Friday Interview: Peter Scott, managing director of Carphone Warehouse Ireland

Peter Scott likes a challenge. The managing director of Carphone Warehouse Ireland could have spent his entire career at Marks & Spencer, such was his joy at working as a food manager for the British grocer. But that would have been too easy.

His desire for career progression led him to a job as head of retail at Ann Summers. The retailer of sex toys and lingerie had a seedy reputation that it was keen to shed. Scott was tasked with helping the company to expand and establish itself as a mainstream player on the high street. It would not be an easy job.

"When we opened on O'Connell Street, my boss [Ann Summers chief executive] Jacqueline Gold was arrested. People refused to let us have stores in shopping centres. They wanted us on backstreets and not on the high street.

“We had great difficulty [getting a premises] in Cork and Limerick, as landlords didn’t want us. In Galway, we couldn’t get in at all. We really wanted a shop there. Ann Summers still doesn’t have a shop there.”

The retail chain had approximately 40 shops when Scott joined, but party planning was its main area. “They really just sold leftover stock from the party planning in stores. I added 110 stores over the next four years,” he says.

Christmas 2014 marked Scott’s 35th year in the retail business, having started out in Tesco as a teenager, before moving on to Marks & Spencer, where he worked his way up to deputy manager.

“I did my apprenticeship with Marks & Spencer, and was there for 12 years,” he says. “I started in men’s socks. I had to actually fold them in a particular way and they were all sized.

“I thoroughly enjoyed being a food manager at Marks & Spencer. It is an art ordering food that goes out of date quickly. If I could, I would have done that for the rest of my life. I only left for career progression. I was really ambitious.”

Recruited by Arnotts

In 2006, Scott was recruited from Ann Summers by Arnotts to help co-ordinate the department store’s plan for an ambitious new development – the Northern Quarter – in Dublin city centre. The plan was to transform an area bounded by Henry Street, O’Connell Street, Middle Abbey Street and Liffey Street into a state-of-the-art shopping, entertainment and residential hub, with 47 new shops, 17 new cafes, restaurants and bars, 189 apartments, a 560-space car park and a 152-bed four-star hotel.

“The plan was to close it [Arnotts] down in 2009, move to a temporary site, flatten the whole store and build the Northern Quarter, “ Scott says. “The new development was supposed to be open in 2011.”

But before the transformation could take place, the 2008 crash happened. All of Arnotts’s financing came from Anglo Irish Bank.

“We had a record Christmas at Arnotts in 2006,” Scott says. “I was really excited about the future. It didn’t turn out the way I expected it to. We had 800 redundancies over the next few years. By 2009, the department store was suffering huge losses and a massive drop in sales. Scott decided to jump ship, moving to Carphone Warehouse.

“I didn’t expect to get the job at Carphone Warehouse as I had no telecoms experience. Mobile phones were a new industry, and they were effectively selling themselves over the boom years.”

The retailer, which had been in Ireland since 1996, had 70 stores at the time and had turned a pretax profit of €1.9 million in 2008.

However, the mobile-phone retail chain recorded a loss of €9.5 million in the year Scott arrived. High rents and poor trading conditions led to another loss in 2010, of €3.4 million.

“We couldn’t respond to the economic freefall fast enough, as we couldn’t change our fixed costs quickly,” Scott says.

Retail standards

Unable to get out of legacy leases, he turned his attention to the chain’s retail standards in an attempt to improve turnover, which had also slipped. “Our retail standards weren’t good back then. The sales staff were seen as used-car salespeople. It was a male-dominated environment and it was a hard sell. We removed commission so that fixed rate of pay became 70 per cent [of salary]. Before that, only 30 per cent of pay was fixed and 70 per cent was commission-based.

“Five years on, I think it was a good decision. Customers get unbiased and objective advice now that they didn’t get four or five years ago.”

Last year, Carphone Warehouse announced plans to become Ireland’s newest mobile operator, by buying capacity from Three.

Scott got a call from Robert Finnegan at Three at the end of March about becoming a mobile virtual network operator. There wasn't much time to analyse the prospect as any deal would have to be in place quickly.

“We had to be really secretive about the deal,” he says. “Only three people in the organisation [Carphone Warehouse] knew what was going on. We worked until 10pm or 11pm every night for two months. The deal was given a code name, Absolem, which is the caterpillar in Alice in Wonderland.”

“I had to ask for €30 million from Carphone Warehouse Europe so that Carphone Warehouse Ireland could buy capacity from Three and invest in infrastructure. It took several meetings . . . to persuade them to give us €30 million.”

Scott says customers want more control over their tariffs, more control over the data they use and more flexibility, adding that a 24-month contract is just too inflexible. “Ireland is still very biased towards pay-as-you-go phones, compared to other European countries. Around 55 per cent of all telecoms customers are on pay-as-you-go. If you remove business phones, it’s 65 per cent.

“Customers want more flexibility in contract lengths and prices. They want to be able to update their phone more regularly.”

Network

From July, Carphone Warehouse will provide mobile services using Three’s network in a mobile virtual network operator arrangement. Carphone Warehouse is already a mobile virtual network operator in the UK, with a mobile network called Talkmobile. However, Scott says that will not be the name of the company’s Irish mobile network.

“We closed the Talk Talk call centre in Waterford. We don’t want to revisit a name that may not have good connotations with people”.

When he joined Carphone Warehouse, it had no smartphones on sale and there was no such thing as apps. Considering how smartphones have changed the business, he says it is hard to imagine what the retailer could be like in another five years. Maybe it will be selling smartwatches or smart glass instead of phones at that stage. Either way, he believes the Internet of Things will explode in the next few years.

"The Dixons merger will help with that," he says. "Mobile phones will be the centre of everything for the next few years, but ultimately it will become wearable devices and technology".

Carphone Warehouse and Dixons joined forces in the summer of 2014, in a €4.6 billion pan-European merger.

Scott says the aim of the merger was to tap into the way technology will transform households by fusing the mobile phone and electrical goods sectors. The merger is expected to deliver a minimum £80 million in synergies by 2016/17.

“We opened three stores within Dixons in early December. One was in the Jervis Centre. That store has been the most successful store in Europe within Dixons. There is a lot of cross-merchandising. If you buy a tablet in Dixons, we [Carphone Warehouse] can provide the connectivity.”

He says the Dixons merger could potentially change his own role again, adding that the companies are looking at organisational changes. Either way, his kids are happy.

“My kids think I have the best job in the world as they always have the latest device,” he says. “They are permanently attached to it.”