Cashback collapse has cost Dextra millions

Cashback collapse has cost Dextra millions

The collapse of a number of online and high street cashback dealers over the last year has caused a serious slide in profits for Dextra.

Dextra posted a £150,000 profit in October last year after consistent profits of £900,000 per month between October 2006 and June 2007. At the height of the business’s performance in 2005 it was racking up profits of £2m per month.

In contrast, the accessories and prepay side of the Dextra business is reckoned to have been performing relatively strongly.

Since operators signed up to Ofcom’s voluntary code on cashback and mis-selling last summer they have clamped down on distributors and their retailers who offer unsustainable incentive deals.

The effect has been withheld commissions that forced some dealers out of business, and multi-million pound clawback payments from distributors.

The highest profile collapse, Dialamobile, was estimated to have cost Dextra £3.5m.

The Birmingham-based retailer went bust in September last year, leaving thousands of customers with unpaid cashbacks, and attracting significant bad publicity for the networks.

Two months later, Mobile Media Systems, which traded as Phonebox Direct and Cool New Mobile, also went under.

Dextra was reported to be a major supplier and, was the only distributor mentioned on the company's websites.

At the time a source told Mobile that operators were paying £365 commission plus a £25 accelerator, which meant the total potential clawback from its collapse could be as high as £13.5m.
Dextra’s managing director James Browning said at the time that Dextra had reduced the business it did with cashback retailers after it was exposed to the £3.5m hit from Dialamobile.

Since then, another of Dextra’s retailers, Mobile Outlet, has also gone bust. Mobile Outlet, which stopped trading in November, connected 2,500 customers per month at its peak.

Written by Mobile Today
Mobile Today

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