Web sales go upmarket

Set up in Watford in October 1995, Mobiles.co.uk claims it was the first mobile retailer on the web. In the very early days, the company opened stores in Watford and Hemel Hempstead to provide a reassuring front for shoppers still unnerved by the concept of shopping for consumer electronics in cyberspace.

But the stores soon closed and the business has resisted new routes to market ever since. When 3 came knocking in 2005, cajoling it to sell off the page, it declined. Today, one of its spin claims is that it is the largest web-only mobile dealership in the UK  on the grounds that its main competitors also dabble in B2B, off-the-page, or call centre sales.
Managing director Simon Mason regards 2006 as a transformational year for the business. Mobiles.co.uk launched its revamped web site on December 22. Mason reckons the new site, which he claims has the first online credit-checking system that is entirely integrated into the networks own systems, puts the company among the elite.
The new site takes us into the premier league of web sites in the country, and puts us perhaps at the top of the division, on the basis of design and usability, he says.

Higher class
In terms of its design, Mobiles.co.uk has moved away from the traditional shop window approach employed by other top online dealerships, which packs the home page with blaring cashback offers and discounted rates that define the sector.
We wanted to inject some personality and character into the new site, explains Mason. If you look at most leading web sites in the UK  online dealerships such as e2save.co.uk, onestopphoneshop.co.uk or mobileshop.co.uk  they are all about the latest offers and theyre very in-your-face. They try to squeeze as much information as possible on to the homepage. Its very compacted and busy.
Mobiles.co.uk wanted to take away all the clutter, and to create as much white space as possible to make it easier on the eye.
We have also used a number of lifestyle-type images to give the site a personality, adds Mason. So were not like every other web retailer, which look just like discount supermarkets.
Its other distinguishing feature, as Mason makes clear, is usability. The holy grail for online retailers is for the shopper to be able to navigate a sale and make a purchase in as few mouse-clicks as possible. Such slick sales processes are more difficult to achieve for online mobile phone dealerships than for other retailers because of the number of linking options available to the consumer.
Buying a mobile phone is extremely complex because of the number of permutations, says Mason. There are countless different handsets with varying technical capabilities, there are five main networks, each with 25 or 30 different tariffs, and there is a wide-ranging choice of free gifts and cashback options.
It is a complicated process, traditionally better suited to physical retail where shop staff can assist the sale. But Mason reckons that online shopping habits have changed. The penetration of broadband, enabling consumers to shop easily online in the first instance, has spiked. Likewise, handset penetration in the UK has reached a point where mobile phones are considered to be essential everyday items and most shoppers, savvy to web retail, are likely to be on their fourth or fifth handset by now.
In addition, experienced shoppers now have preconceived ideas of not only the kinds of handsets they wish to purchase, but also the value tariffs and even the free gifts that they want to accompany the sale.
Accordingly, the new Mobiles.co.uk web site enables online shoppers to navigate their way through the sale from whichever starting point they choose  whether that is the handset, the network, the tariff, or the free gift or cashback deal  and take in, in the order they choose, the other permutations of the deal.
The usability is all to do with intuitiveness and navigation through the sale  how easy it is for shoppers to map their own buying patterns to the web site, claims Mason.
The navigation process of the new site also enables web shoppers to ditch their original purchase plan as the mood takes them and, sparked by the offers available on the site, to fix new criteria as they go. It could be that people enter a web site with a particular buying pattern in mind, and change that as they go along, says Mason. It may well be that theyre led, instead, by a free gift or a handset that they hadnt been aware of originally.
Interestingly, network choice itself is of least concern to shoppers in the sales mix. Mason is sympathetic to the networks struggle to differentiate themselves through brand and multi-million pound marketing spends. Their difficulty to do so, ultimately, is what has led to the ongoing price war as networks resort to price competition. It is the root of the current squeeze on the dealer channel, he says.
Ultimately, for the public, there is very little between the networks now. You can imagine how frustrating that is for the networks  because theyre trying to differentiate, to command that premium and to stop this erosion of voice margin that is happening.

Network pressure
The danger is that they get into a price war. Voice margins are getting squeezed more and more, because data revenues arent picking up quickly enough, so the pressure is on. Thats the real economic driver for the changes in the marketplace now, says Mason.
Mobiles.co.uk is also clever insofar as it briefs the shopper clearly on devices, tariffs and network bundled offers and promotions.
For instance, if a shopper opts for Orange as their choice of network, Mobiles.co.uk marks the best value Orange tariff available to them and also highlights in windows across the bottom of the page ongoing Orange promotions, such as its Orange Wednesdays cinema deal and its Magic Numbers friends-and-family option.
The feature-set and design aspects of all handsets are also described in some detail, and the site has incorporated an Amazon-style customer review system (star-ratings and a word from users) to help shoppers choose.
But the really unique selling point is that customers get an almost-instant network decision when they have completed the cart.

