High street return’s ‘an A1 opportunity’

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A1 Comms and BuyMobilePhones.net MD Paul Sisson is back on the high street after a six-year absence, having bought the Go Mobile retail estate from Shebang in July. He tells Paul Withers about his plans

Back in 1997, Paul Sisson founded mobile phone retailer A1 Comms, looking to compete with the likes of Phones 4U and Carphone Warehouse.

However, such was the competition, he only managed to roll out 14 stores in and around Derbyshire before shutting up shop in 2006.

Sisson took the decision to exit the high street during the dotcom boom, setting up the consumer site BuyMobilePhones.net (BMP) in 2003, which focuses squarely on consumer handset, airtime and accessory sales.

The modest A1 Comms retail estate was sold off to Shebang Technologies Group in 2006 and rebranded as Go Mobile. But the brand was retained and now focuses on B2B connections only.

The move was a good one – BMP has gone from strength to strength ever since.

It now employs 84 staff, and is outgrowing its current office space in Contract House on the Turnpike Business Park in Alfreton, Derbyshire.

Of the three buildings on the site, Sisson owns two and has put an offer in for the third.

“Business couldn’t be better,” is the clear message from a smiling Sisson as we gather in his office.

He reels off impressive statistics that validate his buoyant mood. Financially, the firm is on the crest of a wave, with revenues almost doubling from £31 million in 2010, to
£54 million in just 12 months.

Such is the speed of growth, Sisson has set targets to more than double turnover by the end of the current financial year, suggesting anything up to £120 million.

And the firm is on track to achieve them. The second quarter of this year –BMP’s first of the financial year (April, May and June) – was the company’s most successful ever since it began trading, with turnover averaging more than £7 million a month. The company also maintained that performance through July. Sisson is also expecting BMP’s customer base to grow by a third this year to around 300,000.

“That quarter was without a shadow of a doubt our best trading quarter, both in terms of volume and margin,” Sisson says. “Based on trading in our first three months, turnover is tracking at £90 million in this financial year, which is a massive leap.

“Our first three months shouldn’t be our best trading quarter because with consumer sales of mobile phones, it gets busier as the year progresses. The fourth quarter is always our busiest as it’s when the Christmas trading period begins. We expect that to take off from the start of October.

“If we can achieve turnover of £7 million a month now, I expect that to grow by a third during those three months. If we’re already tracking for £90 million, you would have thought turnover would hit £90 million or perhaps closer to £100 million.

“If you look at the market as a whole, we probably hold something like a two per cent share, so we have 98 per cent of the market to aim for. It’s up to us to continue to grow our brand and eventually make it more of a household name.

“We’ve been working hard to try and establish ourselves as a primary online mobile phone contract retailer.

“I’d almost say I could run BuyMobilePhones.net in my sleep and I don’t have to think about it. I could just carry on doing things right, looking after customers and suppliers.

“In business sometimes you have to be prepared to be out of your comfort zone to be able to push on, so it’s really exciting. The next six months or so will be
very interesting.”

High street return
In a bid to achieve further growth, Sisson is heading back to the high street.

He made the surprise move of acquiring the 100 plus Go Mobile retail estate from Shebang Technologies Group for an undisclosed fee in July – a move which Sisson claims could add around £30 million in turnover to the business.

It is the company’s second acquisition after it bought online retailer Mobile Shop in December 2010.

The deal sees A1 take over Shebang’s contract with Asda. This will involve it running 10 of the supermarket’s ‘Phone Shops’, providing stock fulfilment and processing airtime connections on Orange, Vodafone and Three, as well as prepay handsets and accessories.

The Phone Shops also sell the supermarket’s MVNO offering, Asda Mobile, which runs off the Vodafone network.

The Go Mobile shops will also sell Shebang’s prepay and contract MVNO offering, Go Mobile 4 Everyone, which launched in August.

Around 40 in-house staff working across the Go Mobile, Affordable Mobiles and Asda divisions have switched to A1.

Change of heart
So why the change of heart from Sisson? He remains tight-lipped about the terms of the deal, but admits that prior to an approach from Shebang CEO Iain Humphrey in May, he had no desire to revisit the high street.

He claims he was swayed as the shops were all franchise-operated, meaning he wouldn’t have to take a hands-on approach with the business.

He admits he would have turned down the deal had it not been for that.

“If Iain had said that he wanted to sell 100 stores that he owned, I wouldn’t have been keen,” Sisson says.

“The franchise model means staff are running their own stores and are motivated to run them well, covering the costs of those stores, so it’s a different proposition. That appeals to me as much as anything and I don’t have to take such a hands-on approach.

“I wouldn’t be keen jumping head first, being totally responsible for 300 staff and 100 shops, without the help of partners, which are the franchisees, because they’re equally involved as it’s their staff.

“You have to manage your growth carefully when revenue share is involved. If you’re dealing with a network that pays you the following month, then it’s fine but if you’re waiting a number of months to break even on a deal, you can’t afford to rush things. So I would think twice about taking a business on that’s going to add thousands of connections a month if I’m subsidising the costs of those connections.

“That’s not the case with the franchise model as they run these businesses themselves. It’s up to them to consider what kinds of handsets they sell in their shops and what networks they connect them to in regards to how they get paid by that network, whether it’s all up front or partially up front. They have to manage that payment route, rather than us, and once again it makes it a viable way of growing the numbers reasonably quickly.”

Sisson says he has to be realistic about the tough economic and trading conditions and will only think about changes to the retail estate, in terms of openings and further growth, once he’s confident the business is trading at the best possible level.

“There’s no point saying we’re going to dominate the high street immediately because that’s just rubbish. We can worry about growth when we are certain we’re doing the job properly.”

Ironically, he says the company’s growth has been helped by its decision to take A1 Comms off the high street and away from retail, enabling it to escape costs associated with maintaining shops.

“We’ve managed the growth very carefully. We were in the same boat as a lot of dealers and retailers a few years ago when revenue share first came to market, but we had the advantage of being an online retailer without a big estate of shops or mass overheads to worry about.

“All we really had to worry about was covering the cost of the handset from commissions. We’ve managed to do that, survived and grown at a pace that is sustainable.”

Full article in Mobile News issue 524 (October 8, 2012).

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