Vodafone, Europe’s third largest mobile operator by revenue after Deutsche Telekom and Spain’s Telefonica, has announced that it will close 1000 retail units in response to changing consumer behaviour. The company operates around 7700 stores around Europe, from which it sells mobile plans as well as additional services such as home internet packages. However, chief executive Nick Read believes that the changing environment of more transactions now being completed online rather than in person means that now is the time for a major overhaul of the company’s bricks-and-mortar high street presence.
The overhaul will not only include the closure of around 15% of the company’s physical locations over the next two years. 40% of remaining stores will also be transformed with some upgraded to larger ‘showroom’ type formats showing off the latest smartphones and other technologies. Others will be reduced to “click-and-collect” kiosk formats where customers can, for example, pick up pre-ordered products such as a new handset or SIM card.
Mr Read commented:
“If you believe 40 per cent of your transactions are going to be digital, then how does that impact why someone goes to a store? The journeys and purpose of the stores changes. I ultimately know a lot about what you do. I know whether you are willing to go one mile to a store or half a mile to a store.”
The UK, however, will not immediately be affected by shop closures. In fact, Vodafone UK last month announced a £5.5 million investment in 24 new retail franchises and another 50 next year adding to the 400 shops already in the UK. That’s despite an environment that has seen independent mobile phone retailers, including Carphone Warehouse and the collapsed Phones4u chain, struggle.
Customers are buying more smartphones online or direct from the manufacturer. However, for the networks themselves the physical stores model still seems to work in the UK. New customers acquired through their own shops are far more profitable to networks than those brought in through third parties, to whom commission has to be paid. Falling high street rents in the UK are also a positive factor influencing networks in keeping bricks-and-mortar stores open.
Mr Read said Vodafone’s retail overhaul had been driven by data analytics after a trial in Spain. He said combining data from customers, the company’s finances and sources such as Facebook meant Vodafone could better understand how people want to use its stores, with many instead opting to use its app and chatbot for customer service.