The future of physical retail

Evolving retail store footprint

This report looks at how MNO retail stores and the store footprint has evolved over the last three to four years as operators have progressed with developing a digital first and omni-channel approach that has moved customer service and sales online. It looks at the importance of delivery fulfilment and how operators are utilising physical retail stores to complement the online channel with fulfilment that gives customers near instant gratification on device purchases. While some believe physical stores might eventually be swallowed by the metaverse, telecoms operators for the moment are maintaining a store footprint, which despite reduced in size and in some markets shifted to franchise status, is being used to introduce new product and service lines.

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Impact of online on the high street

Consumer shift towards online shopping was evident for some time prior to COVID-19. However, 2020 and 2021 saw accelerated consumer adoption of e-commerce across the world.
In the EU, for example, Eurostat shows online shopping increased by 4%compared to 2019, and as economies began to re-open in 2021 online shopping increased by a further 1% from 2020. Adoption of e-commerce across European markets varies. In the Netherlands, Denmark, Germany, Sweden, Ireland and the UK over 80%of the internet users buy goods and services online. Whereas in Italy for example, adoption is lower where 61% of internet users bought online in 2021, although adoption is significantly up from 49% in 2019.


E-commerce uptake is strong but still varies by market


Source: Eurostat, STL Partners

The most common categories purchased online tend to be:

  • Clothing (including sports clothes) shoes and accessories (ordered by 68% of online shoppers);
  • Followed by deliveries from restaurants and fast-food chains (31% of online shoppers);
  • Electronics such as computers, tablets, mobile phones or their accessories were purchased by 23% of online shoppers.

The categories represent a blended EU figure and likely to be higher (or lower) across individual markets.

These online trends have taken their toll on the high street and this is most evident in clothing and fashion sector. Tracking the closures of some of the UK’s largest department stores and retail chains such as British Home Stores (BHS), Beales, Debenhams and House of Fraser, commercial property insight firm CoStar Group estimates 388 department stores closed in the UK between 2016 and 2021. However, there are signs (at least in the US) of a slowing in announced store closures according to CoStar, as the economy opens up and consumers adjust to a normality which is transitory in itself.

UK department stores



Telco retail transition was already underway

Over the last five years at least, telecoms operators in the midst of transitioning to an omni-channel and digital-first consumer footing have been thinking about what to do with their retail commercial real estate, particularly given the trend of consumers towards online and SIM-only / digital only service propositions. Many Apple iPhone customers today purchase direct from Apple online, while marketplaces such as Amazon are popular destinations to purchase SIM-free devices.

The young consumer segment can be a difficult group to entice into stores. In recent years operators have found common ground with this segment through digital only brands which don’t require a store visit in order to purchase a SIM connection or verify identity, as these activities which can all be handled remotely over a video call and in-App.

  • Verizon’s Visible brand claims it has “cut out stores (and the salespeople that come with them)” to create its digital only low-cost customer value proposition with a 24/7 customer care team”.

However, some operators opt to promote their low-cost brand in-store alongside their main premium brand. Vodafone has demonstrated this in Spain by offering its Lowi brand in Spanish Vodafone stores and in the UK by promoting its VOXI brand in store.

Telecom retail specialists NTS told us that some digital-only retail brands can opt to form a physical (albeit still minimum) connection with customers by using kiosks to help customers perform tasks such as SIM collection, payment, or replenishment.

In a bid to move beyond offering just phones, operators provide thematic areas in their stores to promote services and solutions around smart home, office, personal entertainment, and health. These specialised spaces are useful for introducing new products but can be difficult to implement where store space is limited. Smart home products are also most likely to resonate with older customers who own their home or have a more established settled status.

