Dunstone outlines blueprint for new age of mobile phone retail

Carphone Warehouse chief executive Charles Dunstone described the new mobile world, and the ways in which Carphone will update its retail proposition through 2007 and into next year to fit into it, at an investor’s conference in London last week.

Dunstone also addressed Carphone’s US expansion, through its joint venture with US retailer Best Buy (see right), and the early troubles with its TalkTalk broadband service, which he claimed are on the mend (see below).

Change has come at last, said Dunstone. Bold forecasts from the dotcom era about future working methods and the wireless home have finally been realised.

“If you go back to some of the drugs we were taking in 1998/99, actually quite a lot of what was talked about in terms of mobility and seamless working is really starting to happen now, and we need to adapt ourselves to that,” said Dunstone.

Original mission

Carphone’s original mission statement the offer of ?simple, impartial advice’ and an assisted sale to bewildered phone shoppers holds firm in the new digital age, he said.

“We’ve been thinking of ways to adapt that model to the changing world because you can’t look at a phone in isolation anymore. There is a revolution going on. It’s just one way to communicate today.”

He added: “Mobile is still at the heart of what we do. But we have got to take full responsibility now for connecting the rest of a customer’s world. That way, we have a much stickier, more loyal customer because the service we’ve supplied from a network is actually locked into a solution, rather than just a stand-alone product in a silo where the customer is more likely to churn. Solution-selling is the kind of thing the networks love to hear us talk about.”

Just as telephony jumped from fixed line to mobile, the new “revolution” repeats the trick for music and office applications. “Suddenly, all these kinds of products are about mobility, and we need to broaden the assistance we are giving people in terms of mobility,” said Dunstone.

To that end, Carphone is opening 250 new stores across Europe, including 40 in the UK. It will relocate around 50 stores this financial year and refurbish another 50.

The relocation programme will see Carphone open larger, new-format stores in locations where footfall is good. The makeover of existing sites, such as Guildford (see photo), is intended to improve the sales environment and provide a better showcase for new wireless products.

Carphone is also changing the fundamental way in which it serves customers. Mobile phones are an easy in-store sale; connected and turned on in minutes. Products such as Wi-Fi routers need to be set up in the home, and consumers are less savvy about installation.

So, Carphone is effectively turning its stores inside out. Its new customer service team, the Geek Squad, is on the road and at the end of phone lines to assist with the installation of home communications products.

The Geek Squad has been inherited from Carphone’s US partner Best Buy and recast for the UK. Best Buy employs 1,100 ?Geeks’ in the US, and Carphone will supplement its UK call centre service with the Fort Lauderdale help desk in Florida.

Geeks on Vespas

The service, which Carphone has calculated as a running 3 million investment, has been running in London since March, where around 50 ?Geeks’ are on the road? on Vespa motorbikes. Carphone is recruiting ?Geeks’ at a rate of around 30 per month, and will expand the scheme to seven service hubs across the country in the coming months.

“Right now you can only really install all of this stuff if you are an IT nerd. It’s perfect territory for Carphone to tame the technology and to explain how to use it and how to install it,” said Dunstone. London punters get charged 100 per visit, and the Geek Squad stays until the problem is fixed. There is a supplementary charge for further fixes and service installations during a visit. Given the technophobia that surrounds wireless home solutions, it puts the Geeks in a position of strength and hikes the transaction value of each visit, said Dunstone.

The call centre cost is 50 and, similarly, the Geek Squad stays on the phone until the issue is resolved. There is also a 12 monthly “peace-of-mind” charge to have the Geeks on call. “It’s not just a service to help people get their printers working properly,” said Dunstone.

The Geek Squad also knits together the after-sale care of its retail propositions? mobile, fixed line, and broadband, plus the range of wireless hardware products such as Wi-Fi routers that its stores will increasingly stock in the coming months. In May, Carphone will launch a new TalkTalk broadband Wi-Fi router, priced at 39.99 with self-installation and at 59.99 with Geek Squad support.

Dunstone said Carphone would stop short of selling high-value, low-margin devices such as PCs and TVs in its UK stores instead, it will stock devices that “help all of these things talk to each other”.

