Research Notes

Retailers – the next wave of mobile suppliers

The retail sector has for many years functioned as a distribution channel for the mobile providers. The retail sector has primarily been used as box movers and has used the mobile providers handset subsidies to attract customers in their stores. However, as mobile telephony has become increasingly advanced, mobile providers have started using more specialised stores as a sales channel.

During the past years, a number of retail chains have taken on a more active role in the mobile industry by becoming mobile providers and many more retail chains are contemplating launching as mobile providers. There are many reasons why retail chains would find it attractive to enter the mobile market as mobile providers. The various reasons can be analysed isolated or as a whole, when examining the incentives to become mobile providers.

The reasons are:

  • Optimal use of distribution power
  • Decreasing margins on ordinary mobile products that retail stores have sold so far
  • Good margins on mobile telephony compared to ordinary goods
  • Increase companies turnover
  • Build a valuable customer base
  • Copy competitors that have entered this market
  • The desired to combine a mobile product with a loyalty program
  • The desired to combine the mobile product with a number of VAS services
  • To appear as a modern company on an exciting market
  • Brand extension

Many retail players have already been quick to launch on the mobile market as mobile providers.

In Germany Metro and Daimler Benz founded Debitel. In England Virgin founded Virgin Mobile, Tesco founded Tesco Mobile and Carphone Warehouse launched Fresh Mobile. The number of retail players entering the mobile market is growing. Today many of the most important retail sector companies are either already in the mobile market – or on their way in.

Germany is probably the market with the most active and successful retail players, but there is activity across all of Europe.

In the future an increasing number of retail stores will launch on this market with the primary goal of gaining a share of the ongoing revenue from the customers mobile consumption, rather than a one-off payment from a mobile provider for acquiring a new mobile customer relationship.

The retail chains will influence the mobile industry over the coming years, as distribution will become an increasingly important competitive parameter for customer acquisition for the mobile providers. The retail chains can therefore either choose to sell a mobile provider’s product – or launch as a mobile provider themselves and sell their own mobile products to their customers.

Much more information about retail chains doing business as mobile providers is available in our latest report;How to get success in the second Generation MVNO Market that analyses the retail chains future role in the mobile universe and why retail chains need to have a mobile strategy and which market phases the retail chains will go through. Included in the report is an analysis of retail chains’ assets/strengths and risks/disadvantages when doing business as mobile providers. The report examines relevant and inspiring cases that document that the retail chains entrance/involvement in the mobile area is not something that may happen in the future, but is in fact a very current phenomenon that will become even more dominant and visible in the mobile industry over the coming years.

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