09
Apr
08

Carphone Warehouse Coming to US

Unless you live in Britain, you may never have heard of the retailing phenomenon cpw known as Carphone Warehouse (CPW.L). From its modest launch less than 20 years ago the seller of mobile handsets and services has grown into an industry giant, with 2,300 stores across Europe offering the widest range of products—and often the best prices.

Now, the London company is poised to leap across the Atlantic, thanks to a joint venture with electronics chain Best Buy (BBY). Starting this year, Carphone Warehouse will roll out nearly 1,000 outlets in the U.S., some of them boutiques inside existing Best Buy stores and others standalone storefronts. Best Buy also owns a 3% stake in Carphone Warehouse.

American mobile operators should pay close attention. Carphone Warehouse revolutionized the industry in Britain by being the first seller of phones and mobile services not affiliated with any carrier or handset maker. That allowed consumers to compare prices and service plans from many providers—and ratcheted up market competition among the players. The novel business model made Carphone, as it’s popularly known, a hit with buyers confused by the bewildering variety of mobile service plans and prices.

Since then the company has pioneered one retailing innovation after another. It has launched its own name-brand telecom services—including fixed-line, mobile, and broadband access—and rolled out training programs that help consumers get up to speed quickly on new gadgets.

“Carphone has been a big innovator in the telecom market,” says Richard Perk, director of retail research at London research firm Mintel. “It does what no other major [tech] retailer can do, offering independent advice and additional services that customers really want.”

Perhaps the most crucial realization by Carphone founder and Chief Executive Charles Dunstone was that selling a phone or other gadget was merely the first step in an ongoing customer relationship. While other electronics retailers focused on moving merchandise out the door—a commodity business with pencil-thin margins—Dunstone adopted a “razors and razor blades” approach, focusing on the more profitable annuity of after-sale services.

Now, thanks to his deal with Best Buy, Dunstone will bring his double whammy of customer service and independent mobile advice to the U.S. Currently the U.S. is dominated by retail outlets affiliated with carriers such as Sprint (S), T-Mobile (DT), and AT&T (T). What’s in it for Best Buy? For all its success, the Richfield (Minn.) retailer thinks it has something to learn from Carphone. Best Buy spokeswoman Kelly Groehler says Carphone’s focus on customer satisfaction will help improve the chain’s mobile sales.

Analysts agree that Carphone’s approach could be a hit with U.S. consumers. “It’s still early stages, but there’s definitely potential [in the Best Buy deal],” says Sam Hart, analyst at brokerage Charles Stanley (CAY.L) in London. “Mobile-phone penetration is reaching its limit, so the extras that Carphone has to offer could make a difference to sales.”

That could be a crucial boost at a time when consumer spending is expected to slow because of the economic downturn in the U.S. And if the joint venture flies, investors say that Best Buy might be interested in raising its stake in Carphone Warehouse to a controlling interest.

Via BusinessWeek Via Mobility Today


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