Following complaints from its members, and indications from other networks considering a similar move to change the way dealers are paid commissions, the IMPDA said O2’s commission model change is not only an attack on dealers, but is yet another way for networks to reduce the independent dealer community in favour of its own stores and big partners.
Commenting, the IMPDA said in a statement: “The IMPDA is dismayed that networks seem to have little thought for small and medium dealers. O2 is imposing a major change to its commission model by bringing in an ongoing revenue stream with low upfront payment on 1 October. This will hit dealers hard, and would make it a serious possibility that many will go out of business or shut up shop as they would not be able to sustain sales, due to massive drop in cash flow and the inability to subsides handsets, with a low upfront payment regardless of what they will get in the months to come.
“With Orange following suit this would have a major impact on all UK dealers? We hear that even 3 are not considering this at this time, but others are. What is surprising and disappointing is that there is no information being given to dealers on what payments they are likely to get so they can see and plan what to do on the 1 October when the first customer is dealt with. With such as major change to their cash flow forecasts and without notice how does the network expect dealers to have loyalty to them.”
The IMPDA continued: “In O2’s case, it said it had trialled such a scheme with some of its major B2B indirect partners in the past. Note that word ‘major’ partners; for those that have a chest of money and who can afford to pay and give handsets to customers, when they will not receive enough up front commission to pay for it initially, is fine, as the large companies will probably have a different agreement in place with the network that would minimise the effect. But the ordinary small to medium dealer just cannot afford to do that.
“Are the networks asking or trialling the scheme with small to medium businesses to gauge the impact on them? Are they consulting small dealers? We doubt it; they seem reliant on the big partners, and ignoring the small to medium dealers. This will be a major change to the networks terms and conditions with serious implications for dealers.”
In conclusion, the IMPDA warned: “If all the networks go that route, many if not hundreds of dealers could see themselves going out of business, or as we have been suggesting for some time, a mad dash to diversify and get other products in to sell, or get out of mobiles altogether, that is not good for competition or the consumer, or indeed the networks shareholders.
“We should all be working together in this industry. If the networks don’t take into account small and medium dealers it’s clear that they don’t support their dealers, despite the statements they make, and it will prove beyond all doubt that the only time they care is when they need their consumer base increased,” it said.