Britain’s city-centre landlords are happy folk right now. Following the demise recently of a number of prime clients like Kookai and The Gadget Shop, there’s no shortage of conveniently-sized retail units – just right for a mobile phone shop, and boy are there going to be a lot more mobile phone shops …

The smaller spaces are being snapped up by the networks. Anything over 1,000 sq ft is attracting the attention of the big chains, notably (maybe solely) Carphone Warehouse.

And it’s a booming market, not least because it’s effectively subsidised by the networks who want the connections but also the brand visibility.
There’s also an underlying feeling among some network marketeers that many independent retailers take too short-term a view, going for poor-quality customers and encouraging churn just in order to put some cash in the bank now. The networks’ argument then is that controlling the retail business themselves via their own-brand shops will deliver better retention and a better clientele. Cutting commissions to the indirect channel means savings that can be ploughed back into direct sales and exclusive offers.
It doesn’t necessarily work like that, of course, but this kind of thinking is helping rental values to rise at their fastest rate for five years. Check out the activity:

Everything must go – O2 is keeping 97 The Link stores but getting rid of the rest

• Orange: 2006 was described as “a year of consolidation and building for the future” but Orange has just acquired 36 ex-The Link stores from O2 and another 11 former O2 sites. That takes it to more than 340 stores across the UK, including 19 towns where it formerly had no presence. They should all be trading under the Orange Retail banner before Christmas, but next year should see a major revamp for most Orange stores-Orange has a quad-play offering now, with mobile, fixed, broadband and home TV.

• T-Mobile: well on the way to hitting 250 new units by Christmas and 350 by the end of 2007, more than doubling its estate in a year. T-Mobile feels under-represented in the city centres, especially by comparison with Vodafone, and wants more visibility to “bring the brand to life”. There’s also a major refurbishment programme for its existing stores.

• Vodafone: spending £15m on store facelifts, aiming to complete 100 by April 2007 as a “key element of new a customer centric strategy”.

• O2: paid £30m for rest of The Link, including its store portfolio. It will retain 97 of them but is selling on 100 that it doesn’t want; rather than take a single offer for the lot (T-Mobile was reportedly prepared to pay top dollar) O2 has parcelled the outlets into batches that mix good and bad sites-that way it doesn’t give any one competitor a leg up – and Orange was an early taker. Another 30 or so The Link shops will be disposed of to non-mobile retailers because O2 doesn’t want to sell sites that impinge too closely on its own territories. Meanwhile O2 also has a nascent franchising strategy that will get its brand into second-level areas at minimum cost.

• 3: hunting for more locations. 3 is promoting itself enthusiastically as an Apple-style entertainment media supplier rather than an electrical retailer.

• Virgin Mobile: newly acquired by ntl:Telewest and keen to build a High Street presence to support triple- and quad-play sales across the group’s cable, broadband and mobile phone offerings. It will have 124 concessions within Virgin Megastores and WH Smith by the end of this year but opened in Lakeside Shopping Centre, Thurrock at the end of July and will have a couple more standalone stores this with a “significant” number of store openings throughout 2007.

• Carphone Warehouse: continued expansion. In the financial year to 1 July the company opened 77 new stores, taking the portfolio to 1,855. It recently said it would be revamping all of them with a whole new “futuristic” look (apparently that means phones will no longer be hung on the walls).

• Phones 4u: reportedly looking for 100 new stores, with over 50 “definitely” opening before the new year. The new owners of parent Caudwell Group have said they’re interested in building the businesses rather than selling out for a quick buck, so it’s likely that the expansion plans will be going ahead.

There’s a fairly sizable elephant in the room, though. Like banks and opticians, the phone retailers (especially the networks) all want to be in roughly the same area of the retail centre of towns and cities, and so do the big independent chains. And in particular they want to be in shopping centres rather than streetside locations – easier for security and likely to be well-organised for deliveries and other infrastructure issues: easier to catch the passing trade especially in wet weather, easier to promote phones as fashion and entertainment if you’re alongside fashion and entertainment outlets.
So there’s a lot pressure to grab the best spots”and there’s a small but growing sense of resistance among shopping centre owners and managers. Too many chain stores in one place removes variety and makes the centre a less attractive option for a shopping visit.
Admittedly the evidence is anecdotal, and frankly it doesn’t seem to be slowing the march of the mobile retail chains. Store refurbishments and increasing promotion of lifestyle interests can probably sustain a sense of variety for a while, and there’s a lot of subsidy money behind those stores. But mostly it will be interesting to see whether (or when) the bubble bursts – and who gets splattered by the fallout.

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