8/14/2008 3:50:00 PM
Voda swims against the tide
It’s often said that in a recession businesses must either pull in their horns to cut costs or be aggressive and expand. This week sees Vodafone swimming against the tide and wading deeper into retail at a time when the more fainthearted will be thinking of heading for shore.
Nick Read and Tom Devine would doubtless say that Vodafone is doing this because of the stunning results it is getting from its retail estate. Everyone else seems to think footfall and connections are levelling off, and with the few remaining shoppers wanting to shop around, tumbleweed will soon be seen rolling through operator stores.
I’ll stick my neck out and say I doubt this aggressive move is based on the normal investment approach involving a business plan with early payback. It looks more to me like a speculative strategic stab at gaining more control in the retail market.
Charles Dunstone, it is often said, used the operators’ money to build Carphone Warehouse’s retail fleet, and did so most effectively when times were hard. Not today. Right now Carphone is opening hardly any mobile stores and is placing its bets on opening Big Box electrical outlets with Best Buy.
So the way is clear for Vodafone to make a counter-cyclical play. The market will come back some time – maybe next year – so why not snap up a heap of retail space while it’s cheap? Vodafone will add to its retail muscle while rivals try to stop theirs wasting away. It can also get some great staff at affordable costs. Apart from recruiting seasoned managers disgorged from struggling sectors of retail, it can promote its assistant managers from within. They’ll have a year to get up to speed - and a bit more until they are on the top salary grades.