You’ve probably seen the news that Carphone Warehouse have recently issued a profit warning and are expected to close 92 of their high street stores. At first glance that could just be another example of harsh trading environment in UK retail – the same as killed off Maplin, Toys R Us, BHS, Ultimo among others.
However, for Carphone, there are probably a few other factors which have led to this. To understand them, we need a quick history lesson.
Carphone started in the late 1980s, but flourished in the 1990s, at a point where the mobile market was new and experiencing significant growth. At that point, the only way to own a mobile was to purchase one – with a SIM – from a network operator. Carphone was a huge disruptor to this market, providing consumers with a brokerage service where they could directly compare networks, handsets and contracts.
As well as this indirect sales route, their other key innovation as a valuable customer experience was providing expert advice about the handsets and technology. At this point, mobile phones and networks were moving to GSM and then to 3G and opening up all sorts of new possibilities beyond voice calling and simple text messaging. As with any new technology, a key element of the experience for customers was guidance and support in understanding it and making choices that reflected their need.
So, what changed for Carphone? As I mentioned in a previous post, one of the key ways to deliver a good customer experience – and hence drive positive business results – is to ensure you are delivering what your customers need and expect from you. Critically, Carphone didn’t evolve their CX to keep up with the evolving needs of their customers.
The mobile market has evolved considerably in recent years. It is now a much more mature market, characterised by:
- largely saturated in terms of penetration so now driven by churn, not growth
- more stable technology – less need for customer education. Apart from the ever increasing bandwidth available from 3G to 4G and, imminently, 5G, the capabilities of the networks are largely stable.
- Platform based environments – instead of needing the features of each handset explaining, the operating platforms – iOS or Android – are now the key ecospheres. There is always “an app for that” and, combined with bandwidth improvements, the key evolution is now about the quality of content that can be delivered (higher bandwidth allowing better definition etc) and the innovative services available over those platforms
- Longer life of handsets – while manufacturers are constantly releasing new handsets, with the stabilising of the technology and platforms, it is no longer the case that you HAVE to upgrade each year in order to be able to do all the latest things. An iPhone 5 will still let you use social media, navigate or order an Uber, or a meal.
- A more educated, knowledgeable customer base
This results in one of the key business propositions which Carphone had no longer exists – or certainly not to the same extent. The need to provide expertise and guidance to support their customers through a buying decision has largely evaporated and, as a consequence, a key driver is diminished.
While this spells trouble for Carphone specifically, it can be noted that the group has diversified from this already – establishing Talk Talk as a broadband provider in the UK, as well as the 2014 merger with Dixons to form Dixons Carphone and the move into MVNO with the launch of their iD branded mobile network.
So while the health of the group overall may not be critically impacted by Carphone itself, this does show how a failure to provide a CX which keeps pace with the needs of the marketplace can impact a business. If Carphone are going to return to profitability, they will need to revisit the needs of their customers and identify an innovative experience that will satisfy them. And they need to keep revisiting this to ensure it stays relevant.