Research Notes

The importance of the right distribution strategy

Distribution choices for different mobile suppliers
The right distribution strategy is a big factor in determining the success of any mobile provider. The following distribution channels are currently used by mobile players:
Mobile provider stores are retail stores directly connected to an individual mobile provider, and therefore typically only sell the mobile provider’s products.Specialist stores are stores/chains that specialise in mobile telephony, but are not controlled by an individual mobile provider and thus normally carry products from multiple mobile providers.Radio/TV-stores as the name implies are outlets that primarily sell radio and television products. These stores increasingly stock computer equipment and mobile telephony products.Fast-moving consumer goods stores are ordinary convenience stores used by mobile providers to distribute their mobile products. Sales force refers to mobile providers’ own employees who are mainly focused on selling to corporate customers.The Internet has become a core part of many mobile providers’ distribution strategies.Different types of mobile providers have, up to now, used different channels and strategies to attract customers and maintain low distribution costs. But growing competition has caused strategies to change.
MNOs have primarily used dealers and their own stores to acquire new customers, both of which are particularly expensive distribution channels. This makes it vital for MNOs to ensure that their investment pays off, and this means ensuring that consumers receive a good service in these stores.
It is essential, for instance, that the handset configuration is correct, which will enable customers to use the many services available as soon as they leave the store. A retail strategy can sometimes justify the higher costs, if it leads in the end to higher spending on mobile services by the customer.
MVNOs have primarily used two distribution channels, fast-moving consumer goods and the internet. Meanwhile, SPs have used various distribution channels, but primarily fast-moving consumer goods (convenience) stores and the internet.
SPs have changed their preference over time. The very first SPs used convenience stores as their core distribution channel for their mobile products. Early SPs focused on copying MNOs’ business models, namely subsidising mobile handsets to attract new mobile customers. The SPs chose convenience stores since they did not have the financial resources to establish their own stores.
BRs primarily use their own stores as a distribution channel, as many such services are built on already established chain stores that want to sell mobile telephony under their own name and using their own comprehensive network of stores. Some of these BRs, however, are using the internet to complement their physical distribution network.
Examples of this approach are Tesco and Carphone Warehouse in the UK and Aldi in Germany – all of which have had considerable success with their mobile telephony services. Their success is influencing a growing number of other chain stores to consider offering mobile telephony in Europe.

Strand Consult’s new report, How to Succeed in the Next-Generation MVNO Market, analyses the different distribution methods used by mobile providers historically, helping players of all types develop their future strategies.

How to get success in the second Generation MVNO Market

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