I can’t really remember the last time I chose a phone in an actual shop. I look online at the different models, memory, and networks I’m considering, and then either get the phone there and then, or at best order it to collect in store.
It seems that Vodafone Group (LSE: VOD) has realised this is the same for most people these days, and has announced they will be closing down 1,000 shops across Europe as part of a broader transformation of its real estate.
Looking at the details it certainly seems like a move in the right direction to me, but I am not convinced it is enough to make me buy the stock quite yet.
Consolidation, digitisation, and data analysis
Interestingly, Vodafone has taken this latest decision after analysing the data received from a trial in Spain – CEO Nick Read says that by combining information from its customers, finances, and outside sources such as Facebook, the company was better able to understand how people use its stores.
I find it slightly worrying that it took this amount of effort to realise what most of us have known for years – fewer people use shops to buy their phones. Indeed independent retailers such as Carphone Warehouse have been struggling because of this shift.
Vodafone’s move will see 40% of its stores transformed in some way – likely consolidated to larger shops or reduced in size to “click-and-collect” outlets – while 15% of its 7,700 European stores are set to close entirely.
Strangely, Vodafone says these closures will not be coming from the UK, where it announced last month it would be spending £5.5m to open 24 new franchise stores. Unfortunately for the company, this seems to me to be an indication that they don’t really get the nature of this shift online, but are rather just taking fairly standard costs cutting efforts in Europe.
This fundamental shift from real world stores to online shopping is of course, one that is impacting almost every retailer, and has been taking place for at least a decade (if not longer). It still surprises me that it has taken so many firms so long to realise it, if indeed they have at all, and fewer still to react to the transformation.
On the surface this latest move from Vodafone seems to be a step in the right direction, but opening stores in the UK suggests it is not quite ready to shift its strategy more profoundly. It just doesn’t seem to get it.
Of course actual store sales make up only a fraction of its revenue and profits, acting more as a customer service channel and a branding presence. Just a few months ago Vodafone announced plans for the potential flotation of its cell tower business. On the investor front, it was forced to cut its dividend by 40% recently in an attempt to bolster its balance sheet.
I can’t help but feel Vodafone is somewhat of the old guard in the mobile phone business, and that it may be starting to show. I do think this latest announcement about stores is a good thing, but as of yet I just don’t see enough to tempt me to buy any shares.
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Karl has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.