Dunstone’s dream comes of age

Window cleaners, builders and, erm, prostitutes.

Carphone Warehouse’s early customers were a motley crew, but what they had in common was the need to talk to potential customers while going about their businesses.

The customer base may have broadened since those days, but as Charles Dunstone returned to reopen the very first Carphone Warehouse store 21 years after its launch, the mission – to help consumers free up their time by making the most of the latest communications technology – remains the same.

Dunstone’s story is one of the great entrepreneurial tales of the past 20 years. From that one shop in Marylebone Road, it has grown to a business worth £2bn (as well as spawning Talk Talk, now worth £1.3bn in its own right).

While he no longer runs things on a day-to-day basis, as chairman he remains the guiding force behind a company that has managed to stay ahead of the extraordinary pace of change in its market.

“The underlying principle of the business is still the same,” he tells Retail Week. “People are interested in the category, but find it complex to navigate. The thing that’s kept Carphone Warehouse relevant is the ability to solve the problems of the day.”

Today the products are more sophisticated today. And as the Carphone model evolves from traditional mobiles into smartphones and tablet computers – and the applications they offer – more of the high street’s retailers are finding themselves in competition with the giant of the telecoms world.

Dunstone says the role of Carphone today is as much about the experiences a product can lead to as the actual product itself. “The product has always been the easiest bit. The problem for the customer was always tariffs, coverage. It wasn’t actually just the features of the product we were selling. Now it’s about apps. Fundamentally, what the customer wants to know is how do I get the most from the device?”

A future on the high street

In fact, says Andrew Harrison, chief executive of Best Buy Europe, the joint venture with the US electricals giant of which the Carphone chain is part, the increasing sophistication of the products Carphone sells has been an opportunity to diversify into new categories.

“It’s an amazingly exciting business to be in,” Harrison says. “We could never have sold books, maps, CDs or newspapers – now we can have a conversation about all those things.”

Ten years ago, shoppers were still getting pictures developed at the chemist. Now, Dunstone points out, Carphone Warehouse sells more cameras than anyone else – but they are within phones.

In general, high-tech categories of retailing have found themselves most exposed to competition from the web. But in an age when many are writing off the high street, Dunstone sees Carphone Warehouse remaining a firmly bricks-and-mortar proposition.

“About 10% of our sales are online, that proportion hasn’t really grown in 10 years,” he says. He explains that because Carphone’s success is dependent on helping customers make the most of technology, it is harder to add value online.

“Things like setting up your email is a hassle if you’re not really geeky,” Dunstone points out. “People really do need someone to hold their hand. Just this morning I was reading an article in Retail Week (July 8) where young people were interviewed and a lot of them were saying they don’t want to do everything online.

“There a danger that because we’ve got a combination of a growth in online sales with a cyclical downturn, if you’re not careful you can follow all the lines and see that in 15 years you won’t have any shops left.

“I don’t think that’s what will happen. Shopping is a leisure activity and while some areas might not exist, such as CDs or books, if you’re in general retail there will still be a need.”

But while Carphone Warehouse’s place on the high street is rock solid, the same cannot automatically be said for Best Buy. The iconic US consumer electronics chain opened its first store in the UK – eventually – last April, as part of the joint venture with Carphone. However, its ambitious store- opening programme has stalled amid speculation that sales have been disappointing, and the brand has failed to achieve traction here.

Connected world

Dunstone insists that the model continues to be refined despite the very difficult market for larger electrical goods. “We said that we would find our way and that we would open a group of stores – we’ve made quite a lot of changes at Hayes [the most recent store opening].

“But as you’ve seen with Comet and Dixons, the consumer environment is very tough for big electrical products.”

Harrison stresses that the Best Buy concept needs to be seen as part of Carphone’s wider vision of the ‘connected world’ and that “so much of what we have been doing with Best Buy manifests itself in the [Carphone Warehouse] stores”.

When asked if he is still confident that Best Buy can become a significant force in UK retail, Dunstone says: “That’s still the aim.”

Harrison believes that new technologies are blurring the lines between big-box electricals stores and what Carphone Warehouse does, and he believes the shift in computing to smaller devices, which can easily be carried home from the store, plays into the hands of the high street Carphone shops. “Computing was put on large retail parks, but these things [tablets] are not very big. We’ve got more stores than all our competitors in this market put together,” he says.

Dunstone reinforces the point that tablets are seen as the future of the business, particularly because the nature of the sale is more aligned to the contract-based deals Carphone Warehouse has always done than to the traditional approach of the computing specialists.

“The tablet market feels like it’s taking the mobile phone model, which is a very significant opportunity for us,” believes Dunstone.

In the short-term, Harrison forecasts that this Christmas will be dominated by the emergence of smartphones in the pre-pay market.

But while the products will change, the focus remains the same, and Dunstone and Harrison remain focused on positioning Carphone Warehouse as the place to go when they need to navigate the complexities of the latest technology, even if at this stage it’s impossible to see far into the future.

“All we have to worry about is whether what we do is going to be relevant in five years’ time,” says Dunstone. “Is technology going to be moving fast and will people be confused by it? The answer is yes.”

A big bite of the Apple

When pressed on what has been the biggest single moment of the past 21 years, Dunstone says it was the exclusive deal for Carphone to sell the iPhone when it was launched in the UK.

“The UK is the only country in the world where Apple went with one single retailer and one network,” he recalls. “Apple has the most fantastically high standards about how its partners operate and so to have had that endorsement at launch was very special.”

The retailer has not sold carphones for years, and even traditional mobile phones are now being edged out by smartphones and tablets. In fact, of the only things unlikely to change is the ethos of helping customers work out and benefit from modern technology.

Dunstone gives the example of a customer in the Westfield London store who was carrying an ancient Nokia phone so old that all the numbers had rubbed off. She had not replaced it, she said, because she was worried she would lose all her stored numbers if she did.

“What she didn’t know is that we have these machines which just transfer data between phones in 45 seconds,” Dunstone says.

There is another thing that is unlikely to change and that is the name, even if the shift away from traditional phones towards tablets and netbooks continues – after all, Carphone Warehouse has not sold carphones this century.

“Never say never, but we’d need a really good reason,” says Dunstone, before adding, with impeccable logic: “You say John Lewis, but you don’t think of a man called John Lewis.”