Wake-up call for resellers: Crazy John's to close

News that Crazy John's will cease operation in September could be seen as a wake up call to resellers of postpaid services, as more phone users look for alternatives to long-term contracts.

While contracts are still very popular, an increasing number of Australians are buying phones outright or via other avenues.

This shift will impact some mobile resellers, according to Foad Fadaghi, managing director of research firm Telsyte.

"It's a lot harder for those third-party brands that are mobile-only to exist in the market… the ones that have to solely rely on mobile phone deals are going to find it a little bit harder, given that consumers are spreading their wings when it comes to buying their handsets," he said.

Resellers that depend particularly on sales of phone contracts are likely to be affected, he said.

Yesterday Vodafone announced Crazy John's would cease operations on 30 September, marking the "end of an era". All Crazy John's postpaid phone services will be deactivated.

The Crazy John's website states that "selected" customers who have plans that can be matched will be transferred to Vodafone. Customers whose plans can't be matched will be asked to port their number to Vodafone or another provider or cancel their contract by 30 September.

The shut down is just the latest episode of ongoing upheaval in the mobile retail landscape.

Last year Optus announced a major change to its channel strategy, revealing it would close 300 non-branded stores and end its relationships with resellers Telechoice and Allphones.

This year the telco reported that average revenue from each user was down. Mobile revenue is expected to keep falling at a "low single digit" level.

Retail is "no longer just a sales channel – it’s a channel where customers come to better understand technology and how to get the most from it," commented an Optus spokesperson at the time the telco ditched Telechoice.

Meanwhile Vodafone moved early last year to close many Crazy John's stores, announcing plans to shut 40 stores and rebrand 21 others. Vodafone's revenue had reportedly seen a drop of 14.8 percent in the second half of 2012.

One onlooker not surprised by Vodafone's announcement this week was Sanjay Sharma of Telstra dealer TSBC Australia.

"The contract world has changed. It's not like the old days where there was money to be made in contracts. Now there are very slim margins, the competition is ridiculous," he said.

Sharma said his business is a service provider offering other services like vehicle tracking rather than depending on one income stream.

Telcos are looking for more successful channels and partners, rather than single product channel partners, said Fadaghi. He said channels that can profit from outright sales are going to be more important than those that depend solely on contracts.

In that light, Vodafone's recent announcement that it will move into 276 Dick Smith stores made sense, he said.

"We're seeing telcos optimising their channel to meet changing purchasing dynamics of consumers," he said.