In 2019, leading telecoms operators collaborated on a TM Forum Catalyst project reimaging the role of the retail store in 2025. The outcome of this project envisioned opening up the store to partners and playing a B2B2C role. It also heavily emphasised the store being used as a vehicle to host events, technical demonstrations, workshops and educational sessions. Speaking with a participant in the project, it was felt that perhaps these events have not proved to be a draw in encouraging customers – particularly younger customers – back into the store. The scale of events is also linked to the floor space available. The project did cite issues relating to the level of space allotted to devices and we can already see operators scaling back on device display space as newer thematic zones are added to the store. 

Events don’t always draw customers to the store


Source: TM Forum


There are still positive outcomes in providing the public, in particular older customers, with educational resources to improve their digital literacy. A Vodafone UK executive noted that since lockdown customers who realised they were not as tech literate as they thought they were have subsequently come into the store to speak with tech experts.

Operators’ sustainability programmes and adoption of circular economy measures in stores such as handset repair, recycle, refurbishment and re-sale is one potential new use case for telecom stores. Orange’s Re program is an example of this.

Stores still serving a purpose for the moment

Operators are still looking for innovative ways to encourage customers in to the store, and some use promotional offers to stimulate purchase during low footfall periods. For example, in January 2021 Bouygues Telecom in France offered a €50 discount to customers entering the store between 9am and 11am who subsequently purchased a mobile phone and subscription package.

European demographics and aging customer profiles could also mean European customers may prefer to rely on stores to introduce them to new device formats, solutions for the home, or wearables to support personal health.

In Africa and the Middle East, operator stores can also be a destination for paying utility bills such as (water, electricity) and telcos have sought to manage this through self-care kiosks and more ideally electronic and mobile payments. While kiosks are useful in handling low level tasks, they also require regular maintenance resource which must be factored into their deployment.

At an in-market competition level, as new players enter the market or territories, they may require retail real estate to establish their presence. For example, T-Mobile USA is now targeting smaller rural markets where it is underrepresented but which (according to the operator) account for 50 million households or 40% of all households in the US. Speaking at Deutsche Telekom’s capital markets day in May 2021, CEO Michael Sievert said the operator would be smart about how it will expand its physical footprint over the next five years, building hundreds of new stores in small towns and rural areas but also using partners such as Best Buy and Walmart to expand its retail distribution presence.

In towns too small to support a retail store, Sievert spoke of using Hometown Experts or individuals dedicated to supporting smaller communities. The operator aims to grow its small and rural market share to 20% over the next five years.

Vodafone CEO Nick Read has spoken of a similar model in Spain for promoting fixed broadband. Similarly in Thailand, AIS deploys direct sales teams to smaller markets or temporary sites providing them with a mobile app to transact sales of devices, airtime and register new customers.

T-Mobile USA expansion to smaller rural markets


Source: Deutsche Telekom, Capital Markets Day – May 2021

Even Tesla re-thought its store model

In 2019, Tesla reversed its decision to close the majority of its 378 stores and instead opted to close half of the stores the car maker originally had planned to close. With electric cars cost is a fundamental barrier to customer adoption and the company initially believed the closure of most of the stores would achieve a 6% reduction in the price of a Telsa car. Stores slated for closure included those with less foot traffic, even if they had a high proportion of in-store sales. However, given most customers like to sit in a car and get a feel it, this may have been a step too far even with Tesla’s seven-day return policy – a policy they felt made the store visit less necessary. The decision to reverse the closure of almost half the stores resulted in a 3% reduction in price of the Tesla car – instead of the 6% reduction under the initial planned closures.

Stores in high visibility locations initially closed due to “low throughput” were reopened, highlighting the usefulness of the store as a billboard for the brand. Tesla reiterated that sales would continue online worldwide and prospective customers entering the store would be “shown how to order a Tesla on their phone in a few minutes.” Tesla believes its seven-day or 1,000 miles returns policy is enough to remove the need for a test drive (effectively a store visit), however cars would still be available for test drive onsite and a small car inventory (stock) level would be maintained to serve customers who want to purchase and drive away immediately.


