Box breaking investigation exposes retail staff breaches


With stringent rules on handset bulk-buying in place, operators and retailers claim box breaking has all but been removed from their stores. Mobile News tests their staff to see how well these rules are upheld

Box breaking has been in the news again lately, with ‘professionals’ claiming earnings of up to £60,000 for a couple of weeks’ work – buying and exporting devices acquired from UK high-street stores.

The model for box breaking is relatively simple. Box breakers buy prepay handsets from a retailer, typically the network stores, mobile specialist retailers and the supermarkets, and sell them abroad unlocked for a greater value.

The reason for its appeal is due almost entirely to prepay subsidies, which reduce the cost of the device below the price the company originally paid. Operators rely on customer-spend to eventually profit. When a handset is purchased by a box breaker, unlocked and sold abroad, the operator makes a loss.

To put this in context, the BlackBerry Curve 3G device, which has been highlighted as a popular target for box breakers, is available as a handset only – thus not locked to a network – for £240 with Carphone Warehouse.

But the same device, sold through Carphone Warehouse and network-locked to Orange and Three, costs £149.95. This represents a £90 loss on a single device, when sold to a box breaker wishing to sell abroad. Box breakers typically make a significant profit, sometimes 50 per cent, on each device they sell on.

No exact figures have ever been produced by the operators on the number of devices that follow this path, but it has been suggested about £300 million a year is lost as a result, accounting for hundreds of thousands of devices.

But speaking to the operators, the subject of box breaking is almost dismissed entirely. Previous stories related to issues with box breaking, published in these pages, typically with the Apple iPhone, were all but denied.

Investigation begins
Measures have been taken in the past few years to help reduce the trade. Although, with the exception of Carphone Warehouse, all operators and retailers refused to discuss the measures actually in place.

To find out, Mobile News investigated O2, Vodafone, Orange, T-Mobile, Three, Virgin Media Chitter Chatter, Phones 4U, Carphone Warehouse and a number of smaller independent retailers, to see just how easy it is to buy devices in bulk.

Our remit was a minimum of 10 handsets, typically Apple iPhone 4, BlackBerry Curve 8520 and the HTC Desire, all of which have been mentioned by box-breakers as the most sought-after.

The investigation began over the phone, asking members of staff simple questions such as: how many devices can we buy? How often can I make a purchase? Do I require identification? And can I pay by cash?

The results will shock some, and satisfy others. While it is very clear rules are in place to prevent bulk buying by box breakers, the staff we spoke to, with the exception of those at Carphone Warehouse, were more than happy and fully prepared to find ways around them to make a sale. The need to protect their employers was evidently not in their interest.

It become instantly clear rules were in place for the iPhone 4 more than for any other device, so we instead requested the BlackBerry Curve 8520, which retails between £150 and £180 in stores.

The Carphone Warehouse store in Islington echoed the statement from Carphone’s press office, stating only two devices, per customer, per quarter, per store can be purchased, with no exceptions. A driver’s license or passport would also be required for cash payments.

The Phones 4U store in Camden Town, North London, said we could buy up to three phones every six months in a single store using a debit or credit card. Each device would require a minimum £10 top-up.

But after he handed over to another colleague, we were told we could actually buy as many handsets as we wanted at any time, provided it was paid with cash. No identification would be required, with the only stipulation that cash was required to buy a £20 top-up voucher.

The Orange store in the Trafford Centre in Manchester said we could purchase our requested 10 BlackBerry 8520 handsets, but it would have to be over the course of three days, due to a three handsets per person rule. But after our suggestion we return to the store on three occasions in a single day he said this would be fine. We were even told to bring in friends to complete the transaction in one go. No identification was required, but a £20 voucher per handset was.

An O2 store in West London said it would only sell us one “high value” handset per customer per day. The male advisor refused to sell more than one iPhone 4, but said we could buy one HTC Desire S per day every day. When asked if we could buy 10 BlackBerry Curve 8520 handsets, he checked the stock and said he could supply seven in black and three in purple in a single day, provided each was topped-up with £15. No identification was required and they could be paid for with cash.

The Three store in Tunbridge Wells said one BlackBerry 8520 Curve could be bought by one person per day, with no identification required for cash payments, and we could come back every day. A £15 top-up voucher was required for each device.

A T-Mobile store in Ipswich said we could buy nine BlackBerry handsets in a single day, but would need to bring in two other people due to a three devices per person rule. The advisor explained for every three devices purchased, a single name must be registered.

However, when we said we would pay by cash and asked if we could simply provide three different names, the advisor agreed. No identification was required.

Vodafone does not allow customers to directly call its stores and speak to a retail staff member, thus invalidating the results. Instead, calls have to be made to its call centre. The advisor there insisted we could buy two handsets from customer service and “definitely 100 per cent” buy 10 in stores, paying with cash and no identification would be required.

In total, Mobile News could have purchased a total of 59 handsets for £6,819.21, from all these stores.

On the high street
The second part of the investigation saw Mobile News take to the high street, again in search of 10 or more devices.

We visited T-Mobile, Phones 4U, Carphone Warehouse, O2, Orange, Argos, Vodafone, Chitter Chatter, Virgin Media and Asda. We also targeted a number of small, independent, local dealers, which included Guls Communications (Stratford) and Easy Phone (also Stratford).

The results will again alarm Phones 4U, Three and Orange, who were all willing to break company policies, especially when paying in cash – presumably to thwart potential restrictions to a transaction made on the same debit or credit card.

Perhaps most alarming for Phones 4U in the Tooting store was its member of staff obeyed the rules, but was overruled by his manager who, provided it was paid in cash, allowed a transaction of up to 20 BlackBerrys, despite us only requesting 15. He even checked stock levels to ensure this could happen and enquired as to where the devices would be sold on to.

The Orange store in Wood Green, North London, turned us down flat for the iPhone 4, but was more than willing to fulfil the same request for the BlackBerry 8520. Due to only having seven in stock the staffer would have requested more to fulfil the entire order. He suggested we contact him in advance.

The suppliers of the independent dealers Easy Phone and Guls Communications, both based in Stratford, East London, will be particularly concerned with the number of devices the business is happy to offer. One even offered us 100 iPhone 4 handsets, which would  cost £42,000.

The Three store in Wood Green was the only retailer happy to fulfil our request for 15 iPhone 4s, which would have cost £7,725. Stock was available in store that day and the staff member said he had been given the go-ahead to proceed. We pushed a little harder and also requested 15 BlackBerrys, something they immediately agreed to.

Asda was the only supermarket that failed the test, although it seemed to be more of a loophole rather than an obvious breaking of the rules. With requests for 15 BlackBerrys turned down due to company policy, the request to buy 15 different devices was acceptable.

Full article in Mobile News issue 490 (June 6, 2011).

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