|Jason Kemp, head of marketing at Data Select|
The world of mobile distribution is consolidating, while also converging with other sectors, branching out into new areas and growing. We look at who the key players are in mobile distribution, see what challenges and what value these players add to the mobile market, and how they can do their job better. Heather McLean investigates.
The ever-decreasing mobile distribution market has been a hot topic for some time. Julien Parven, marketing director at Fone Logistics, states that the industry continues to contract in terms of the number of active dealers, while revenue based models start to replace the traditional commissions, and customers are committed into longer term contracts, so some form of consolidation is inevitable.
“There has been consolidation right the way through the channel recently, and out of that has come stronger partnerships between us and the networks and between us and our partners,” Parven comments. “It has also become more about partnerships than transactional relationships, and more about the long term rather than short term thinking. This leads to fewer addressable opportunities to grow the business other than capturing competitor share, which further leads to a consolidatory position.”
Jason Kemp, head of marketing at Data Select, comments that the industry will always require competition, because that’s what suppliers and customers demand. “Survival will be based on having a solid customer base, good supplier relationships, a well managed inventory, good cashflow and funding. Without any of these essential ingredients, distributors will find it tough.”
Kemp adds: “It’s true there are less dealers than in the mobile heyday, but there are a lot of quality businesses out there. We indentified nearly three years ago that key to our success was investing in this area; we’ve doubled our key accounts team and held eight Platinum Club conferences in the last two and a half years to demonstrate this.”
Yet the problem with consolidation in distribution is the subsequent dealer base churn, says Bob Sweetlove, business manager at HSC. “Independent dealers don’t like being dictated to and if their supplier changes hands there is no guarantee that they will remain loyal to the new owner. This makes acquisitions extremely risky. Owners don’t want to sell on an earn-out basis only and acquirers don’t want to risk upfront payments with no customer contractual commitment.”
Sweetlove continues: “What we have seen over the last few years is virtually all distributors adjusting their cost bases downwards to cope with reduced sales volumes. Suppliers and customers have become more demanding again, impacting already thin margins. Distribution by its very nature relies on a certain level of volume, so if we all remain active the likely consolidation will be through painful business failures, leaving a handful of larger distributors supplying the bulk of the market.”
The single biggest consolidation influence Sweetlove has seen has been network channel strategy. He states: “They have chosen to restrict consumer terms to the big retail and online players and leave the smaller independent retailer uncompetitive or unable to access the consumer tariffs. The moves to revenue share and more realistic rewards based on customer spend have also contributed as has the wider economic slowdown.”
Survival of the fittest
|Bob Sweetlove, business manager at HSC|
On main rivals in mobile distribution, Kemp says: “We don’t really want to give the competition too much publicity, but obviously 20:20 have been around for years and Micro P is one to watch, with its aggressive marketing. There have seen a lot of distributors either come and go or fail to make an impression in the market over the years. At Data Select we always plan long term and believe that you need a solid business in both independent dealer and retail to give you that platform.”
|Julien Parven, marketing director at Fone Logistics|
Micro P has the capability to deliver a complete solution for its partners, comments Doughty. “Our focus is on bringing together the component parts of the proposition, including devices, airtime, fixed line, accessories, applications, and services. This then enables resellers to be confident of providing their customers with a complete solution to create a more efficient business, and work with just one partner on delivery.”
Kemp comments on Data Select: “Adding value varies according to the sales channels in which we operate and the supply partners we represent. Manufacturers may seek to increase market share, drive volume, increase accessory attachment rates or open new markets. Alternatively, customers require product choice and availability, information and marketing support, account management, logistics and fulfilment services, IT and online services. Quite simply, Data Select can do the lot.
Our Platinum club is over two and a half years old and provides marketing services for our key accounts. We provide Sony Ericsson’s online store, delivered the iPhone for Vodafone and offer all our customers the ability to order 24/7 through our online portal.”
HSC is maybe the only mobile distributor capable of putting competitively priced airtime and handsets on one simple trading account for dealers, according to Sweetlove. “Easy to say but far harder to deliver,” he comments. “Aside from doing the basics very well, such as handset and SIM distribution, connection administration and commission payment, we also provide our own suite of training courses, pre and post sale technical support engineers and produce a host of exclusive marketing support materials, like our quarterly POS pack and most recently Independent Mobile Choice, a new sales tool for independent dealers.
“We also provide a whole host of functionality online through www.yourhsc.com allowing dealers to view, order and return stock, check their connections and commissions and pretty much perform all day to day HSC transactions. And we won’t stand still either. We are actively working on new initiatives to help our dealers run more efficient businesses, extract more from existing customers and win new business,” Sweetlove explains.
Challenges for all
|Julien Parven, marketing director at Fone Logistics|
While Kemp says: “At this moment in time we have more manufacturers offering a greater range than at any time in mobile history. However, we are in a mature market that is swinging towards longer contracts, which reduce hardware turnover. Couple this to squeezed margins, the cost of borrowing being high and recession hit sales, there are massive challenges ahead.We have been bullish, continuing to build our business by providing the best service the industry can offer which has resulted in increased market share.”
The main challenge also provides the biggest potential for success, claims Tow. He says it is a ‘plate spinning’ objective; the challenge of getting the best from all the parties you interface with and maximising the connections between them. “For example, are we getting to roll out the biggest, best and highest margin products from the operators? Are we on the cutting edge with the hardware we source and provide? Are the resellers aware of all this, and getting the most potential for success, claims Tow. He says it is a ‘plate spinning’ objective; the challenge of getting the best from all the parties you interface with and maximising the connections between them. “For example, are we getting to roll out the biggest, best and highest margin products from the operators? Are we on the cutting edge with the hardware we source and provide? Are the resellers aware of all this, and getting the most straightforward and profitable solutions from us? These are questions that occupy my mind, and my team’s minds, every day, and they’re the questions that inform our work. They’re challenges, but they’re part of daily business,” he states.
Making a difference
|John Doughty, general manager for the mobile division at Micro P|
Parven says: “I think there will be further increased focus on convergence and fixed line. Working with O2 to launch its ‘Landline’ proposition, we have registered our largest sale in distribution to date, so this is defiantly something we will be focusing on in 2010 onwards. Additionally, it is just a matter of time before Microsoft makes a significant play for market share and this will lead to opportunity. Machine to machine may also gain further ground as the requirement to furnish outreach workers with a device grows, while their usage pattern does not support traditional mobile,” he adds.
While Tow comments: “What’s next is using convergence as a foundation for mobile resellers to grow into true multi discipline communications suppliers for their customers. To blend fixed line with airtime, IT with mobile, and concentrate on what an end user wants to achieve: instant comms; global conferencing; mobile working... rather than the individual tools and tech to achieve it. All of this is achievable in a very short space of time.
” Watch this space!