Cutting Room: Overlap of retail, trade and handset powers


Carphone Warehouse appears set on a major move in box-shifting distribution in Europe. What are its chances? And what do recent industry appointments and business strategies tell us about the power play unfolding within the market?

There are two ways of looking at hardware distribution, and they depend to an extent upon your outlook and your mood. And they determine your view of Carphone’s ability to strike up in the sector – if indeed that is its plan.

The first view is distributors add inherent value in the supply chain, above and beyond siphoning excess stock for retailers that have misread demand. This is the common view of distributors themselves, especially on the record in trade magazines.

They do not like the idea they are vulnerable to new entrants, especially when they have been developing their offer for such a time.

The second view is hardware distribution is about box shifting and price, and little else. It is a dangerous opinion for distributors to have because it, essentially, undermines their existence.

And if there is truth in it, then it leaves them exposed should a power like Carphone take a run at the market. The idea that Carphone’s rivals on the high street could not stomach buying from it, however low it sets pricing, is a far more likely impediment to its success.

Buying power
The anti-competitive nature of such a move, which would increase Carphone’s buying power (already enormous) in the market with every sale from a rival, must preclude a serious move by it in UK hardware distribution. It would render manufacturers powerless against it – as most already are.

More likely Carphone will ramp up its European buying activity with manufacturers, so that Best Buy Europe and all its retail and B2B assets are accounted for via a single centralised purchasing department.

This is the future model in a globalised market, clearly, where operators look to centralise supply, and Brightpoint and Brightstar find efficiencies. This seems a likelier model for Carphone, and Mitchinson (pictured left).

Surely this is better use for Carphone of Mitchinson,  arguably the most successful UK manufacturer head the market has seen, to interface with handset makers and network operators for it across Europe. Surely he will be a central element in Carphone’s grand scheme as Best Buy Europe.

Loyalty in distribution
Either way, UK hardware distributors should not consider longterm customer contracts and ‘value-added’ services a facet of their longevity.

Historical economies of scale, which will be utterly overshadowed soon enough, bank overdrafts and risk-taking are a surer measure of their success. Plus some very shrewd trader individuals.

Loyalty in hardware distribution is limited, unlike in airtime distribution, where account managers, systems and strategies can draw business, which might well inform Tanny Price’s move from Brightstar to Shebang, which covers both airtime and hardware and can claim genuine points of difference – although, like Mitchinson, Price (pictured right) was not talking with the press last week as the story came out.

Smartphone dynamics
A mirror of Carphone’s retail power is the sway of Apple and BlackBerry in hardware terms. HTC might be brought into this duo too. An interesting aspect of its recent UK development under Jon French is its adoption of Mitchinson’s old model, which French saw at close quarters – to feed the high street and squeeze the channel.

Its recruitment of Brightstar has intensified competition in the dealer market, when there is little stock reportedly available from Brightpoint anyway. Because demand on the high street is through the roof, and it is its primary conduit.

The difficulty in 2011 for the old guard is just to find a way onto the high street. What is left of operators acquisition budgets for the years when they have purchased and subsidised all the iPhone and BlackBerry smartphones and tablets requested by the mass market now.

The likes of Motorola and LG, in particular, face a huge challenge if they are to claw back anything like their market shares of old.

Even Nokia and Samsung get only a small share of retailers’ attentions when premium devices are discussed now, compared with three years ago.