Timing is everything when launching a business and UK retailers are not having the easiest time of it at the moment as consumers tighten their ever shrinking wallets. True, the mobile industry tends to fare better than many other retailers, as consumers see a mobile phone as an essential purchase rather than a luxury.
Consumers are therefore prepared to spend a disproportionate amount of their disposable income on mobiles, but even so, they are looking hard for better value tariffs, cheaper handsets and are delaying upgrades.
So with an economic crisis looming, it might seem an odd time for supermarket giant Sainsbury’s to launch an MVNO and attempt to take on rival Tesco in the mobile space.
Asda has been trying in a desultory kind of a way to grow its MVNO operation for some time now without making any real impact. And aside from a handful of mobile retail store-within-stores it has not expanded its estate for a while.
Tesco, on the other hand, has succeeded in establishing itself as an alternative retail destination for consumers to buy mobile phones, while its MVNO has grown by 21% year on year to reach a total of 2.7 million customers in Q2 2011.
Sainsbury’s isn’t short of cash and can probably afford a long run at trying to establish itself as a credible player in the mobile arena, but is it a bit late in the day?
Perhaps not: as mentioned, consumers look hard for bargains in tough times and Sainsbury’s can afford to offer some very competitive prices. It will need to do so anyway if it wants to lure people away from Tesco.
Good news for consumers, but it might make life difficult for other mobile retailers if they are unwilling to cut margins to compete with Tesco and Sainsbury’s.
But then again, price isn’t everything and with the networks, Phones 4u and Carphone Warehouse increasingly selling on the basis of the quality of their service, there may be room for everyone to survive, if not thrive, in the current climate.