Cutting Room: Retail realities and O2’s monster deal


Reality bites

So, the Christmas rush is over for another year, and retail sales staff are probably relatively pleased with themselves.

Why? Well, despite the year-on-year slowdown and the immense pressure from targets, December was at least the one month in the year they were able to persuade punters to part with their cash.

Compared with the rest of 2008, as well as 2009 as far as we can see ahead, consumers at least splashed out over Christmas on more than mere essentials.

At the same time, reality bites.

Woolworths has gone, along with half a dozen other high street brands. Marks and Spencers is to cut more than 1,000 staff and 27 stores.
Everyone is scrutinising their bottom lines.

December sales were slow because the global economy is having such a torrid time. Mobile is not recession-proof, as some optimistic industry watchers have claimed. Punters might view a mobile phone as an essential item, but spending on all the accessories and paraphernalia will surely slow to nothing.

As such, it is hardly surprising the likes of Carphone and Phones 4U have reined in store targets.

It’s an annual breather for staff, for sure. But it usually comes much later as retailers max out the post-Christmas/New Year/January Sales rollercoaster.

But Carphone’s cutbacks to its sales targets appear more generous, even realistic.

Phones 4U hiked targets to such levels ahead of Christmas store staff could hardly breathe. They’ve come down, but only by 15 per cent.

T-Mobile and Carphone seem to be on the right tracks by implementing achievable targets, tightening up on store budgets and giving back to customers in device subsidies and broadband packages.

O2’s monster deal

A mind-blowing way for O2 to see out the old year and bring in the new: €350 million over five years for supplying and managing 60,000 fixed lines, and 80,000 mobile connections and 100,000 LAN ports on behalf of Deutsche Post.

In light of the economic situation – along with the old clichéd talk of convergence, consolidation and globalisation – this deal is right on the money.

It represents good cashflow, of course, for the provider and around €150 million in savings and for the customer.

It also offers the benefit of one bill from one provider for Deutsche Post, rather than the 84-odd it previously dealt with.