Home > Uncategorized > Phones 4u. Where did it all go wrong?

Phones 4u. Where did it all go wrong?

168132-1The owners of Phones4u have put the blame for the recent collapse firmly on the shoulders on the firms suppliers. Is that fair?

Julie Palmer, partner at restructuring company Begbies Traynor, said: “This is a classic case of Phones 4U being over reliant on just three major suppliers and, ultimately, not being able to justify its existence in the face of those suppliers becoming more adept at dealing directly with customers.”

A problem of their own making perhaps? It does surprise me a little that with quite a wide range of suppliers the phone shops haven’t extended their reach and effectively become a broker across the whole market. Surely that is the way forward? Either that of a wider diversity of products such as those available at Carphone Warehouse

The other side of the coin was that Phones4u apparently had a difficult relationship with suppliers. They demanded the commission for whole two year contracts up front whereas other retailers were accommodating in spreading the payments over the term of the contract. Also there was some rumblings about their quality of service

Perhaps more pertinently the market is on the slide. Developments in phones have reached a peak and people are changing their handsets less frequently. Simply put, it is a mature market

And does that now leave Dixons Carphone at risk? This is from an excellent article linked below

So is even Dixons Carphone, the £3.8bn merged company from the high street chains of Dixons and Carphone Warehouse, at risk from carriers seeking to claw back profit?

There are two signs that it should be worried. First, the Three network stopped selling its handsets through Carphone Warehouse in 2013; it had done the same with Phones 4u in April 2012. Second, EE has not yet completed its negotiations on a new deal – exactly the problem that eventually led to the domino effect that killed Phones 4u.

What do we take from this?

For me it re-emphasises the lesson that credit management is not simply about numbers. The balance sheet and profit and loss are the starting points but an understanding of a businesses place and status on the market is essential to understanding risk. The whole picture has to be formed


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