Exploring the Mobile Retail Landscape

The shift from high-street retail to online shopping has affected many industries. The telecom sector is no different: CCS Insight’s research shows that 55% of UK mobile phone owners bought their device online; among 16-to-24-year-olds this rises to nearly two in three. Only around a third of phones are now sold in a physical store and scarcely a quarter of people can even recall visiting a phone shop in the past six months.

With a combined 1,500 stores, UK operators still have a major presence on the high street. I wanted to find out how shops are being used, what are the main promotions and whether there’s anything that could tempt people back. Last week, I took myself off to Westfield shopping centre in West London to survey the landscape.

My first stop was O2. I was initially struck by the strong level of promotion for Samsung’s Galaxy S23 Plus smartphone, which was announced in February 2023; a big banner touted savings of up to £500 on 25GB-a-month plans. O2 is enhancing the offer with the option to claim a pair of Galaxy Buds2 Pro, apparently worth £219, for just £1, a deal I suspect is strongly supported by Samsung’s extensive marketing budget.

This strategy to bundle or cross-sell accessories is becoming more commonplace as the industry grapples with lengthening replacement cycles of mobile phones. Elsewhere, I noted a similar approach using smartwatches. The aim is to encourage brand loyalty — once someone owns more than one device from the same manufacturer, they’re likely to stay longer than if they just buy a phone.

Samsung may have been keen to draw attention away from the iPhone 15, which Apple unveiled just a few weeks ago. In fact, the marketing material for the latest iPhone — which largely centres on the titanium casing of the Pro version — was more muted than I had expected across all operators. This could be because the latest model offers only incremental improvements, or that Apple is simply not investing as much in retail marketing as Samsung. Still, given Apple’s prominence in the industry and how popular the device is in the UK, I thought I’d have seen more. Maybe there’ll be a bigger focus in the run-up to Christmas.

O2 is using its store to promote its main offers, such as inclusive roaming, the ever-popular Priority reward scheme, the more recently introduced Switch-Up programme and a range of Apple services that are free for six months on certain plans.

Very little of the store was allocated to Virgin Media. This surprised me, as convergence and cross-selling is one of the main pillars of Virgin Media O2’s strategy and the high street feels like the perfect place to put this into practice. Oddly, I didn’t spot anything related to Volt, its flagship joint offering which includes special benefits for customers taking both O2 mobile and Virgin Media broadband.

There was a much greater focus on home broadband at the nearby Vodafone store. Admittedly, its Westfield outlet has far more floorspace than O2’s, but a major display promoting Pro II broadband immediately caught the eye. It advertised “the UK’s fastest Wi-Fi”, 4G mobile backup, inclusive Apple TV and affordable pricing. Vodafone was a late entrant to the UK broadband market, but its disruptive strategy and strong marketing is helping it add an average of close to 50,000 new customers each quarter.

I was drawn to a banner promoting Vodafone’s Tech Team support service, which offers one-to-one help in areas such as setting up a new phone and using apps. Our research shows that technical support is the fourth biggest reason that people visit a store, so I understand why it’s offering the service. But its price of £25 for 30 minutes or £35 for an hour means I couldn’t help but wonder how many takers Vodafone gets. I understand it wants to cover its costs, but this feels steep; Apple customers, for example, can usually receive this kind of service for free.

There was also a banner stating that Vodafone’s network runs on 100% renewable electricity. The environment is a big topic for telecom operators and is an increasingly important factor in customers’ decision-making. But barring some promotions of trade-in offers, it was about the only reference to sustainability that I spotted throughout my visit.

This includes the industry’s eco-rating scheme for mobile phones, which launched to quite a lot of fanfare in 2021 but appears to have fallen largely silent since. It’s supposed to score devices in areas such as repairability and resource efficiency to help customers make more-sustainable purchase decisions. Vodafone and Telefonica were part of the original five European operators to unveil the initiative, with EE joining later.

Directly opposite Vodafone’s store is that of its potential partner, Three. Unsurprisingly, Three strongly touted its network credentials in its shop window. Negative perceptions of service quality have long held it back, but recent impressive improvements in 5G have been recognized in independent third-party tests. I don’t blame it for trumpeting that.

Inside, it heavily promoted its home broadband offer. This forms one of the main areas Three has identified for growth. The service is available for £20 a month, with the first three months free as part of a 24-month contract.

I also noted several promotions for Three Your Way, a flexible tariff introduced at the start of 2023 that allows customers to tailor the length of their contract and choose from extras such as phone insurance, access to Paramount+, screen repairs and roaming.

EE’s store at Westfield is its new flagship retail space, EE Studio. I visited in June, the day before it opened, and blogged at the time about how I felt it broke the mould of traditional phone shops through an impressive and welcoming destination that did much more than just sell devices and airtime.

Four months on, I was keen to see how the space had evolved; but I left slightly disappointed. The format was virtually unchanged and I didn’t sense much of an atmosphere, although my visit was on a weekday, which are normally quieter.

One of the keys to success for experience stores is to keep their appearance fresh and updated. This isn’t easy and requires significant investment, but will be vital if EE is to meet its goal of having people return week after week.

Overall, my visit to Westfield offered little to suggest that telecom retail is set for a resurgence. I’m not expecting shops to disappear yet, as they still play an important role in showcasing products, promoting offers and giving customers the face-to-face support many still cherish.

But with online channels becoming more influential in the entire purchasing journey, and new technologies like e-SIM set to bring further disruption, it’s hard to see anything other than a diminishing role for physical retailing in the future.