It is the day after Nokia made the surprising announcement that Orange and Phones 4u are the chosen partners for the 5800 touch-screen loaded with its unlimited music download service.
Carphone Warehouse has been overlooked for the second Comes With Music phone after the retailer devoted considerable floor and store window space (for a price to Nokia) to the first handset with the service, the 5310, in the run-up to Christmas 2008.
The 5310 was a flop, but no one could find any holes in Carphone’s ‘execution’ of the device and the ‘store theatre’ it created around Nokia’s music service. Consumers just didn’t want it.
So, you could forgive Carphone’s chief commercial director, Graham Stapleton, if he feels the retailer deserves a second crack at Nokia’s improved music service having done the ‘heavy lifting’ on launching the original.
Stapleton appears philosophical, bouncing with energy as he looks at the mocked up store wall of Carphone exclusives for the coming months.
‘Clearly we’re disappointed, but we have some fantastic exclusive devices coming up,’ he says, pointing to a smart array of handsets under the legend: ‘new and exclusive’.
It is six months since Stapleton was unveiled as the replacement to George Dymond, who ended a long and illustrious career at Carphone as UK trading chief in December.
UK CEO Andrew Harrison gave Stapleton a much bigger brief as Dymond went to join former COO John Durkan in Australia at the supermarket, Coles.
Harrison amalgamated UK and European handset buying into one role, and included negotiations with operators.
Stapleton has been given a clear, if daunting, remit amid the challenging economic backdrop: get exclusives and find money.
Exclusives are regarded as the magic ingredient to help increase market share. Securing them is made harder amid manufacturers’ instability and a strategy to reduce handset range. It naturally puts pressure on Stapleton and his team to back the right products, raising the stakes and leaving little margin for error.
A wide-ranging, cost-cutting programme has also spread through all areas of Carphone, with savings and new revenue opportunities sought to squeeze more money and margin.
Although the group ‘chief commercial officer’ role is a new, enlarged one at the retailer, some feel that in the context of the market and with the objectives Stapleton has to meet, he has a much tougher role than Dymond.
But on the plus side, Stapleton is armed with even greater powers. He has the muscle of a new partner: Best Buy, the biggest buyer of electrical goods in the world.
‘Relationships’ and exclusives
Stapleton says his job will involve getting exclusives, but critically, working closer and more collaboratively with a handful of ‘strategic partners’.
He adds: ‘When times are in as challenging a period as the retail market [is in], we want to develop our business in a very collaborative way.
‘You have to work together when there are fewer customers, rather than just beat a fist on the table.’
He cites LG and the Cookie as an example of a handset that is a triumph of collaboration.
‘We have a close relationship with LG as a consequence of several visits to Korea,’ he says.
Over 350,000 Cookies have been sold by Carphone around Europe in four months. Only the pink Motorola V3 has sold in bigger numbers in the retailer’s history.
Stapleton says he saw the device in June 2008, and the two companies had identified a target customer and fought for a ‘semi-exclusive/first to market’ deal.
‘We thought we could do a really good job for them, give it the focus and bring touch-screen to a mass market for Christmas.’
He says there was some resistance internally. ‘The group team knew this was going to be a very, very big product. Some of [Carphone’s] nine territories didn’t have that view and needed to be persuaded.’
The success of the product has, in Stapleton’s view, strengthened the relationship between the two companies.
‘It has shown LG that working closely with us is good for them. LG have become more important for us, too.’
Those on the other side of the table to Carphone say Stapleton is reminiscent of Dymond’s predecessor, trading director and latterly chief operating officer Durkan. He came from Safeway to introduce more rigour to Carphone’s buying, and to raise the retailer to the tougher dynamics of supplier-retailer relations common among supermarkets.
Durkan’s confrontational style wasn’t to everybody’s taste, and is famously cited as the reason things turned so sour with Vodafone (more on that later).
Stapleton is described by more than one manufacturer boss as ‘Durkan, but with softer edges’, a kind of ‘Durkan-lite’, if you will.
One manufacturer says: ‘Graham makes the same demands as John did, but without throwing the toys out. Like John, Graham puts the customer right at the centre of everything, and he will absolutely deliver.’
One source close to Stapleton says: ‘Graham is totally passionate about exclusives. He wants that opportunity, and brings in the supplier. He’ll open up a chance to make a proposal to the other party, and tries to work with them rather than be confrontational. It’s a very smart way of working.’
Seasoned manufacturers issue some hesitancy that the relationship card could be over-played.
One manufacturer director says: ‘It’s virtually all down to the customer proposition. Motorola had a fabulous relationship with Carphone, but when the handsets were of little quality it didn’t make much difference.’
Another manufacturer says: ‘It’s true the relationship side of things isn’t as make or break as the handsets, but when you have Carphone backing a handset they absolutely deliver.’
Stapleton is of no doubt that a deep relationship with a manufacturer is vital, as both parties can share insight and go deep into the manufacturing process to target specific demographics.
‘You can’t be a strategic partner with everyone, and really mean it. This way we can align our businesses and make long-term plans.’
Stapleton says he and his peers at other retailers, and even the operators, have been against instability in the manufacturer landscape, and the emergence of several new handset brands offer an opportunity to differentiate. ‘We’ve seen the demise of Motorola, and Sony Ericsson struggling in Europe more recently. But Samsung and LG have really grown.’
He adds: ‘A lot of the new manufacturers are coming into specific segments. Look at HTC, Acer and Dell and it’s not another Nokia. We are looking to support as many new entrants as we realistically can. Obviously there will be a restriction.’
Asked what would determine the manufacturers that Carphone leans towards, he says: ‘If we have an existing relationship with a laptop manufacturer, say Acer or Dell, we will give them priority. It feels right because we’ve done a lot of work with them already.’ (See box on previous page for Stapleton’s laptop buying strategy).
Pressure to get best terms
The other objective for Stapleton and his team is to find cost-savings and run a tight ship. This is understood to be Stapleton’s strongest suit, with a belief that the ‘commercial’ in his chief commercial officer role couldn’t be better suited.
‘I’ve seen him find opportunities no one else can see. He looks at where Carphone can get an ongoing deal on service, and pushes for all sorts of terms,’ says one source.
Carphone has been battling volatile demand and wide currency fluctuations.
Stapleton says: ‘Giles Harvey, our supply chain director, is very capable. We’ve kept good control of our stock and reacted quick