Carphone Warehouse this week kicked off a pounds 5m pre-Christmas
TV and radio advertising campaign, its heaviest ever. It’s a low-key,
workman-like affair with no creative frills. The commercials show off
the fact that in the convoluted world of mobile telephony, it is a
straight talking honest-broker.
’It won’t be winning any awards,’ admits Charles Dunstone, founder and
chairman of Carphone Warehouse, ’it’s just an honest, hard-working
It will need to be. Even though the company will have a turnover of
nearly pounds 200m this year, making it the largest single player (and
heaviest advertiser) in mobile phone retailing, it is a minnow up
against some very big fish.
Until now Carphone Warehouse has managed to hold its own and flourish
against the likes of BT, Dixons and Vodafone. The story of its growth
from Dunstone’s living room into a 170-store chain in just nine years is
But now the sharks are circling. The introduction of pre-payment
packages (doing away with credit checks) two years ago turbo-boosted the
market and nearly doubled sales. Attracted by such activity Tesco, Asda,
Boots, Sainsbury’s, Safeway and even convenience store chain Alldays
will all start selling mobile phones this Christmas. As ever their
platform will be price.
Dunstone can’t conceal his alarm. ’It is very difficult to compete with
people for whom this isn’t their main business. They can say, ’Let’s rip
the arse out of the market for a couple of months just to see what
As if that weren’t enough, even without an impending recession some
analysts warn that with Carphone Warehouse planning to expand to 200
outlets from the current 170, Vodafone planning 500, the Link 200 and
Pocket Phone shop and Phones 4U a further 100 each, there will be far
more capacity than the market can bear.
’The real growth in the market has come from the uptake of non-business
users. Over the past two years, sales have been given a lift by the
introduction of pre-payment packages. Once the market sinks back there
will be over-capacity. There could be a shake-out similar to that in
sports retailing,’ predicts Ben Perkins, an analyst for Corporate
Intelligence on Retailing.
’Growth has come from new technology working its way throughout the
population. Soon it could become largely a replacement market and sales
will fall away,’ Richard Hyman of Verdict Research adds.
However, others say the market has some way to go before saturation.
’If you look across Europe, penetration is much higher than here. There
is evidence that when it reaches 20%, new products gain a sort of
critical mass of acceptability and new users flood in,’ argues Alexander
Gunz, telecoms analyst for ABN Amro. He predicts that penetration,
currently 18%, could well triple by the year 2007.
Even so, Dunstone admits he has a problem. ’We aim to maintain our 12%
share. As the market expands, turnover per transaction is falling, so we
have to run faster just to stand still. We’ve got to build on the fact
that we are the best, and add enough value through the best service and
advice. We are the only major player to sell all four mobile systems. We
want to be more of a consultancy than retailer.’
That is the theme of the new ad campaign and every marketing initiative
the company takes. This autumn it plans to launch a multi-faceted
strategy aimed at demystifying the mobiles market. This includes the
launch of a pounds 500,000 web site, simplified catalogues and price
list, a prepay loyalty scheme and an in-store tariff calculator. It has
also launched ’early recruitment’ crusades to target students.
Dunstone says there are many other new ideas being developed, but he
won’t reveal them. ’The Link would copy them in a week.’
Although he doesn’t much fancy a scrap with the big multiples - ’I’m not
sure we could take on Tesco in a price war and win,’ he says - his big
fear is one of the service providers ’breaking out and simplifying’.
Meanwhile, even the most pessimistic analysts say the outlook for
Carphone Warehouse is still good. ’They are the best placed of the
They have size, but most importantly they have a powerful brand. The
public trusts them and understands what they are about,’ says Perkins.
’If anybody survives, it will be them.’