New commissions system from O2 and Orange could cause fractures in the relationship between distributor and dealer, according to senior distributors and dealers.
‘It’s about trust, how will we know they are telling the truth about commission,’ said one independent dealer.
Mobile understands that distributors are currently negotiating a collective strategy for the new system. Ian Gillespie, managing director of Fone Logistics said: ‘There are some negotiations going on at the moment [with regards to the Rules of Engagement process] and there are things to be finalised so I don't want to pass comment on it yet, what O2 have done is good is some respects.’
The new ongoing commissions’ structure will mirror customer spending and some dealers are anxious, they will not be given their fair share for retaining the customer.
The new O2 system will pay a primary amount up-front sum equal to 48% ARPU for the first 14 months of a contract, but this may not be enough to help cash flow mobile understands
Dealers are concerned with the initial amount: ‘It’s difficult to see any positives; initial commission may not be enough for the handset. It means we will have to drop subsidies, putting us at a disadvantage to networks,’ said one dealer.
Mathew Croxford, sales director at Citytalk Communications Ltd agreed: ‘O2 must realise to ask the Dealers\distributors to take the hit on Hardware, staffing costs and petrol, they jeopardise the sustainability of this industry.’
Orange’s new ongoing model has already been trialled on federated dealers who have had little problem with the new model.