1/14/2009 5:33:00 PM
Where now for Virgin Mobile?
In the space of three weeks Virgin Mobile lost its two key retail channels – 800 Woolworths stores and 83 Zavvi concessions. The indifferent response to the closures provokes one to wonder what Virgin Mobile’s objectives are.
The breath of fresh air that it once was in invigorating the prepay market has now dissolved into the mix of prepay brands currently available to the consumer. The incumbent networks have now sharpened their brands and prepay strategies to reduce any advantages Virgin once had.
To me, Virgin Mobile’s distribution strategy symbolises its broader raison d’être: serving the needs of the Virgin Media group. Virgin Mobile’s most important channel has not been Woolies or Zavvi, but the existing Virgin Media base of TV, broadband, and fixed-line telephone customers. Virgin is still capable of clear, simple and attractive execution; witness ‘Liberty Sim’, mobile broadband and the recent unveiling of its mobile internet proposition.
Virgin also has considerable expertise in customer service and telesales, which is the foundation for its business and has always deterred it from entering the costly business of opening its own stores. Stores that have historically been tricky for selling fixed-line products, but remain the most successful channel for mobiles.
Despite its strengths, if there is no purpose beyond selling another product to the Virgin Media base, the company must clearly be braced to see its mobile customer numbers quickly decline. The Zavvi concessions are reckoned to have represented between 10% and 20% of its mobile handset sales. But with a declining distribution network, and a brand that has lost much of its following, the group need to support the mobile division if it wants it to be more than a product line to offer its existing fixed-line base.