Dixons about running a Currys/PC World mobile store. That just goes to show how important our white label services are and will continue to be, it is a major growth area for us.’

Phones 4u
If EE’s consumer distribution review is important to Dixons-Carphone, then it is absolutely critical for Phones 4u. Having completely split with O2 this year, the company has only two major networks left on its books. Ominously Vodafone also announced plans to concentrate on its direct channels by opening up a further 250 stores in 2014. None of which bodes particularly well, but of course it is still hard to predict what will happen and if EE were to ditch Dixons-Carphone in favour of Phones 4u then things would appear different once again.

What is unquestionable is that there has definitely been a shift in the channels that customers use when purchasing new handsets and it is not just the networks that the independent retailer contends with as Ronan Dunne, O2’s CEO, explains: ‘It is very much an omni-channel market these days, research suggests that around 80% of customers now look online first when looking to purchase a handset, and that 80% of customers also have some kind of in-store experience so the two work very much hand in hand with one another.’ This insight has particular relevance to Phones 4u’s plans when you consider that the company said they were looking at both ‘online and retailer partners’. Certainly if the firm can leverage a white label side to the business it could be an area for growth.


Staff and stores

‘We will need to eliminate areas where there is duplication,’ said Dixons-Carphone’s deputy CEO Andrew Harrison on the official confirmation of the merger. Quite where the duplication exists is what will be causing concern for Carphone staff up and down the country. Thankfully for the retail workers the merger brings together a town centre-based brand (Carphone) with a business with numerous out of town units (Dixons, Currys/PCWorld). And the takeover of the existing Phones 4u concessions in Currys/PCWorld stores means that staff numbers on this side of the business will grow.

But inevitably there are numerous areas where the companies overlap. Carphone has said that the deal has not predicated on any store closures and there are no store closures in the business’s plan. It also pointed out that the Carphone Warehouse stores have been competing with a Phones 4u trading inside a Currys store.

Phones 4u
Phones 4u has said it has been working to avoid staff cuts in the 160 concessions that are based in Currys/PC World megastores which will close by May 2015.

The 350 Phones 4u staff had been told that alternative roles would be found in Phones 4u stores or in ‘future retail partnerships’ suggesting that Phones 4u has agreed a concessions deal with a new partner. Whatever the outcome it will be interesting to see how the retailer does find shop space for its staff to sell in.

The threat of staff in these concessions defecting to Carphone concessions is also a very real one because, as one Phones 4u staff member told Mobile in May: ‘It is very unsettling. Phones 4u have told us there will not be job losses but it is still worrying – the uncertainty of not knowing where we might end up.’
Clearly, the firm’s out of town presence will also need to be addressed with the loss of the concessions.

There were rumours at one stage that the retailer would be pulling out of its deal early but Phones 4u moved swiftly to deny such talk - it will be interesting to see who the brand decides to go with if it does indeed choose to seek a concessions deal.

Either way, 4u CEO David Kassler has been emphatic on the issue of redundancies: ‘I’m pleased to say that there will be no redundancies as a result of the merger. We have guaranteed roles for those people affected, and will offer redeployment opportunities to our people across the store estate orwithin new strategic partnerships.’



So much talk surrounding the merger focused on the possibilities that lie within the ‘internet of things’ with the mobile acting as the central control for a wide range of products, from washing machines to the Fitbit. It’s difficult at the moment to predict how this will play out but the combination of these two major retailers is a sign they believe that it will be important. Service is clearly going to be a critical factor particularly in terms of how the Carphone Geek Squad tech support team combines with the Dixons Retail Knowhow installation service to guide the consumer around this ‘internet of things’.

So many industry insiders are excited about this convergence and recognise the potential within the merger for it to grow. Andy Coughlin, head of mobile at manufacturer LG, can certainly see its potential: ‘The mobile industry has been making noises about the connected home proposition for many years now but with few organisations explaining how simple and intuitive it really is to link their home electronics and make the most of the many capabilities their devices offer.

‘I had the pleasure of working for Sir Charles [Dunstone] some years ago and he once said, and I hope he forgives me for paraphrasing, that mass adoption of new tech was only inhibited by the apparent complexity of the user experience. Dixons-Carphone in my view is best placed to tell the story and bring the connected home experience to life in store. Coupled with the scale of the new business, it will quickly accelerate the understanding of how mobile can act as the hub to unlock some great user experiences and ensure consumers get the best value from the purchases they have made.’

Phones 4u
Interestingly Phones 4u has taken a very different approach to Carphone, turning questions about convergence outwards to the consumer with its BE.SMART initiative. The pilot scheme, which has run across selected 4u stores in the Midlands, has no commercial target other than getting closer to the customer.

Scott Hooton, CMO at Phones 4u, explains: ‘There is a general awareness from the consumer around smart tech, but our research has shown that they aren’t necessarily sure what’s right for them. There is a need at the moment for categorisation and indexing so that the customer can learn what they want. As a tech company in the consumer space we believe that we are well placed to be the connection between these type of products and the customers.

‘We need to understand as a retailer what questions we should be asking. If it does take off as we believe it will we need to make sure that we know the right way to do things.

In terms of understanding the package, Phones 4u is well placed, we are plugged right in to the centre of all this connectivity and can offer advice from this position. It’s all about building repeat business and helping the customer to understand the benefits of the device they have bought.’

An interesting issue arising from this is whether it is wise for Phones 4u to have been embarking on a consultative examination of a market segment whilst its main competitor has been placing itself firmly within it. Currently it’s hard to say because Phones 4u’s decision to focus on the customer for a little longer could also prove to be a smart move.


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