In our recent blog about O2’s rationale for leaving CPW and what it meant for the market, we speculated that BT/EE could win extra share of the category. But it appears that EE was unable to agree terms.

There’s no doubt now that EE’s decision will cause a chasm for CPW. Firstly, it could prompt a wobble with Vodafone. Secondly, the group of consumers that once gravitated to the high street darling because it was independent, might not be so willing to do so now. After all, if your line up only represents 40% of the market (one MNO and a handful of MVNOs) you can’t be considered an independent advisor.

It all feels like very bad timing when CPW has relatively only recently announced it will leave the high street. A strategy designed to get CPW stores in Currys and PC World working harder. But now you have to say the outlook is pretty glum. Granted, no one could predict a pandemic but now that strategy really falls flat.

You could argue that it still has its MVNO iD (on the Three network) to fall back on. True. It’s grown the brand significantly and has well over 1million customers. It’s a success story. But the model for acquisition has always been through the CPW stores. With 531 fewer stores on hand, and less of a consumer pull to go into a shop today, iD no longer has all the options it did at launch. Safe to say, I think we’ll see iD’s acquisition number start to slow significantly.

But could it be part of the plan? Does Dixons Carphone already acknowledge this risk and could it be is warming up to sell off the iD family silver? They have done this before with previous MVNO Talk Mobile (sold to Vodafone) and when Three’s CEO Robert Finnegan talked about consolidation a way to realise immediately value from iD may have presented itself. Extra customers for Three would give its retail numbers a boost not to mention the retail revenues (Though I admit the consolidation ambitions Robert has, might be grander than this!).

What is clear is that there is a very real risk of CPW being consigned to history, like the previous Dixons mobile phone retail chain The Link. Remember them? I do, I opened their first store, but that’s another story…

Overwhelmingly the pressure is on Alex Baldock now. Dixons’ mobile revenue for its 2019/2020 financial year saw a 20 per cent annual decrease to £1.589 billion. Yet commitment to the sector remains, citing mobile as the number one technology for customers, therefore it will continue to work on being the number one destination for tech. There’s even talk of more flexible transparent mobile offerings in 2021 to give customers better value.

But it can’t come soon enough, especially when there is a question mark over whether the brand will still be a destination or even relevant next year. Already retailers that sell unconnected hardware are filling the void using services like C-Tech that does all the operator and credit checking integration for them. It makes it easy to take advantage of the extra commissions for selling connected services with relatively minimal effort. No brainer.

So, the short story on all of this change is that CPW has to act fast or it will face the music.

If you need help working out what this means for you then speak to us. We know this market inside out and can help you work out a clear path.

The post Can Dixons Carphone survive now BT/EE has pulled the plug? appeared first on Graystone Strategy.

The first thought anyone in the industry will be having is that there could be a catastrophic domino effect. Phones4U went into administration after networks pulled out, and it happened in weeks!

But you have to remember Dixons Carphone is a more diverse business and it has been here before. Firstly, Three hasn’t sold through Dixons Carphone since 2013, and that’s despite using Three to run its MVNO iD, which boasts 1 million customers. Secondly, Vodafone pulled out of Carphone Warehouse in 2006, only to return again a few years later. One can only assume this is because they lost customers as a result of leaving.

Understanding the decision through customer segmentation

I can only assume that O2 is confident it can address customer segments that would normally buy from Dixons Carphone through other channels. Time will tell as to whether O2 can achieve its goals without Dixons Carphone.

I have my doubts. Research Graystone Strategy has conducted as part of our Customer Market Segmentation shows that 27% of consumers buy from a mobile specialist (stores, online or telesales) whereas buying directly from the mobile networks accounts for 35%.

Of those buying from a specialist, around half will buy from Dixons Carphone or one of its online brands, which accounts for a substantial part of the market.

But when you look at the channel preferences of the different customer segments you really uncover some interesting insight. Our segmentation shows that THREE of the SIX segments over index on a preference to buy from a specialist mobile phone store, rather than a network store. Those segments are Digital Devotees, Technology Trail Blazers and Budget Balancers.

It’s important to bear in mind that the segments we’ve developed are based on customers’ attitudes so they are powerful indicators of behaviour. They provide a far more accurate view of what people do, want and aspire to. They are not assuming anyone with the same postcode will shop and do the same things – as I’m sure you’ll know from looking up and down your street, that’s not how society works.

That’s why we’ve developed a more accurate model and successfully used it help MVNOs and retailers better understand the customers they have access to and in turn make more strategic decisions about how to develop their propositions.

