Should mobile operators close down their stores?

It’s an open secret now that bricks and mortar retail strategies are getting economically less viable now. While mobile operators are fighting to remain relevant to consumers, transforming a mobile operator’s retail strategy is one of the most challenging jobs in telecom right now.

The following article will narrate how it all started, how has been the run for telecom operators, and in the process, we will assess if physical stores hold any relevance in today’s changing business models.

Digital Transformation Journey for Incumbent Telcos

In the past 5-6 years, digitization has been reshaping the telecom industry landscape, and in the process, incumbent telcos have found themselves in the state of enigma multiple times in this while. According to a 2015 cross-industry HBR survey of senior industry leaders, telecom was second only to media in the ranks of sectors, expecting substantial digital disruption. In fact, they were considered capable of adopting this wave because of their integral capability of ‘thinking digital’. They were not only providers of their own digital products and services, but also been enablers of digital transformation for other sectors by providing the essential connectivity infrastructure for functioning and growing in the digital economy.

At the same time however, during 2010-2015, telecom business entered into a period of decline with revenue growth down from 4.5 percent to 4 percent, EBITDA margins down from 25 percent to 17 percent, and cash-flow margins down from 15.6 percent to 8 percent[i]. Following this period, consumer behavior regarding traditional communication services and distribution channels started changing, and the total consumer spend on these services expected to decline even while overall communications activity grew. Finally, as technological breakthroughs accelerated, more and more new digital natives entered the core telco market with innovative business models and technologies, leaving many incumbents to wonder if they can keep up or if they will be displaced.

In the process, the telecom sector itself left behind in creating enough value for itself, which has of course impacted revenue growths and margins.

Customer experience at the heart of digitization

According to “Unlocking Customer Satisfaction: Why Digital Holds the Key for Telcos“, a Capgemini survey of over 5,700 customers of 48 mobile network providers across nine countries in the US and Europe, the relationship between mobile operator and consumer started changing in the midst of rise of internet and mobile applications, with physical channels falling out of favor and the consumers wanting to engage through more immersive experiences. This period initiated the need for using digital technologies - website, mobile apps and social media – to improve the customer experience. Capgemini survey substantiated the high demand for this new type of customer experience by finding that more than half of network users (58 percent) surveyed showed inclination towards switching over to a digital-only operator that exclusively uses digital channels to interact with customers[ii].

Through 2017, the telcos were made to think about whether or not to radically reform their stores or to create multi-faceted touch-points – both digital and physical. The challenge is now to understand what sells well – online vis-à-vis offline, thus creating and selling appropriate product-service bundle across various channels.

Retail shops continue to be at the center of any telecom operator’s distribution strategy

Understanding the need of the time, few players have recently started to pay themselves off by focusing on digital customer experience.

• Verizon’s next-gen retail store for example, is intuitive, consumer-friendly, store-staff friendly, and takes retail store experience to a new level. All accessories in the store are available for quick grab-and-go purchase. The open layout and large café tables give customers a place to test-drive a new device or try out new accessories, or set up their new device with the help of a solutions specialist[iii].
• AT&T has also begun launch of its concept entertainment stores, offering modern merchandise such as virtual reality and streaming devices. Again, the experience is very much digital – no cash registers, and employees use iPhone to process orders[iv].

Although the emerging markets may still consider retail stores as critical and strategic touch points to connect with customers, those in advanced western economies, digital touchpoints now influence customers’ preferences across the whole decision journey. Among these touchpoints, websites have by far the most influence on customers’ brand preferences, with mobile apps a distant second because of their limited reach. Social media play a part only when negative coverage harms customer acquisition. In the near future, telcos will be able to use real-time 360-degree data on individual customers to personalize promotions, campaigns, and service interventions along the entire customer journey.

Experience will be the key in setting up or evolving into next-gen retail stores

The major purpose for the operators will be to find a new balance between delivering on the functional requirements of the business (customer acquisition and retention) and driving more relevant and emotional relationships with customers. With digital wave pouring in and assessing customer preferences, one thing is very clear – physical stores cannot beat online for convenience, and today’s customers expect an easy-to-use interface across all channels, an exciting in-store experience, and fast service 24/7. Since in-store experience has always been a vital touch-point in the operator-to-consumer relationship and digital-only adoption will still evolve over time, the best path now will be omnichannel sales by engaging consumers through multiple channels during their journey.

The time is now for adopting a Bimodal path, with digital and agile channels like e-care, interactive bots, mobile apps, social media can keep coming up and personalize the functionalities to the consumers’ delight, and on the other hand, the in-store experiences must evolve to provide a personalized, branded and guided ownership experience that matches products and services to customers’ lifestyles. AR can be used to show how the product looks on the customer (for example, clothes, sunglasses, makeup), or how a product fits into a real environment (such as furniture in a living room), and can be made available via online, mobile and in-store channels using browsers, apps or digital fitting mirrors.

The sheer number of technologies involved in delivering a superior digital customer experience demonstrates the complexity of digital commerce strategies and initiatives. Application leaders must consider the manner in which digital commerce technologies integrate with other channels — including physical stores and call centers — to enhance the customer experience and build a technology ecosystem that supports digital business.

Few Sources used:

[i] https://www.mckinsey.com/business-functions/digital-mckinsey/our-insights/how-telecom-companies-can-win-in-the-digital-revolution

[ii] https://www.capgemini.com/news/mobile-operators-investing-in-digital-are-outperforming-their-peers-in-customer-satisfaction/

[iii] https://www.retailtouchpoints.com/features/news-briefs/verizon-introduces-next-gen-experiential-store-concept

[iv] https://www.chainstoreage.com/article/att-unveils-next-generation-store-design/