Be afraid: Best Buy shakes up mobile retail

Be afraid: Best Buy shakes up mobile retail

Best Buy has arrived in the UK and it is taking no prisoners.

The retail giant says it is prepared to lose £45m in its first year of trading in Britain to grab market share from its rivals.

Its joint venture with Carphone Warehouse, which was set up in a £1.1bn deal in 2008, is the landing stage for its assault on the UK market, which began last month with the opening of its first UK store in Thurrock, Essex.

The launch saw queues around the block, with the company reporting the highest sales figures it had ever seen from a newly opened store anywhere in the world.
With plans to open between eight and 10 more superstores this year and up to 200 stores in total, the US discount giant has set a chill wind blowing among the UKs electronics retailers.

Meanwhile, mobile features large in its expansion plans with no less than 110 live phones on display at its first store.

In addition, Best Buy will match the price of any items selling at a cheaper price within 15 miles of the store, alongside a discount of 10% of the difference.

A key pillar to Best Buys strategy is service, with the retail giant employing highly-trained geek squad staff with in-depth knowledge of products and no commission to taint their customer advice.

So who does Best Buy have in its sights in the mobile phone arena? Neil Mawston, director at Strategy Analytics, says: 'The likes of Phones 4u, Tesco, the operators, the online retailers and independent retailers will all be in its sights and of these under most threat will be mobile phone retailers particularly Phones 4u'.

He predicts: 'Best Buy will start with the low-hanging fruit the mid-range guys that are not part of a big group. They will pick off the weakest. Its all about the chains now'.

Phones 4u dismisses the argument. A spokeswoman says: 'We do not consider Best Buy a competitor as its an electrical retailer and Phones 4u is a high street mobile retailer'.

But some retail experts believe Best Buys arrival marks a fundamental shift in the market which cannot be ignored.

Richard Perks, director of retail research at Mintel, says: 'With the convergence of electronic goods, it is no longer sensible to talk about mobile phones in isolation. Im not sure if being a mobile phone specialist is the way to go look at PC World. What place is there for a computer specialist today?'

He adds: 'Given the nature of the gadget, there is definitely a place for the mobile phone on the high street but retailers must broaden their offer, much as Carphone already has, to respond to that fundamental change'.

Some retailers are already responding to the challenge, taking advantage of the delayed launch of Best Buy in the UK.

Greg Lawless, retail analyst at Collins Stewart, says: 'Best Buy is already late in this market. They planned to have around five stores up and running by the end of last year and so far they have just one. Breaking into the UK is a bit tougher than they thought and the delay has given DSG and other rivals time to make life difficult by moving into every potential site where Best Buy wants to'.

Perks agrees, and explains: 'Two years ago, I would have said Best Buy would have a dramatic impact here as the opposition was in pretty poor shape. I am hugely impressed with the new Currys stores. They have taken a huge step forward and so has their staff training, which was long overdue'.

Best Buy must also create a brand in the UK from scratch. 'It is not just about price and service; it is also about brand perception. Best Buy is starting with a blank sheet of paper and it is quite difficult to create brand recognition', he warns.

Neil Mawston believes other mobile phone retailers must take rapid action to counter the threat. 'There are a number of things they can do', he advises. 'They can cut prices which is easy but painful. They could look to better retail locations, before Best Buy gets them or they could move around geographically; say to Wales or Scotland, to establish a presence before Best Buy gets there. They could also do more marketing'.

DSG has raised its game, launching new Currys megastores in prime locations and taking an aggressive approach, responding to Best Buy's 15 mile price challenge with a 30 mile price challenge.

Similarly, John Lewis is taking a combative stance, sticking firmly to its never knowingly undersold pledge in the face of Best Buy's rock-bottom pricing.

Tesco Mobile declined to comment on Best Buy's arrival but with similarly deep pockets, it is in a strong position to put up significant opposition, already pledging to open 500 Tesco Phone Shops across the country and driving hard into the contracts market.

The writing is on the wall and mobile retailers and operators would do well to heed the warning.

Broad mobile focus in Best Buy

Best Buy's head of mobile and connected world, Ross Yealland, told Mobile last month: 'Mobile is really important to us. We are focused on smartphones and we have a 100% live offering'. 
However, the retailer reveals a broad remit offering everything from a 4.99 Nokia through to an iPhone.

The company hailed the opening of its Thurrock store last Friday (30 April) as a resounding success, with the BlackBerry Curve selling out on the first day.
The retailers top opening day mobile product was the BlackBerry Curve 8520 in black and lilac, which had a sale price of 99.99 on prepay down 100 from the normal price.

Best Buy's appeal to manufacturers

Mobile phone manufacturers will welcome Best Buys arrival, as key beneficiaries of another dynamic channel.

Jon French, HTC's UK and Ireland executive director, explains: 'This is a real positive for the industry. Potentially it is going to bring a breath of fresh air to the way mobile phones are sold.

'I am particularly excited about Best Buys commitment to developing the connectivity between devices and products to give added value to smartphones.

'This is really important as smartphones can do so much more than people realise and so it is good that Best Buy is committed to making that come alive'.

He adds: 'It is a new way of retailing and I guess other retailers will have to question whether they want to adapt to that change.'

Written by Mobile Today
Mobile Today


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