Why we should mourn the downfall of Carphone Warehouse

While UK mobile network operators will be raising a glass to Carphone Warehouse’s current woes, we consumers should pause and mourn its decline.

Last week Carphone issued a profits warning and promptly closed 92 stores. In its annual report it admitted that the year ahead was fraught with difficulties.

Yet another high street retailer is in trouble, so why should we mourn Carphone?

Because without Charles Dunstone’s retail model we would probably be paying a great deal more for our mobile devices and at the mercy of the major operators.

Their business model was predicated on them controlling not only the networks but also the retail side of the supply chain either through their own stores or through relationships with big box retailers.

But Carphone’s genius was by inserting itself as a middleman into the mobile supply chain. This proved highly successful, helped keep the retail sector competitive and the giants at bay.

Contrary to the business model of the operators, at its inception the mobile industry was designed to create separate device and airtime markets.

As a consumer the idea was you would take your SIM and shop around for both the best phone and the best network deal. And that was Carphone’s raison d’etre when it entered the market and it was highly successful operating, essentially as a broker for the consumer.

Carphone’s role as a broker included some deals with networks with which they were able to offer discounted handsets then make it up on any airtime commission. And, in particular it was able to offer unlocked phones which clearly angered the networks.

This anger was seen when giants such as Vodafone blocked sales to Carphone in 2006, eventually returning in 2009. While Three pulled out in 2013 and never returned.

Emboldened by its success Carphone moved into network services and launched TalkTalk in 2003. For their part the networks responded by building their own retail presence.

But as with all markets the maturation led to a more challenging environment for Carphone. Its merger with Dixons in 2014 and the demise of Phones4U gave it some breathing space but the writing had been on the wall for some time now.

Especially with the growth of online retailers such as Amazon that hurt red-brick retailers such as Dixons with the demise of the walk-in mobile buyer.

As consumers we no longer need the advice they once offered. We now know what we’re looking for when buying a phone. Everything is now familiar to us and we also tend to hold onto our handsets longer than previously. All of which undermined Carphone’s strategy.

Competitive markets move on, it’s the law of capitalism. Carphone Warehouse was, in its heyday, the champion of the consumer, but time never stands still, and the once great innovator has become, sadly an anachronism.

Carphone, we salute you.

Image: EdwardX