Concessions success for mobile retailers

Concessions success for mobile retailers

High street shoppers are familiar with brands and retailers teaming up to offer products they would not usually expect to find, via a concession store.


One of the most successful models has been between book stores and coffee shops. Borders partnered with Starbucks, and Waterstones with Costa, offering obvious benefits for the companies.


During 2009, two of the mobile industry's major players started using the concessions model to attract different market segments. Both Orange and Phones 4u have secured concessions partnerships with retailers that would not normally sell their products.


However, it is not the first time the mobile industry has ventured into an alternative retail model. The question is, will it work this time?


Past mobile concessions

When 3 entered the mobile market several years after its competitors it had a lot of ground to make up, but one crucial arm of the business was missing - a retail estate.


Instead of investing in the expensive process of buying stores, it partnered with Superdrug (also owned by 3's parent company, Hutchison Whampoa).


The company decided that a series of 'stores in stores' would work more effectively. At the peak of the partnership, 3 had 1,303 concession stores in Superdrug shops around the country.


However, the operator had also embarked on a programme of standalone stores, and it soon became apparent that these were in direct competition with the Superdrug concessions.


In addition, 3 started appearing in HMV, but this stopped when the operator shifted its focus away from music and towards internet services.


Lessons learnt?

Retail expert Richard Hammond says: 'There are two key things that make a concession work. First, it has to be a good match between the host retailer and concession, and second, the host retailer must have good footfall.'


Retailers heavily scrutinise the value of floor space and the concession must generate more revenue than the retailer would normally get for the same space.


'And for the concessions, they get a prime location for a rent that is unlikely to be as much as paying directly to a landlord. In exchange, there will be some sort of profit share and a percentage of the concession's revenue will go to the host retailer,' says Hammond.


The latest partnerships, between Phones 4u and Currys, and Orange in HMV and Asda, will have looked at key factors such as competition, strategies and location to ensure that they will work in the long term.


Orange and HMV

Orange's HMV partnership was first announced in April 2009 and began with a trial of 15 stores, with aspirations of reaching 100. By November, the network had a total of 23 concessions in HMV stores, which has now risen to 25.


An HMV spokesman says of the concessions venture: 'We are always looking for new ways to deliver entertainment content to our customers and to make optimum use of our stores. Mobile represents an engaging platform that can only grow in appeal and impact in the future.'


Both companies view mobile content as a space for earning revenue, which is a key factor in why the concessions are proving to be so popular.


The HMV spokesman continues: 'There is a good fit between HMV and Orange. They are keen to promote their devices featuring music, film and games content, which obviously overlaps strongly with our company.


'HMV, in turn, has diversified and now stocks a wide range of technology products, including mobile phones and MP3 devices. Orange is ultimately a desirable, aspiration brand, and works well with our own brand profile.' 


The network's relationship with Asda is also developing and, as Mobile recently reported, more concessions will be added to its Asda portfolio this year.


Both Orange and Phones 4u have deployed existing staff into the concession stores to ensure that the technical knowledge is not lost.


However, both companies are keen to emphasise that they are working in partnership with the host stores. Orange staff have to go through the Asda training, while Phones 4u staff must be able to point Currys' customers in the direction of products that aren't mobile related. Both partnerships have also merged their logos for the concession stores.


Phones 4u and Currys

Phones 4u's first concession opened on 1 August in Curry's flagship 60,000 sq ft megastore, initially as a six month trial. However, a second concession was opened in Lakeside, Thurrock in November.


Phones 4u business development director John Welsh said at the opening of the first concession: 'We have deliberately not set any targets as this venture is an unknown entity.'


For some staff members, working in an unstructured environment could have proved problematic. But Welsh was clear at the time that the new venture was a direct way of tapping into a market that would not be attracted to Phones 4u on the high street.


A similar benefit has been acknowledged by Asda and Orange. Asda telecoms buying manager Spencer Brown tells Mobile that, due to the different customer demographic, it is able to pick up a completely different customer base from that which Orange would normally attract.


This is another key factor for successful concessions, while location is also important. Brown continues: 'We are working with Orange very closely to ensure we put them in the right shops. We are taking into account customer feedback and have to be careful on how we select those stores.'


HMV's spokesperson echoes this sentiment: 'The main two considerations are availability of trading space in-store - typically, the selected HMV stores tend to be larger than average; and also to ensure the concessions complement Orange's own retail trading, so that they are in areas where Orange may be relatively under-represented.'


Will concessions take off?

The most recent wave of mobile concessions are more considered than their predecessors, and those involved are working closely to ensure the partnerships are successful.


However, to survive and generate revenue long term, it is vital that the products sold by the host retailer and the concessions complement each other in some way.

Written by Mobile Today
Mobile Today

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Virgin used it successfully for years but that's not mentioned as usual!
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