The O2 customer base over-indexes on Digital Devotees and Technology Trail Blazers suggesting that Carphone Warehouse is a good channel fit for them. However, O2 can still acquire a “fair share” through its own stores, it’s just that those segments above have a preference for independent specialists.

And delving a little deeper, I think there could be something else at play here – by coming away from the high street and moving its stores into the Curry’s and PC World retail park stores, Dixons Carphone may have scored an unwitting own goal driving more customers into the high street stores of the mobile operators.

It’s possible the customer wants to shop around and as there is no ‘one-stop-independent-shop’ on the high street then the path of least resistance for the consumer may be to visit four operator stores on the high street rather than driving to the retail park. It’s a theory but my experience supports it.

So, what is actually going to happen?

Well, I would expect O2 to invest in online to drive more direct business through that channel. Let’s face it, we are all having to shop online right now, and it is going to have a lasting impact on all high street stores. I’d also expect O2 to put more focus on other independent channels like AO Mobile and even independent local retailers.

On the other hand, I would expect Dixons Carphone to try and recover the situation and shift the available “category” onto its MVNO iD mobile or offer a greater category share to other MVNOs and Operators that they range.

In terms of other operators, I think we can expect EE to benefit from an increased share. The research shows that  Digital Devotees, who traditionally visited a CPW store, also have a high consideration for EE, an adept salesman could easily switch them out of O2 and into EE.

What will be interesting is the reaction of other operators. As long as they don’t use this as an opportunity to change their distribution strategy, and therefore pull out of CPW, then I think Dixons Carphone will weather the storm. Although, I hasten to add, they will lose overall market share of that I am sure.

The big question that remains for me in all this is whether the shoppers in Curry’s and PC World are made up of different segments and if so, does this offer them a strategic advantage – can they offer the networks access to customer segments not readily available in a standalone Carphone Warehouse store.

I’ll have to run more research and segmentation to see if that’s the case but it’s certainly something to think about. Indeed, if you’d be interested in testing the hypothesis with me then give me a call. I’m sure there is much to learn.

For now though, it remains a watching brief for all MNOs and MVNOs, especially as we move through uncertainty and plan for recovery. There’s no doubt that understanding your customer is more relevant now than ever before.

The post O2 quits Dixons Carphone – what will happen next? appeared first on Graystone Strategy.

I’d call that shrewd. Bundle bad news with a definite plan to address the woes head on.

MPD generated £121.7m and EBITDA of £5.5m at the end of March 2018. It’s a solid business that certainly has the right network agreements in place.

Contrast that with Dixons Carphone, which has struggled lately, posting a 2% revenue increase in electricals versus the 9.9% AO shared last week. I realise it’s not exactly comparing apples with apples to compare an omnichannel business with an online only one, but I’ve no doubt there’s some devil in the detail of those numbers that will be making the team at Dixons Carphone consider what their next move will be in this retail game of chess. Dixon’s Carphone has been struggling to sign distribution agreements with the main network partners, and now AO has its hands on MPD the world has got a whole lot tougher.

AO is now in a position where is can sell connected handsets and claw away at the lucrative monthly revenues that Dixons Carphone has access to. But the deal brings so much more than service revenues. The real prize lies in IoT.

I fully expect AO to go on the offensive and start building relationships with the networks. It makes perfect sense for its connected home strategy, as much of its success will rely on some shape of mobile connectivity. If it wants to position itself as a leader then it will have to have propositions that are end to end – buy a device, plug it in and connect it all with one bill.

That said, Dixons Carphone still have an ace up its sleeve, namely its MVNO iD Mobile. Earlier this year, it reported customers in the region of 800,000 with plans to reach 1 million.

As an MVNO, Dixons Carphone can build propositions directly for its shoppers and that doesn’t just mean mobile phone tariffs. It can use its wholesale connectivity in all areas of IoT like wearables, tracking devices, remote security cameras and so much more. And as it’s already focused on the connected home, why wouldn’t it start cross selling into those million customers with a monthly bill?

But it will need to act fast to capitalise on this strategic advantage, as it’s highly likely AO could follow suit with MPD and launch its own MVNO. The white label model that was discussed at MVNO Europe last week would certainly have piqued my interest if I was at the helm.

In response and anticipation, Dixons Carphone must start analysing its base, understand the customer segments it has and identify where its strengths lie in serving these loyal customers in the future.

What is it that Dixons Carphone could do, product or service, that would make them stay loyal? What else would they buy? How far can the brand stretch? Delving into this data could unlock the propositions that will make the operators sit up and listen and want to partner.

But as I have said to those that have asked for my professional opinion over the last few days, CPW needs to be quick to act or it could find that it has much bigger things to worry about.

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