Table of Contents

  • Executive Summary
  • Table of Figures
  • Introduction
    • Impact of online on the high street
  • Target: Innovation in fulfilment
  • AIS Thailand: Building experiences
    • Expanding into virtual shopping
    • AIS experiments in physical retail
    • My AIS app becomes a super app
  • South Korea’s unmanned stores
    • LG Uplus
    • SK Telcom’s retail network and unmanned store
  • Vodafone: Focusing on efficiencies
    • Vodafone Digital First
    • Vodafone experience store: Billboards aligned to be digital first
    • UK franchising partner model: Local, smaller towns
    • COVID-19 and Vodafone store re-format continues
  • Orange France: How to leverage pop-ups
    • Moving from physical to digital sales
    • New digital skill sets and KPIs
    • La Petite Boutique stores: Promoting suburban and rural fibre broadband take up
  • Altice Portugal: MEO proximity stores
    • Live streaming video chat
  • Safaricom: Working with dealers
    • Balancing digital first and a dealer network
    • Experience stores
  • US: AT&T and Verizon’s hybrid approaches
    • AT&T restructures its corporate store footprint
    • Verizon: Touchless Retail
  • Three Ireland: Connected lifestyle stores
  • Conclusions and recommendations
  • Recommendations

Related research

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Telco digital customer engagement: What makes a winning strategy?


Customer experience is at the centre of telcos’ digital transformation efforts

Telecoms is one of many industries that are transitioning towards becoming more digitalised businesses. More specifically within digital transformation, the need to be customer-centric, and improve customer engagement, has been a crucial theme in telco digital transformation efforts. This is exemplified by Orange’s CEO Stèphane Richard who recently claimed that users needed to be “at the core of systems”.

As revenue growth in the industry continues to decline and telecom operators’ core services become commoditised, customer experience remains as one of the few areas operators can differentiate themselves from their competitors and maintain relevance with consumers. This places greater need for operators to make customer engagement a priority.

The way in which telcos engage customers has changed dramatically in recent years through the growth of different channels and touch-points a customer has access to. This is often contributed to the rapid adoption of smartphones and tablets, initiated by the launch of the iPhone in 2007, and the speedy adoption of social media platforms like Facebook (launched 2004) and Twitter (launched in 2006). Customers now expect businesses to be digitally savvy, knowledgeable and “joined-up” in their interactions with them.

There is no shortage of commentators and technology providers extolling the virtues of a more customercentric focus, urging operators adopt an omnichannel approach. By integrating online, call centre and bricks-and-mortar store customer experiences – through omnichannel capabilities – the promise to operators is that they can deliver joined-up customer experiences: simultaneously improving the effectiveness of telecoms marketing by building a ‘single-view’ of the customer, reducing time spent on resolving customer service issues, and preventing data from getting stuck in specific siloes.

But are these investments in technology (and the considerable internal resource implications) really a priority for operators or just another example of technology vendors pushing operators to spend more on expensive capabilities that they will never benefit from? Our survey suggests that those operators who have built omnichannel capabilities are reaping the rewards. However, operators also appreciate that success is not just down to implementing fancy systems: it’s also about what you do with them and having the right skills.

Telcos’ benchmarks come from within and outside the industry

Although most telcos are investing in their efforts to digitise the customer experience, it may not be obvious where they should be concentrating their efforts and what targets they should be aiming for. For this, there is a need to determine what the relevant benchmarks are when it comes to best-practice for digital engagement, how well they stack up and how they should seek to close the gap.

Telcos are looking to learn from outside their industry as customer engagement is a domain that all businesses constantly seek to improve. Digital natives, companies such as Google, Facebook and Netflix that started off as digital businesses and did not have to make a transition from legacy practices, are often leading the way when it comes to offering customers a truly digitized experience. However, for a telco, it may seem like an unrealistic dream to replicate their efforts, therefore telcos often look for best-practice examples from other industries, which are undergoing a digital transformation and still have the burden of legacy services, systems, processes, people and infrastructure. These industries include finance, retail and media.

