Store closures have also cost them contact with customers, writes Kester Mann, who suggests some possible remedies, including fighting fraud more efficiently.
CCS Insight's recent research identified further disruption to traditional buying patterns for mobile phones and connectivity [as Orange's Deputy CEO, Europe discusses in this exclusive interview with Mobile Europe]. The journey, spanning research and information-gathering to purchase and after-sales support, shows that people's attitudes are changing as they become savvier in their purchases and increasingly willing to embrace new and emerging channels.
One of the clearest trends is the decoupling of mobile phone and airtime purchases. Our latest survey into mobile buying behaviour highlights that new destinations including Amazon, Apple and eBay are now established and important channels to buy mobile phones. In the past, mobile operators dominated sales, offering heavy device subsidies for bundled phone and airtime tariffs.
The decoupling doesn't stop there, as SIM-free phones and SIM-only connections are on the rise. The SIM-free segment reached 4.4 million units in the UK in 2020, our research shows, equal to more than a quarter of total sell-in. Supporting this, nearly half of all post-paid mobile customers are now on a SIM-only deal.
Another factor is a diminishing role for bricks-and-mortar retail as consumers more readily embrace online channels. Naturally, Covid-19 has accelerated the migration; nearly two-thirds of people who bought a mobile phone in the UK in 2020 did so online. This compares with 52% among those who bought in 2019 and just 36% before that.
Customers have become increasingly confident of buying handsets based on listed features, familiarity with leading brands and recommendations. Phone shops will play an important role for many years, but it's hard to see a return to pre-pandemic footfall.
Our survey also suggests that device replacement cycles, which have been getting longer for years and are now at about 48 months, are unlikely to shorten much anytime soon. More than a third of people (34%) expect to keep their current mobile phone for longer than their previous one.
This is twice the number of people (17%) who thought they will keep it for a shorter period. The remainder (48%) expect to retain for a similar length of time. A slowdown in device innovation, coupled with the very steep prices of many premium smartphones, are turning consumers off quicker upgrades.
The changes in consumer buying behaviour raise important questions about a part of the mobile phone industry that's often overlooked. Fraud and theft have been rife for years, costing the industry billions of dollars annually. As the channel landscape continues to fragment, it's creating opportunities for organised and international crime.
Risk & Assurance Group (RAG) recently reported that handset crime could cost telcos almost 3% of their revenue globally [editor's note: SIM card fraud is huge, and many think operators could do much better at fighting it] According to other sources, about 400,000 devices are reported stolen each year in the UK, although the real figure is probably two to three times higher. Flagship smartphones cost over £1,000 (€1,166), criminals are grabbing a lucrative opportunity.
Credit rejection rates reported by some network providers globally can be as high as 70% for new promotions. One reason for this is thought to be that wrongdoers sidestep operators' security mechanisms. The rate in the UK is lower, but still far higher than in many other sectors. The mobile industry has yet to properly address this issue.
As buying habits change, operators could find they need to offer a broader range of financing options. This could be accelerated by the pandemic, which is pushing people to seek greater flexibility and control over their spending.
Financing is a complex area and not one in which operators typically have much expertise. A 2020 survey from RAG found that bad debt represented by far the greatest single cause of revenue leakage among communications providers globally – $14 billion in lost revenue annually.
Operators could mitigate risk working with a service like Trustonic's Telecoms platform to make smartphones more affordable while minimising risk of bad debt and delinquent payments for operators, and helping to cut losses from handset fraud.
Safer financing could help mobile operators tackle many emerging trends we've identified: in a changing telecom landscape subject to fallout from Covid-19 and faltering economies, it could be a prudent investment.
The author, Kester Mann, is Director, Connectivity and Consumer at CCS Insight.
This article appeared in the Q1 editions of Mobile Europe & European Communications magazine, which you can download free here.