At the same time, Dunstone failed to rule out the possibility of selling subsidised PCs alongside TalkTalk broadband to drive take-up.

Worryingly for the dealer channel, which has seen its footfall slow to a trickle and its offers trumped by high street offers, the Geek Squad also looks set to help Carphone service the SoHo and SME market place, the last reserve of small dealers.

Said Dunstone: “There’s interest from small businesses that struggle with IT. Best Buy is seeing this in the US, and we are seeing this here.”

Dunstone on TalkTalk: “Spend whatever it takes”

Carphone boss Charles Dunstone said last week that Carphone will spend what it takes to get its TalkTalk broadband customer service up to scratch.

Last month, Carphone announced it would invest 15 million in the service. Dunstone said: “I have to say to the team to get it right because we don’t have a sustainable business if we can’t look after our customers.”

He said customers should notice a marked improvement in its customer service within two months.

Just over a year since launch, Dunstone summed up its performance in the broadband sector to date. He said: “Our capacity problems meant we had more demand than we managed to convert. So there was something of a wasted opportunity there. The cost structure in terms of customer service, we got wrong. We scored too many own goals. We’ve had to put so many people on the phones. Migration is getting better but it obviously had a tricky start. For customer service, we get a ?X’ and that’s our key focus.”

But Dunstone said 96 per cent of customers are now being connected to the TalkTalk broadband service on time, and that Carphone has managed to eliminate the queues, which had stretched to more than 20,000 customers? to sign up.

He said of the migration of customers from BT’s wholesale network onto Carphone’s own network to December: “The process was not robust enough and too many people just lost service in the process.”

But he refused to blame BT’s engineering arm, BT Openreach, which is in charge of the migration process. Dunstone said: “It (BT) certainly made a lot of mistakes in the early part of the migration but actually we had already screwed up in the way that we actually provisioned people in the first place.

“If TalkTalk’s brand image is tarnished, and there is no doubt it is to some extent, BT has played its part but the fault is mainly ours. We take responsibility for that. BT’s rate of improvement is rapid and gets better week by week.”

By comparison, Carphone’s premium internet brand AOL ranked highest in a recent JD Power customer satisfaction survey. “AOL makes it an even starker comparison because AOL is the best-rated ADSL supplier in terms of customer service there is. So we manage to span the spectrum pretty well at the moment.”

But Dunstone insisted that TalkTalk was on track, and outlined the importance of its network build. He said: “We’re a long way ahead of everyone else in terms of building a fully unbundled network? BT and Sky are delaying it and others are building partially unbundled networks. There is such an economic advantage in supplying the totality of someone’s communications that, if anything, the timeline is actually moving further away.”

Carphone to open 200 US outlets

The Carphone Warehouse will open 150-200 outlets in the US during the next 18 months through its joint venture with US consumer electronics retailer Best Buy.

Carphone chief executive Charles Dunstone said the New York Best Buy branches Carphone first set up were ranked higher than 300 for individual store handset sales in the US when it entered the market five months ago. They are now all ranked in the top 10.

“Best Buy has 17 per cent of the US consumer electronics market place, but nothing like that of the mobile phone market. Our ambition is to help it get much closer to its normal market share,” said Dunstone.

“We bring our skill in small-box retailing, the consultative sale and service agreements, and Best Buy has absolutely enormous market share within the US market. It has a very strong brand and all the back office systems, which would be pretty scary to set up, are in place already.”

Most of its new stores will be sales points within existing Best Buy outlets. But Dunstone said that Carphone will set up a stand-alone unit in New York, and also in Boston and Texas.

“Manhattan is not average-town, America, so we need to trial the stand-alone format in somewhere that is more representative of the rest of the US,” he said.

He added that, despite falling connections and consolidation within Western Europe and the non-existence of independent mobile retail in the US to date, the US market has enormous potential for independent retail.

“The US opportunity is so massive. The dependency there and love of mobile is less well developed than it is here, but you can see it changing quite quickly and Best Buy has such enormous footfall.”

The venture is expected to break even in 2008/09.