Nonetheless, when comparing telcos’ digital customer engagement to these industries, many different measures suggest that telcos are lagging behind. When looking at cross-industry Net Promoter Scores (NPS), telecoms operators come out at an average of 11% compared to an average of 50% for retail (which leads all industries). The next worst industry, insurance, has an average score of 23%, just over twice that of telecoms.

These statistics suggest there is room for improvement, but in which specific areas do the most critical gaps exist and how should telcos go about changing this?

So, STL Partners has attempted to answer two questions:

  1. What should telcos be aiming for?
  2. How well are telcos measuring up to their ambitions in digital customer engagement?

To address this, we created an online tool to benchmark telcos across various metrics in three domains related to digital customer engagement: commerce, marketing and sales & service.

The Digital Customer Engagement Benchmarking Study5 took place in two phases. The first phase was focused on commerce and took place over July and August 2016. In the second phase, the scope was expanded to include marketing and sales & service and took place in April and May 2017. In total, 70 respondents from 47 telecoms operators took part in the study.

For the purposes of this study, operators are categorised into 2 ‘peer groups’:

  • Mature Market: Medium-high income per user, predominantly post-pay, developed fixed infrastructure
  • Mobile First: Low-Medium income per user, predominantly pre-pay with limited fixed infrastructure

Figure 1: Respondents by region and peer group

chart on global customer experience survey

Source: STL Partners


  • Preface
  • Executive Summary
  • Introduction
  • Characterising operators’ digital customer engagement strategies
  • Commerce: selling more digitally and selling digitally more
  • Telcos’ online channels are still not being used enough by customers and prospects
  • Revenue benefits from online channels are relatively lower
  • Leveraging digital channels to upsell customers is one way to help drive online revenue
  • Data use is the key differentiator for a successful digital commerce approach
  • What is best practice for commerce?
  • Commerce Case Studies
  • Marketing: this time it’s personal
  • A (good) personalised marketing approach is more likely to secure returns…
  • …but most telcos’ marketing still uses traditional customer segmentation
  • What is best practice for marketing?
  • Marketing Case Studies
  • Sales & Service: Delivering the promise
  • Customers of the Omnichannel operator group are most actively engaged on digital channels
  • Online service engagement requires adequate channels and functionality
  • Omnichannel operators add value to customer service by ensuring complete visibility of customers
  • What is best practice for sales & service?
  • Sales & Service Case Study
  • Conclusions


  • Figure 1: Respondents by region and peer group
  • Figure 2: Mapping operator digital customer engagement strategies
  • Figure 3: On average, less than 20% of total sales are from online channels
  • Figure 4: Variation between average telco and best performer across online sales
  • Figure 5: ARPU tends to be higher for customers who purchase their core package on offline channels
  • Figure 6: Mature Market operators have higher online attachment rates than Mobile First
  • Figure 7: Most operators are offering at least one online channel for upgrades
  • Figure 8: Omnichannel operators out-perform in digital commerce
  • Figure 9: Our research shows a link between the levels of personalised marketing and online marketing conversion rate
  • Figure 10: Most operators are not using personalised marketing techniques
  • Figure 11: On average, most customer interactions are not contextual
  • Figure 12: Online marketing conversion rates are at 31% across operators
  • Figure 13: A minority of purchases are being scaled up
  • Figure 14: Omnichannel operators excel in app-based customer engagementrst
  • Figure 15: Omnichannel operators are ahead in the number of channels a customer can use to raise a ticket
  • Figure 16: Omnichannel operators excel in the functionality of their channel offerings
  • Figure 17: Omnichannel operators lead converged billing capabilities
  • Figure 18: Omnichannel operators are on average twice as likely to have complete and partial visibility of customers compared to Digital Nascent operators