It’s been a tough 2018 so far for Dixons Carphone. It started with the departure of CEO Sebastian James and CFO Humphrey Singer following a troubled 2017 in which profits fell considerably, and the bad news hasn’t stopped since.
In June, annual profits fell from £500 million to £382 million due to narrowing margins and unfavourable market conditions. It also expects profits to fall again during the next 12 months and has announced that it will shut 92 of its 700 Carphone Warehouse stores in 2018.
And then, to cap it all off, it suffered a data breach that saw millions of personal data records and payment cards affected.
Changing habits
A lot of its woes can be attributed to changing consumer habits. Carphone Warehouse is the UK’s biggest mobile phone retailer, but the market is saturating, and people are buying fewer phones. SIM-Only tariffs and SIM-free handsets are becoming increasingly popular and this is having an effect. Margins are being squeezed and sales are flat.
“It does feel like there’s quite a tough journey ahead. There are a number of factors at play here,” Kester Mann, an analyst with CCS Insight tells TechRadar Pro. “Firstly, it’s a plateauing device market and mobile phones have been the bedrock of Carphone Warehouse’s strategy.
“The harsh reality is that people are upgrading less frequently than they used to. With a lack of innovations in smartphones and the lack of a key market driver, I think that’s a concern.”
Operator relationships
Current CEO Alex Baldock has been in the job since April and has indicated his desire to overhaul the company with the increased use of data analytics, new technologies and better marketing, as well as renegotiating contracts with the mobile operators.
Since the collapse of Phones4U in 2014, Carphone Warehouse has been the only major retailer where consumers can compare tariffs from a number of different operators.
According to a Financial Times report last month, Baldock wants to change the terms of its deals with EE, O2 and Vodafone – many of which were signed after the fall of Phones4U – because they were “unsustainable”.
All four major operators have invested significantly in their retail presences over the past few years and there is a suggestion that they might prefer to focus on their own channels because they are more profitable.
Three view
Three is the network partner for Dixons Carphone’s iD Mobile MVNO but withdrew from Carphone Warehouse back in 2013. Three CEO Dave Dyson told TechRadar Pro that although the retailer was an “important channel” for the industry due to sales volume, he said the operator was unlikely to return.
“We have a fixed cost of 300 retail stores ourselves and we don’t want [customers] to walk into a Carphone Warehouse store when we have our own rents and then we have a charge to use their infrastructure,” he explained. “It doesn’t make sense when it doesn’t add more value.”
“It’s a real challenge for a customer to walk into a Three store and see a tariff and then see the same in a Carphone Warehouse store at a different price. For those two reasons alone, we don’t think it’s the right for our business. Other operators do that for different reasons.”
As part of Three’s modernisation efforts, it is overhauling its own IT infrastructure so it can operate an omni-channel strategy, with a focus on online and ‘Netflix-style’ service provision. This highlights another challenge – the rise of online and the difficulties facing the high street.
Several high street names have vanished over the past few years, including electrical retailer Maplin, due to competition from the web.
“The UK high street feels like a bloodbath at the moment and every day it seems as though [someone is failing] and Dixons Carphone has a big high street presence,” suggest Mann. “[Online] is a concern and the rise of the price comparison website is a concern. These are a threat.”
Future of Carphone Warehouse
But there are some reasons for optimism. Mobile operators’ investment in their retail divisions shows that mobile customers still value face-to-face interactions and there’s no reason that Carphone Warehouse can’t still benefit from this.
Mobile phone repair specialist iSmash is expanding its high street presence and believes it is possible for mobile and electrical retailers to succeed.
“As obvious as it might sound, for bricks and mortar stores in the tech industry, the way to thrive is to remain agile,” says Julian Shovlin, managing director and founder of iSmash.
“This means embracing new technology and listening to, and actioning insights from, your customers. Traditional tech retailers are going to need to innovate to stay relevant.”
Such an approach would clearly benefit from Baldock's ambitions to make better use of the company's data and Mann sees that Carphone Warehouse is already making changes.
“It’s interesting what Carphone Warehouse is doing with its leasing plans, which is new for the UK, and something to follow,” he explains. “They’re also doing some price comparison with energy suppliers.
“The UK moving slowly into a multi-play world and Carphone Warehouse is reflecting that.”
iD Mobile could be an area of growth, especially if it lives up to its earlier vision of providing mobile connectivity to connected devices.
“The MVNO is doing quite well. it’s up to about 750k subs which isn’t bad,” he says. “But the MVNO market is difficult, especially with Three and Vodafone moving in. They did unique things like data rollover to begin with but lots of networks do that now.
“Perhaps it could do more by integrating iD into consumer electronics.”
from TechRadar - All the latest technology news https://ift.tt/2OlCbB2
No comments:
Post a Comment