Tesco is on the march, with plans to open a ‘Phone Shop’ on virtually every high street in the country by 2013. Just as Tesco has become the number one food store in the UK, Tesco Mobile wants to be number one in the mobile space.
Lance Batchelor, CEO of Tesco Telecoms, tells Mobile: ‘Tesco has
around 20 million visiting customers a week. We want to be the leading supplier of telecoms products and services to that audience.’
Batchelor is 20 months into his role, with a brief to bring in sales of £2bn and £200m of profits. He will not reveal the timescale, but these targets are clearly linked to Tesco Mobile’s rollout of 500 in-store Phone Shops by 2013.
In the past 18 months, Tesco Mobile has opened 107 Phone Shops. From this week it will increase the pace, opening between two and three shops per week to deliver at least 100 Phone Shops each year.
At this run rate, Tesco should reach its target of 500 Phone Shops in 2013, becoming the third largest UK mobile retailer, after the combined offering of Orange and T-Mobile (613 shops) and Carphone (813 shops).
The Phone Shop rollout has so far centred on Tesco’s 200 large ‘Extra’ stores, but is about to be extended to the retailer’s medium-sized superstores and its smaller high street Metro stores.
‘This will give us the ability to be on every high street in the country,’
This is a significant move, and one that Tesco’s high street rivals will
watch with interest, and presumably with some trepidation.
Batchelor promises ‘a very different sales environment’ in Tesco's Phone Shops than that found in high street mobile retailers, which he claims can be aggressive and confusing.
He explains: ‘Most people in Britain are not tech-savvy individuals, and they don’t want the whole thing shrouded in smoke and mirrors. They want simple tariffs, which make sense, and they want to talk to someone who speaks normal English and who won’t force something they don’t want down their throats.’
To this end, Tesco Mobile sales staff are trained to build up a relationship of trust with the customer over time, rather than push the stores’ products and services.
No commission pushers
‘We are different from traditional mobile phone high street retailers who, when you come through their door, know it is probably the only time you are going to be in the store that year and won’t let you go until they have sold you something.
‘Our enormous advantage is that our customers come in week in, week out, and if they choose to engage with us over a four to six to 10-week period before making a purchase, well, that is fine by us,’ says Batchelor.
To ensure staff do not push products, Tesco Phone Shops have no staff commissions. Employees are motivated instead with the promise of a fast-track career path, which could see effective staff quickly promoted to store managers, with the possibility of going on to become regional managers and even strategic directors at Tesco Mobile’s headquarters in Slough.
Batchelor says some handset manufacturers have been ‘startled’ at Tesco’s refusal to carry brand offers linked to staff commissions. He defends his position, condemning ‘the financial structure of the industry, which forces some retailers to churn customers back and forth between brands’.
He adds: ‘It is no accident this industry has a churn rate of 30%. We have no intention of churning our customers back and forth between brands.’
He justifies his stance, pointing to Tesco Mobile’s ‘explosive growth’, particularly in terms of contract sales, which he says are as good if not better than rivals’ sales rates.
Batchelor confidently predicts that Tesco Phone Shops will achieve ‘over a third of a million contracts in our shops this year’.
Offering the cheapest 12 month iPhone tariff is another factor fuelling Tesco Mobile’s growth. Tesco clinched its iPhone deal with Apple late last year, ahead of Vodafone and Orange. At the time, some analysts predicted poor sales.
‘They were wrong,’ says Batchelor.
He declines to give numbers but says demand for the iPhone has exceeded estimates. ‘I am selling all I can get,’ he adds. ‘It shows the iPhone has gone mainstream. It is no longer a geek, techie product; it’s for everyone.’
He continues: ‘That’s why Apple was keen to work with us. We have the broadest customer base of any supermarket in the UK and they knew we could bring the iPhone to a whole new audience, and that is exactly what has happened.’
A new demographic
The iPhone deal has also brought a wealth of new customers to Tesco. Bachelor explains: ‘The majority of iPhone customers at the big networks are current customers who are upgrading, they are not new.
Whereas the majority of our iPhone customers are new to Tesco Mobile,
which just confirms we are bringing in a new demographic.’
This month, Tesco Mobile stepped up its assault of the contract market, introducing a range of 28 new handsets alongside the iPhone.
‘This is a very exciting step change,’ says Batchelor. ‘With prepay we were only playing in half the market. Now, with our Phone Shops and the addition of 28 new handsets in our contracts range, we have moved into the whole of the consumer market.’
Tesco is also targeting operators, with new operator upgrade deals planned for this year.
Batchelor explains: ‘We are becoming an increasingly important channel for Vodafone, Orange and O2. We spend a lot of time talking to operators about how we can become their favourite channel to market, and it is clear they are excited at the opportunity of a new channel to market and excited about the opportunity to do upgrades in that space.’
Using the combined power of the Tesco Clubcard and operators’ knowledge of when customer upgrades are due, Batchelor says Tesco Mobile will craft ‘an upgrade experience that fits in brilliantly with the customer, to save her having to go back to the high street to find her operator’.
Tesco Mobile recently confirmed it has more than two million
customers. Batchelor says: ‘That figure is growing at a steady clip. We
are the fastest growing prepay operator in the UK last year and now we have added the postpay, we are growing even faster. This time next year, I am confident we will have a significantly larger number than two million customers.’
High street mobile phone retailers will need to raise their game or they could find themselves facing the same fate as the many butchers, greengrocers, pastry shops and hardware stores that have been swept aside by Tesco’s inexorable advance into new markets.