AGENDA: Carphone fights off retail giants - Carphone Warehouse is under attack from retailers lining up to sell mobile phones. Alex Benady talks to founder Charles Dunstone who is pumping pounds 5m into marketing his brand to defend its share

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.

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

campaign.’



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

well documented.



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

happens’.’



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

independents.



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.’



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