NEW YORK – More consumer
electronics retailers
have entered the cellular
market in recent years
or aggressively stepped
up their cellular presence.
As a result, the indirect
channel’s share of the cellular
market has grown –
albeit slightly — in recent
years, marketers and analysts
say. Strategy Analytics
estimates that about
one-fourth of U.S. handset
sellthrough in 2010
went through non-carrierowned
brick-and-mortar
stores, and the ratio will
grow to a third in 2015,
Strategy Analytics senior
analyst Alex Spektor said.
Retailers, however,
continue to struggle with
the challenges of entering a market that is more perplexing
than traditional consumer electronics, but
nonetheless presents opportunities because rising
technology-driven replacement rates are raising
sales despite high market penetration. Cellular handset
sellthrough in the U.S. grew 5.5 percent in units
in 2010 to 172 million following 3.2 percent growth in
2009 and 1.9 percent growth during 2008, the first
year of the Great Recession, Strategy Analytics said.
The figures combine sales to consumers as well as
sales to enterprises.
Because of the market’s size, many retailers have
ramped up their cellular efforts. Retailers also realize,
however, that they have the potential to win share because
their stores, unlike carrier stores, generate more
foot traffic and can offer service from more than one
carrier.
“The broader choice for the consumer, combined
with strong foot traffic, gives retail stores an advantage
over operator-controlled direct stores, which generally
have lower foot traffic and a handset selection limited to
a single operator,” said Spektor.
Stores such as Best Buy Mobile, he continued, have
been “ramping up the sophistication of their consultative
selling approach, for example, by helping users configure their new devices in-store.” Those efforts
are designed in part, he said, to compete with online
sales, estimated by Strategy Analytics to have grown
its share of U.S. retail sales 7 percent in 2007 to 14
percent in 2010.
The indirect channel’s share is growing with the encouragement
of carriers, who in the 2000s were actively
expanding their company-owned store counts.
“Before, carriers wanted to cut out the middleman, but
now they realize authorized agents are really good at
it,” said Sally Lange, Brightstar’s president of global
retail services. Carriers have also come to realize that
their stores are “expensive,” she said.
Kevin Sinclair, president/CEO of the 440-store
Wireless Zone franchise chain, agreed. “Carriers are
still opening stores if it makes strategic sense,” he
said. “But if a sophisticated agent steps up and gives
them what they’re looking for, then why wouldn’t a carrier
lean on better quality agents?”
Although carriers’ existing stores “are paying off,”
he said, “do they want to keep adding to their fixed
expenses or switch to a variable expense?” The issue
has become more important to carriers, in part because
the market is more mature, driving up the cost
of getting a new subscriber, he said.
Carriers are particularly supportive of large agents
dedicated to a single carrier and to operating multiple
stores that look like carrier-owned stores, Lange said,
pointing to such multistore Verizon agents as Moorehead
Communications of Marion, Ind., Go Wireless of
Las Vegas, and Wireless Zone. All four major carriers
support multistore wireless-specialty chains dedicated
to selling only their service.
Carriers also realize that cellular is no longer a niche
business and that people want to buy cellular where
they already shop, Lange said.
Outsourcing options: Despite the potential to tap
into a broad-based and growing market, the challenges
of coping with the market’s complexity has driven
many retailers to outsource most or all of their cellular
operations to third parties ranging from multi-carrier
master agents, such as Wireless Advocates, to singlecarrier
master agents, such as Moorehead Communications
(one of Verizon’s largest wireless agents).
Moorehead has moved H.H. Gregg from prepaid and
unlocked phones into the more lucrative enterprise of
activating postpaid phones, though only on the Verizon
network.
For its part, Target has outsourced its cellular departments
to RadioShack, which in effect becomes
Target’s master agent. RadioShack said it expects to
expand its Target Mobile kiosks to about 1,450 Target
stores by the end of June, up from 887 at the end of
March.
In a limited number of cases, carriers operate the
cellular departments of some retail stores. Verizon
Wireless, for example, said it operates cellular kiosks
departments in P.C. Richard and Sons appliance/electronics
stores and in BJs. The kiosks are staffed by
Verizon salespeople. AT&T operates kiosks in Walmart
stores in Puerto Rico.
Carrier-operated kiosks, however, are less common
than they once were, marketers said.
The most common outsourcing option – using
a master agent -- is less profitable than running it
yourself, but master agents “provide a turn-key suite
of services such as handset purchasing, managing
commissions, retail training, MDF, co-op support,
and POP/merchandising,” said Alex Paskoff, EVP
of sales and marketing for distributor and master
agent Brightpoint.
In return, master agents get compensated through revenue sharing and possible rental
payments, marketers told TWICE.
In most cases, master agents don’t provide
plan-o-grams or fixtures to their retailer
clients. Instead, retailers usually apply
co-op funds toward purchasing fixtures
that they would select in conformance
with carrier requirements, Paskoff said.
In some cases, a master agent will
staff a retailer’s cellular department,
Paskoff noted. Costco and AAFES (the
Army and Air Force Exchange Service)
are cases in point.
When a master agent provides sales
staff, the master agent also usually provides
a plan-o-gram and fixtures in close
coordination with the retailer, he noted.
Key challenges: In general, master
agents relieve retailers of the challenges
of keeping salespeople up-to-date with
frequent changes in handsets and rate
plans for each carrier’s service. “Everyday
something changes, and we [Wireless
Zone] focus only on what Verizon is
changing,” said Wireless Zone’s Sinclair.
Outsourcing to master agents also relieves
store management of the stress
of coping with carrier partners that, for
competitive reasons, often inform indirect-
channel partners of new phones
and rate plans as little as a day before
launch. “Sometimes we find out about
it by reading the newspaper,” said an
executive with one large cellular chain.
The migraine of cellular headaches –
cash flow – also gets a dose of Tylenol
when master agents get involved.
