Keep on moving…

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.

Consolidation fever

“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

On what Andy Tow, managing director at Avenir Telecom, thinks is causing weaker distributors to fail in the mobile market, he notes: “The recession would be the obvious answer but, if you scratch beneath the surface, it's what the recession has exposed: a lack of adaptability; a lack of communication with client bases; and possibly something also lacking in relationships with operators and manufacturers.”

The ability to adapt is causing weaker distributors to fail in the mobile market, agrees to Parven. He says in a converging space where fixed and wireless worlds are becoming more interconnected, a distributor must be capable of reinventing itself and leading its partners on this path, or fail.

While John Doughty, general manager for the mobile division at Micro P, comments: “The reason is lack of diversification, and lack of investment in their businesses and infrastructures to enable diversification, meaning in some cases they are no longer able to compete.” On rivals in the marketplace, Sweetlove comments that competitors in multi-network airtime distributors include HSC, Anglia, Avenir and Fone Logistics. On Orange, competitors include Mainline, Midland, HSC and in the IT channel the likes of Brightpoint, Brightstar and Micro-P. For SIM-Free handsets, Data Select, HSC and 20:20 clearly stand out. Shebang is also there on prepay, and EBS for distance sellers and SIMO. MoCo also has a very loyal dealer base especially on O2, as does HSC.

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.”

Value-add disties

What makes a good distributor is its ability to maintain good relationships. However, you are only as good as your last sale, Parven notes: “It is important to remember that as a distributor we are only as good as our last transaction, and the moment we stop focussing on going the extra mile for our customers we lose our edge.

“Therefore, we continually strive to add value at every level; from offering an extended product range with all the back up service you would expect, to investing in technology to improve our service and streamline our processes and employing the best people to enhance our customers’ experience,” Parven adds.

Tow states: “For resellers, our business adds increased sales opportunities and increased margin and stability. For operators, we increase their potential customer base and their re-signs. And overall Avenir glues the two together, increasing the stability and growth of the market.

“Our work is focused on our client base, the resellers,” continues Tow. “We keep raising the bar higher and higher, so our focus is on how we can grow and expand, rather than who we can copy. That’s a rocky route to tread in any business and our focus is on taking the first mover advantage.”

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

Finding new business is a challenge for distributors today, says Parven. “The move from a repetitive acquisition model where customers moved between the networks on a perpetual basis, to a retention-driven world where we are required to manage churn and increase tenure has had an impact on the volume of available new business.

“To meet this change, distributors have had to remodel themselves and their commercial offerings to encourage dealers to share in this cultural change. This involved rewriting of systems, management of data assets and working more closely with partners. The industry is all about challenge, so while we must be prepared to face it and fight on all fronts, nothing causes particular concern; rather this is an opportunity to add value to our partners in meeting these challenges,” explains Parven.

Doughty agrees that maintaining relationships is difficult: “Probably the biggest challenge any company faces is retaining and servicing existing partnerships, while looking at new areas to develop and grow. In many businesses the most successful way of addressing this is to have a business development, new business team to ensure this is always a focus, so as the market changes, you’re in a position to capitalise on it.”

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

A distributor can always do its job better by taking a long hard look at the feedback it gets from its client base, comments Tow. “How can we service our resellers better? There’s no single answer or magic bullet. Instead it’s about talking, constantly, maintaining a dialogue and being instantly flexible and adaptable to their needs.

“Around 18 months ago, resellers needed a lot of help on reducing customer churn. The help could have come from anywhere, but it was a good chance to show what we could do as a distie,” says Tow. “We set up a dedicated customer retention team, buddied up our staff with resellers, if they needed it, and hooked them directly into operators, even taking operator representatives out to customer sites that needed some extra TLC. This was just a small part of our anti-churn strategy but it yielded some great fruits. And it proved that a distributor has the power become a reseller’s ‘right hand man’ for increasing business,” explains Tow confidently.

As for what is next in mobile distribution, Parven says there are many new opportunities and technologies hitting the market that are set to increase activity for the market going forward.

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!