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We managed to get our client into the Daily Telegraph! What are your suggestions for Mobile Fun owner Anthony Cook?
When a 21-year-old Anthony Cook started a mobile phone accessories business from a room in his Wimbledon flat in 2000, he was driven more by despondency about his chosen career than entrepreneurial zeal.
After three months of moonlighting, Cook realised “going to work wasn’t paying as much as staying at home”. He quit and moved his fledgling online operation, Mobile Fun, to his native Birmingham, where office space and staff were more affordable. Eleven years on, he has an £11m turnover business that will produce a £1m profit for the year to March. Recently established German and French versions of the site deliver almost 20pc of revenues and the company has diversified into distinct sites for gaming and tablet accessories.
Things are good enough for Cook to have stepped back from his day-to-day role – Mohammed Hussain has taken over as managing director – and Cook is currently studying part-time for an MBA. With his role at the business now more about strategic direction than daily operations, he says he’s weighing up a “tough judgment call” that could shape the future of the company.
Mobile Fun currently sells 7,000 products, sourced from more than 170 suppliers, to customers across Europe from its Birmingham warehouse. While the majority of the company’s revenues still come from the UK, Cook expects around half of its sales to come from mainland Europe within 18 months, once dedicated Spanish and Dutch sites are added to its French and German offerings. That would place a considerable strain on one hub, and Cook is wondering whether he should take the “complex and costly” step of establishing a warehouse on the continent.
Mobile Fun has managed to make its French and German sites profitable quickly by taking a lean approach. Its overseas offices are restricted to sales, marketing and translation functions, with core activities, such as IT, warehousing and accounting, all handled from Birmingham. While the business has 49 employees in the UK, it has managed its new sites with just four people in Germany and three in France. “We needed just enough of a presence to offer native customer service and an office people could visit. We didn’t go much further to avoid more exposure to the tax regime and local regulations.”
Partnerships with local couriers mean German customers can get products delivered within 48 hours, but their French counterparts have to make do with a three-to-five day service unless they are willing to pay €8 for a 24-hour service.
Cook points to an order form on his desk for a €10 mobile phone case with an €8 charge. “It’s hard to see a French consumer seeing that as attractive. In the UK it’s £2.50.”
Strangely, the price is competitive since most of Mobile Fun’s European rivals in accessory sales are general electronics retailers with a standard delivery charge that’s intended for larger, more expensive goods such as televisions and laptops. “Next day is expected as standard in the UK. We seem to be getting away with this longer service in France and Germany and we’re still growing.”
Once the company adds Spain and the Netherlands to its key markets by this summer, it will have websites in five countries. Doesn’t that demand a more comprehensive service?
The 33-year old estimates that the biggest cost associated with going it alone would be the £300,000 cost of duplicating its UK stockholding. Establishing an integrated secure IT system would take “time more than money”, Cook says, and it would take around 12 months to set the operation up. Partners such as Amazon’s Fulfilment Service are a less cost and time-intensive option, but relinquishing control would be a leap for a business that’s almost entirely vertically integrated. “When you put your products in someone else’s warehouse, it becomes hard to manage quality and there are time delays in turning it around.”
Mobile Fun could afford to fund its own continental warehouse operation from retained profits, but Cook says the money might be better employed elsewhere. He also admits that his attitude to risk could be the real cause of the reticence, perhaps influenced by some over expansion in 2006 that resulted in redundancies. “I’m the 100pc owner. If an investor was on board, they’d be gunning for growth and there would be more of an appetite for that investment. I want to maintain profitability because it’s personal, but maybe that makes it hard to take a longer-term view.”
Can phone accessories business Mobile Fun keep “getting away” with serving its European customers from a Birmingham warehouse, or does it need to invest in a dedicated presence on the continent?
Tony Leach, Solutions director, Virtualized Logistics
The first thing Anthony should do is have an assessment of his total supply chain – from the 170 suppliers, through his existing warehouse system, and out to the customers. It is about cost and speed to market. For instance, there could be circumstances where a warehouse should be bypassed altogether. And, even if the Germans and French are satisfied now, faster delivery can soon prove to be a competitive advantage.
Although it is understandable that Mobile Fun is hesitant about relinquishing control over its warehousing and distribution, if it is serious about expansion in Europe than it needs to outsource its supply chain. By using a 3PL provider, with warehouse and a distribution networks throughout Europe, Mobile Fun can more closely match its costs to its revenue. With minimal capital outlay and therefore lower risk, outsourcing leads to cheaper overall cost to market and greater supply chain flexibility, allowing Mobile Fun to concentrate on its core business such as increasing sales.
It is not a question of relinquishing control. There is sophisticated supply chain software which would give Adam total visibility of his inventory, deliveries, invoicing etc (as well as highly detailed management and financial reports) and allow him to extend as much of that visibility as he needs to his suppliers, customers and anyone else in the supply chain.
But the most important for Adam is to find a 3PL that understands his business and can align its strategy to his – not one that has its own rigid system that Mobile Fun must fit into. If he does choose to look at this option, I’d recommend visiting the facilities, meeting the operational team in Europe and so building a true partnership with the people who would actually be handling his business.
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