The Christmas shopping period is usually associated with frantic sales. For mobile phone dealers however, it was a disaster.
A recent survey of Christmas shoppers by the NOP Research Group suggests the public appetite for mobile handsets was there this Christmas. One in 10 shoppers was set to give a handset to a friend or relative over the festive season, claimed the report. But such optimism for the Christmas rush was not reflected in dealers ‘ moods after the event.
Last issue, Mobile News reported that dealers were experiencing a 50 per cent slump in sales in the run-up to Christmas due to a combination of competitive pre-pay offers from the high street multiples and the introduction of 18-month contracts. In truth, the warning signs go back much further. High street retailers, dealers and networks were already reporting low footfall as part of the wider retail malaise as far back as October.
Looking back, it appears that sales were even slower than expected during Christmas. Futurenet Communications founder Jez Harris describes sales for the period as abysmal.
Many dealers point the finger at the networks. They have not put sufficient money into their packages and have put too much emphasis on their own direct sales routes.
Microline managing director Jas Singh says: The networks aren ‘t putting any money into the right places and, furthermore, the payment structures are continuously changing.
Mark Finlayson, managing director of B2B dealership Next Communications, agrees. December was as good as expected for B2B sales, claims Finlayson, but he sympathises with the plight of the smaller independent retailer.
The networks are now starting to go more direct, he says. They aren ‘t putting enough money into the channel for consumer retail, which could spell the beginning of the end of traditional independent consumer retail.|
Many dealers also blame the introduction of 18-month contracts by the networks. The additional six months on top of the regular 12-month contract has left a large gap on the sales front.
Gary Bridger, who owns Airwaves Communications in Yeovil, speculates that 18-month contracts are a ploy by the networks to reduce footfall to dealers ‘ stores.
Customers are now tied into an 18-month contract, leaving a six-month trading gap where there is hardly any movement in the market for the smaller dealers, says Bridger. It has been a deliberate strategy [to slow sales within the dealer channel] from the outset.
Dealers reckon fewer customers are available for upgrades because of longer-term contracts. Phone Zone area manager Mark Graham explains: The problem is that a lot of customers are upgrading early on in their initial 12-month contract, increasing it to an 18-month contract. That leaves a six-month period where absolutely nothing is happening.
He adds that outside interference isn ‘t doing them any favours either, in reference to the classic dealer moan about poaching. Call centres are causing us problems by calling up potential customers on behalf of other networks. Obviously we have no knowledge of this so it ‘s impossible to tell what is going on, says Graham.
Dealers will have the opportunity to sell more feature-packed devices to the youth market in 2007. However, at the same time the advancement of technology is lost on niche markets, such as the ܘgrey market ‘. Bridger claims that some customers are simply all phoned out.
People aged over 35 are simply not going out and grabbing these phones because most of the handsets are too technical for them, he says. Phones are becoming more and more dominated by high megapixel cameras, high quality video and Bluetooth technology. The fact is that many customers aren ‘t interested in these additional features because they don ‘t know how to use them properly. They have no real need for them at all. They just want a simple phone that does the job they bought it for, something like the 6310i.
Despite the gloom for independents, some handsets did sell well over Christmas. Next Communications ‘ Finlayson says that the Nokia N73 has been his best seller over the period, with the Sony Ericsson W810i also making an impression.
MK Mobiles joint-owner Karl May reported a quiet November but an improved December, with most of the LG range selling well, alongside Samsung ‘s D900 and its slimline X830.
Others find it hard to pinpoint handsets that did well over the period, on the grounds that it has been so disastrous for sales in general. I can ‘t say if any handsets sold well at all because it was a pretty poor period all round, says Busby Communications ‘ Jake Atkins.
The January sales would appear to be the perfect opportunity for smaller dealers to get back on track and recover some of the lost business over Christmas. Phone Zone ‘s Graham says: I am very much hoping that the January sales turn things around for us after such a poor period.
The NOP Research Group survey claims that footfall should increase again in January, thanks to the sales period and the ongoing British love affair with the mobile phone. But others are not so optimistic, and less clear on shopping trends in January.
I really can ‘t predict how things are going to pan out in January, said MK Mobiles ‘ May. People just simply haven ‘t got the money to spend any more.
Finlayson also puts a dampener on any hopes of a quick recovery. As I ‘ve seen first hand, retailers are very busy in town, but in the end there won ‘t be a big difference in the amount of business being done in small phone shops.
Futurenet ‘s Harris, on the other hand, believes smaller independent dealers will find it tough to begin with this year, but he believes things will eventually return to normal.
I don ‘t think that the January sales will have a huge bearing on the troubles being suffered by smaller dealers at the moment, he says. The sales will definitely work in the favour of the big guns, like The Carphone Warehouse, but things will probably get back to normal for the independent dealers eventually.
So does the new year mean a fresh start for most and an opportunity to right the wrongs of the slow Christmas sales period? It appears not. In the opinion of small dealers themselves, the independent retail channel is in for a torrid 2007. Most put the doom and gloom down to the networks.
Atkins sees little light at the end of the tunnel. He says: I can only see this year getting worse. The networks have no interest in the dealers whatsoever. They ‘re happy to put their marketing material in our shop windows, but their support doesn ‘t go any further than that.
Harris agrees that the networks will, ultimately, determine what the future holds for dealers.
This year, more than ever before, our future is in the hands of the networks, and it is slightly worrying as they seem to have lost interest in the individual dealers.
Microline ‘s Singh reckons the potential lack of money from the networks will take its toll on the dealer channel in 2007, and will lead to more dealers disappearing from the marketplace.
I can see it being a very tough year, says Singh. We ‘ll have to wait and see how Q1 goes and maybe the networks will start to put some money in.
Bridger agrees that continued lack of commissions payments could spell the end for the independent. The networks are cutting back all the time and this looks like a long-term plan. Apart from B2B sales, independent consumer retail is not needed any more.
Networks failed to put money into seasonal offers
Emphasis is now on network direct stores
Introduction of 18-month contracts has hit renewal
Call centres are poaching potential customers
Some customers are just phoned out under the onslaught of new technology
Hit sellers were the Nokia N73