Market Insight

Mobile operators and handset OEMs should fear Samsung's retail expansion

January 30, 2014

Ian Fogg Ian Fogg Senior Director, Mobile & Telecoms

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Samsung plans to open sixty Samsung-branded stores across seven countries in partnership with technology retailer Carphone Warehouse (CPW). Outside the UK, CPW uses the brand The Phone House.

Three Samsung stores are already open in Spain and this retail initiative is being brought to the UK, Ireland, the Netherlands, Germany, Sweden and Portugal in the coming months as well as expanding operations in Spain. Most of the Samsung stores will be converted from existing CPW shops, and so Samsung will reduce the retail shelf space available for selling other smartphone OEM's products through this deal. CPW believes there is significant room for further growth as the company will be Samsung's preferred partner for retail in Europe.

Our take:

This Samsung CPW initiative takes Samsung's retail ambitions to another level compared with past retail efforts. Samsung has gradually increased its retail presence since the launch of its Galaxy range. In addition to installing dedicated Samsung displays in many mobile independent retailers' stores, Samsung has also experimented with its own branded pop-up stores usually coinciding with a major product launch.

Operating Samsung-only retail stores will shut out the competition. There are several other advantages for Samsung: it makes it easier to cross sell Samsung PCs, tablets, TVs, and many of its other consumer electronics products with its smartphones. Many of these products would not be usually stocked by either mobile operators or by independent retailers.

More importantly, Samsung is trying to build its brand and ensure that consumers are loyal to the Samsung brand rather than to an operator. By having a one stop shop for all Samsung device sales and crucially repairs and other trouble shooting, Samsung stores could indeed steer more consumers into its stores and not into operators' stores. Not only would this increase Samsung's device sales, but also gives Samsung a slice of the lucrative accessories market.

Operators will be disappointed to see an already dominant mobile handset maker become even stronger in retail. Operators greatly desire more choice of smartphone suppliers beyond the two leaders, Apple and Samsung. But if a leading mobile phone retailer converts a significant number of its stores to only sell Samsung products then operators will see Samsung engineer an even greater concentration of mobile market power.

By teaming up with CPW, Samsung will drastically cut down on the time to market for launching large numbers of Samsung-branded stores. It also reduces Samsung's risk in this initiative, and Samsung retains flexibility because it can continue to operate some of its own stores outside the partnership. As these new Samsung stores will compete directly with CPW stores, Samsung retaining this flexibility is a shrewd move to protect Samsung's interest.

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