Quick decision
Prior to this new system, what we offered  and what all our competitors still offer  was an email confirmation after the online sale had completed, says Mason. They still have to carry out the various credit checks offline. A lot of those might be done over the phone, or keyed into a network credit checking extranet. Weve established computer integration with all five networks so the network decision is almost instantaneous  and thats a first.
Mobiles.co.uk customers can wait for a couple of minutes at the end of the sale, while an hourglass spins on the screen, to find out whether the network has cleared the sale. Its technology integrates with the networks credit checking systems and pulls back a response. It is automated, so no Mobiles.co.uk staff are required to run the network credit checks, which can take hours when carried out manually.
There is a slight difference in the time it takes networks to credit check and pass customers, depending on their own systems and procedures. T-Mobile passes customers in a matter of seconds if their credit is good, while other networks can take longer. But Mason insists the site informs every customer of the network decision in just minutes.
Its a trade secret how this is achieved, however. The networks abilities to integrate with external computer systems are wildly divergent, and some networks are considerably less sophisticated than T-Mobile. But while Mobiles.co.uk has been able to integrate its systems with three of the major networks for over a year, it took the service live last month only when integration with the other two had been given the green light. We have a lot of technical capacity there, says Mason, though he wont be drawn on the technical know-how behind the integration process.
Were trying to effect speed as a competitive advantage so that we can get decisions quicker and get things shipped more quickly, he says. In online retail, people expect to get things the next day. Were trying to exploit that and make it a benefit of shopping with us.
Mason claims that, as it stands, around 60 per cent of connections are credit passed by the networks. The networks have, of course, got much tougher on quality control during the past year, and have levied harsher penalties against dealers for poor quality connections.
If customers are declined by a network at the end of the the cart stage of the sale  normally because some adverse credit information has been found  then Mobiles.co.uk has traditionally looked for alternative solutions. But it has cut down on switch-selling  where it suggests, and re-runs credit checks on, alternative networks with lower credit thresholds  in order to adhere better to the new network focus on quality connections.
It is now more likely to suggest a pre-pay solution or else a tariff such as T-Mobiles U-Fix, a half-way house that offers a reduced monthly subscription alongside a top-up facility to boost a subscribers airtime allowance.
But the networks focus on quality has convinced Mobiles.co.uk to go further than the straight network decision to sign customers to airtime contracts.
We are now cancelling orders that were not happy with, even if they are initially accepted by the network, claims Mason.
Thats the litmus test for the networks, because it shows that we are taking ownership of quality. Until recently we have been a new connection engine like everyone else  because it has been about volume until now. But volume is now inter-linked with value. The networks are not going to provide additional funding if they do not get the right quality connections. The two are intrinsically linked, and thats why there are a number of players in the market that did large volumes, ahead of quality, that have been cut off.
Mason believes that, in the future, he wont be able to write large volumes of business for the networks unless he gets the quality right.
And, really there is an advantage for us there, because if we can demonstrate to the networks that we have that capability, theyll continue to employ us in the future.
Mobiles.co.uk applies an additional card check and, according to Mason, takes a tougher stance on transactions and card behaviour. It also runs more thorough investigation of the individual to counter identity fraud, which has increased within the online retail sector since the the introduction of chip-and-PIN technology on the high street.
One of the things we do as a web retailer is only deliver to the card-holders address, because the classic fraud is to assume someone elses identity but have it delivered to your address or to a dummy address  an empty house or somesuch, says Mason. People set up temporary residence in an address and staff it with people to carry out fraud and get items such as mobiles delivered to the fake address. Its a business in its own right.
He adds: Its a real issue, as is site security. People want to know that the information they provide is not going to be compromised.
Its timing looks good. The indirect channel is at a crossroads at the start of 2007 and the networks look set to call time on old-school box-shifters. Consumer connections appear to be drying up for dealers as the networks take an increasing proportion of consumer business directly from their own sales channels, leaving small business connections as the last frontier for dealers. Mobiles.co.uk appears to have struck out on its own, and distinguished itself from the rest of the pack, at a time when the networks are wielding the axe.

Different offering
Mason thinks that, as a rule, online retail offers something different to the networks, even within the consumer market, and has the legs to keep pace with the networks demands. Online dealerships are more agile and responsive to the market climate than traditional retailers because of, in the main, low overheads and slimmer margins. It is a scaleable model, too, because, as its new capabilities demonstrate, it can keep costs low and service levels high.
Mason explains: You have to understand the prevailing competition in the market within different channels, and position yourself as best as possible. Theres absolutely no doubt the networks want to put more connections through their own sales channels, and reduce the number that go through indirect.
But he maintains there is still a role for dealers. And within the indirect channel, there are still certain areas that are more attractive to the networks via the dealer channel than others  B2B sales, for instance, and web retail as well because it is a channel the networks can switch on and off very easily.
Retail is much less attractive for them now, says Mason.

More about Mobiles.co.uk
– Founded October 1995
– Headquarters and warehouse in Watford Business Park
– Turnover £9 million per year
– Largest web-only retailer
– 95% consumer connections
– Connects all five networks
– Direct relationships with Orange, O2, 3 and T-Mobile