Retailers - the next wave of mobile service providers

The retail sector has for many years functioned as a distribution channel for the mobile providers. The retail sector has primarily been used as box movers, relying on service providers' handset subsidies to attract customers to their stores.

Now, as mobile telephony becomes increasingly advanced, service providers have started using more specialised stores as a sales channel.

During the past years, a number of retail chains have taken a more active role in the mobile industry by becoming service providers themselves and many more retail chains are contemplating launching as service providers.

There are many reasons why this is an attractive proposition:

"¢ leverage distribution power;

"¢ decreasing margins on ordinary mobile products that retail stores have sold so far;

"¢ good margins on mobile telephony compared to ordinary goods;

"¢ increase companies turnover;

"¢ build a valuable customer base;

"¢ copy competitors that have already been successful in the market;

"¢ combine a mobile product with a loyalty programme;

"¢ combine the mobile product with a number of value-added services;

"¢ to be perceived as a modern company in an exciting market;

"¢ brand extension.
Hence in Germany, Metro and Daimler Benz founded Debitel. In the UK Virgin set up Virgin Mobile, Tesco launched Tesco Mobile and Carphone Warehouse introduced Fresh Mobile.

Germany is probably the market with the most active and successful retail players, but there is activity across all of Europe and the number of retail players entering the mobile market will grow.

Many of the most important retail sector companies are either in the mobile market or planning their entry, with the primary motive of gaining a share of the ongoing revenue from the customers' mobile consumption (instead of a one-off payment from a mobile provider for acquiring a new mobile customer as in the past)."¨"¨

The retail chains will influence the mobile industry over the coming years, as distribution will become an increasingly important for customer acquisition from the service providers' point of view. The retail chains can either choose to sell a mobile provider's product, or launch as a mobile provider themselves and sell their own mobile products to their customers, whereby the network  owner still derives some income too.