Vodafone rushed in to congratulate O2 on its move to drop Phones4u, describing it as a means to ‘optimise their supply chain’. A new era in mobile phone retailing has been ushered in with the power being moved away from the retailers to the mobile phone networks. In the past the networks have relied on the retailers to sell their mobile phones and contract to the public, this obviosuly put them in a weak position. So over the last couple of years the networks have been actively developing their own retail operations by buying up high-street stores, building full e-commerce websites, and learning the tricks of direct-response advertising in the national press and online.
Now they are less reliant on retailers the networks are also able to impose tougher terms and lower commissions. In Sept 2006 Vodafone took the next step in their plan by agreeing an exclusive deal with Phones4u which excluding the market leading retailer Carphone Warehouse from selling its mobile phone contracts.
Vodafone’s commercial director, Ian Shepherd, said: ‘We’re not surprised to see others change their distribution strategies as they also seek to optimise their supply chain, following the lead we set six months ago.’ Traditionally, the reason to use a retailer rather than going direct to a network is to obtain free impatial advice about which mobile phone deal is the best in the marke place. This is no longer possible because neither Phones4u nor Carphone Warehouse are able to sell all the different networks and therefore their impartiality has been eroded.
The Carphone Warehouse may have lost Vodafone, but it has recently managed to secure a new deal with Orange, but this was only possible after CPW agreed to a new set of stringent new terms. Less money will be paid up front to the retailer, with the bulk of commissions now hinging on how much money customers spend with Orange Mobile Phones and how long they stay on the network.
Sources claimed that Orange was concerned over connections coming through Carphone’s online and off-the-page channels, where the quality of customers is believed to be significantly less than those coming through stores.
Orange have said: ‘Increasingly, I will reward and work with channels who deliver us value, not just volume.”
Who will be next to put pressure on the retailers, 3 or Virgin Mobile?