Asda mobile: new lease of life

Asda mobile: new lease of life

One of the biggest obstacles that supermarkets have faced since they started selling mobile phones has been the difficulty in making consumers associate them with handsets in the same way they do with tins of beans.

Asda has been one of the key players in fighting that problem, most notably with the infamous £5-phone promotion, which drew widespread media coverage. The supermarket raised some eyebrows in April when it announced that it would sell phones from major manufacturers, including Nokia and Sagem, for less than the cost of a pack of cigarettes.  

All the phones, which according to Asda was more than 55,000, sold out within the space of a weekend. The deal was so popular that it pushed Asda’s total market share to 7% at the last count from its usual figure of around 5% of the prepay market.

Asda expects that share to drop back in line with current expectations to the 5% mark by the end of the year. Sources inside the supermarket say that a potential goal for mobile market share could be around 17%, which would bring mobile sales in line with the market share for groceries. But this is very much a long-term aim.

On the surface, reaching that kind of figure looks a tall order, with Asda Mobile already present in almost all Asda stores. However, a new opportunity has appeared in the form of ‘Asda Living’ stores, a new chain that looks set to provide the supermarket’s mobile division with a big opportunity to close the gap on Tesco.

Asda Living stores are large, non-food outlets that sell mainly clothing, electronic equipment and home furnishings. There are currently around 15 UK stores, but Asda says hundreds will appear over the next 10 years, all of which will be located in retail parks. The existing stores have been around for up to five years as part of a trial. It was decided last year that the stores would start to be rolled out in much larger numbers from this year.

Asda’s mobile teams see this as a large opportunity for market-share growth. It will create a more level playing field with Tesco Mobile, which currently has considerably more stores in which to sell its mobile range. 

Economic climate
Few retailers relish the prospect of a recession, but due to its aggressive pricing strategy, Asda believes that it will be better suited to the difficult economic conditions than its main competitors as more shoppers look to a cheaper supermarket.

Asda spelt out a message of intent last week when it slashed prices on a number of essential items including bread, butter and eggs, while rival Tesco also cut the costs of around 3,000 items by up to 50%. These moves have been perceived as the start of a price war.

In mobile terms, Asda generally operates in much lower-end phones than Tesco, so Asda could stand to gain in a climate where many customers are looking to tighten their belts.

Data from research company GfK shows that the market is in the midst of a low-end handset boom. According to the figures, two thirds of all prepay phones sold in February cost less than £50, whereas one year ago, over half of prepay handsets bought were priced at £50 or more. At the same time, high-end phones are contributing to a decreasing part of all handsets sold.

Head of Asda Mobile Ted Cadogan says: ‘With the credit crunch going on, customers have tighter purse strings, and there is more focus now on saving than there is on having the latest phone. We are very well suited to the current climate. Customers are becoming more value conscious and that’s a big opportunity for us. 

’The networks are always pushing people onto the next big thing, but the opportunity for Asda Mobile is the mass market – we will never be early adopters. The Asda Mum, which is our core target, isn’t worried about the latest thing.’

The Asda Living stores represent an important opportunity in the long term, but Asda’s mobile teams are currently focusing on Christmas – which is an annual make-or-break time for all prepay retailers.

James McMurrough, Asda’s marketing manager, says: ‘We are working on plans for Christmas this year and there will be a weighty campaign with a lot of outdoor activity and national press. There will be uplift in activity on last year, which is very important because Christmas is so key for us.’

Asda Mobile is still a relatively new proposition and the team is learning how best to promote the brand. One of the biggest barriers faced by McMurrough is how to teach consumers what an MVNO is.

’To make sure we reach the Asda Mum, we are also using editorials and advertorials in Women’s magazines. We need to tell them how an MVNO operates - one of the most important things is to get that point across.’

Asda sees the Living stores as a way to branch out from just selling to the Asda mum and appeal to a new, more technology-savvy, market. The outlets also give the supermarket score to sell more expensive devices.

McMurrough says: ‘Living stores gives us new marketing opportunities as it targets slightly different customers – those who already know what they want to buy. It targets those who have done research, so in that sense you’ve broken down one hurdle.’    

The three sides of the business
Asda’s mobile division is run by three separate teams. Asda Mobile, which is the supermarket’s own-branded MVNO, launched last April. 

There is also a separate mobile business within the supermarket, which sells prepay handsets from all the major manufacturers on all the big networks. Asda is considering branching into selling contracts but no moves have been made as yet. Prepay market share is expected to sit at around 5% by the end of the year.

Thirdly, there is the online business, which is run completely separately to the other two parts. Asda’s mobile team sees expansion of the online as a potentially significant opportunity.

According to Spencer Brown, buying manager for telecoms and new services, the existence of separate teams creates a healthy competition. He says: ‘There’s a very clear dividing line between the two businesses – Asda Mobile and separate. There will always be two separate teams – if there wasn’t it could take away some of our competitive edge.’

Having three businesses that effectively compete with each other can also cause conflicts of interest within the company. As the marketing manager for all the mobile divisions, McMurrough is sometimes caught in the middle.

‘There are certain times when we get info that we can’t pass over - we don’t want to upset our partners,’ he says.

Asda’s target audience
The Asda mobile teams make their decisions based on the needs of the Asda Mum. This typical Asda shopper is between 25 and 45 years old, with one or more kids, and most importantly, she is very price sensitive.

This target market is why Asda chooses not to sell many high-end phones. Cadogan explains: ‘Our core target, the Asda Mum, isn’t worried about the latest thing, and is interested in calling and texting. 70% of all Asda shoppers are female.’

The £5 promotion
In April this year, Asda announced that it would sell phones by major manufacturers for just £5 while stock lasted. The promotion was a success, with the handsets selling out nationwide in one weekend, but it was dismissed in some quarters as a PR stunt, and was also criticised for being a box breaker’s paradise.

Spencer Brown, buying manager for telecoms and new services at Asda, says: ‘The £5 promotion was very successful; it was another great example of what we can achieve. I would absolutely dismiss that the £5 promotion was a box breaker’s paradise – we had a very high percentage of customers buying airtime at the point of pur

Written by Mobile Today
Mobile Today


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