Tier 1 operators are beginning to use retail outlets to build long-term customer relationships and generate revenues from lucrative data applications. But when it comes to the brick-and-mortar sales counter, the wireless consumer is still very much up for grabs.
While the wireless industry has always been good at showcasing eye-popping technology, its failure to provide a satisfactory retail shopping experience is well-documented. According to a recent study from The NPD Group, only 24 percent of recent U.S. mobile-phone buyers said they had a good or excellent experience buying a new handset. Further, carriers’ own stores make for some of the worst retailers. While 68 percent of all mobile purchases were made at operator-owned stores, consumers who bought phones from RadioShack Corp. and Wal-Mart Stores Inc. were substantially more satisfied with their overall shopping experience.
“There are a lot of things that could work better” at the retail level, said Clint Wheelock, vice president of wireless research at NPD. “I think it’s critically important to the business.”
Operators could get away with lackluster efforts at the retail level a few years ago, when consumers were moving to wireless in droves. But as penetration levels begin to plateau and voice becomes a commodity, the sales counter is becoming a front in the battle for the consumer.
Figures from J.D. Power and Associates indicate those who are unhappy with their retail experience are more likely to switch carriers. Indeed, the likelihood of unhappy shoppers switching wireless service providers has increased 46 percent from 2004, with 20 percent of unsatisfied users saying they will definitely or probably switch carriers within the next year. Unhappy users are 25 percent less likely to visit the same carrier store again to purchase wireless services, and 35 percent less likely to recommend the carrier’s service to family and friends.
The NPD Group found that buyers at carrier-branded stores are more likely to sign up for data services, and are more likely to stay with the operator once their contract is up. Thus, operators are hoping to exploit that advantage by expanding their retail presence, aggressively building out stores across the country to gain even more market share.
“(Operators) know that a subscriber who signs up through a company-owned store is likelier to purchase a higher-priced handset, and also to sign up for more of the right kind of calling plan and for more wireless data services,” Wheelock said. “The opportunity at that point of sale for their sales associate is to really educate subscribers to all the things they could really do on their phone.”
And while multimillion-dollar marketing campaigns can be effective in drawing and retaining subscribers, a good retail experience can accomplish many of the same goals at a fraction of the cost.
“The battle is on” for the mobile consumer, said John Jackson, an analyst for the Yankee Group. “Because we’re not going to be adding massive numbers of subscribers anymore, the issue is around controlling cost per add.”
While big-box retailers often make for a more satisfying shopping experience-RadioShack Wal-Mart were the top two overall retailers in terms of buyer satisfaction in the NPD study-they may not sell the whole wireless story. For example, Wal-Mart workers often are less inclined to push wireless data services than accessories due to commission structures. A sales associate can make 10 percent or more from any accessory sale, but substantially less-or nothing at all-from selling wireless e-mail or another data offering.
“I think with big-box retailers there’s a culture clash with respect to how people buy mobile phones and services,” said Wheelock. “The real advantages those guys offer is a wide selection, a wide variety of choices, and the ability for consumers to comparison shop between different carriers. What they don’t have is the same level of in-depth service you’re typically seeing carrier stores try to offer; the same consultative approach.”
Operators are beginning to exploit the advantage, preaching the importance of customer service and add-on data plans to their employees. Cingular Wireless L.L.C. recruited two local Cingular store managers to demo new offerings last week at the International Consumer Electronics Show in Las Vegas because of their ability to push lucrative non-voice services.
“These guys … have some of the highest bolt-on rates for data plans of any stores in the country,” Cingular’s Ritch Blasi said of the managers. “We give people a lot of training, putting work and expense in upfront” to lower churn rates and maximize revenues.
Another hurdle for nationwide chains is the fact that wireless users typically aren’t interested in seeing a variety of offerings at the sales counter, Wheelock said. Many have already done their comparison shopping on the Internet, and head into the store only to consummate the deal.
And even the national chains that offer a quality shopping experience are struggling at the retail counter. RadioShack, the second-largest national reseller of wireless phones and services, recently said it is unlikely to meet its fiscal 2005 earnings target due to weaker-than-anticipated wireless sales.
Such difficulties aren’t preventing others from joining the playground, though. IMO-short for “independent mobile”-hopes to take advantage of the lack of customer satisfaction by providing a variety of plans and services sold by knowledgeable staffers. The company, which has launched a flagship store in Columbus, Ohio, sells offerings from three Tier 1 operators (only Cingular isn’t offered), as well as Boost Mobile and Virgin Mobile USA L.L.C.
Master agent Brightpoint Inc., which essentially serves as a middleman between carriers and retailers, hopes to capitalize on its carrier relationships by going directly to consumers as well. The distributor has announced plans to sell phones and services from Sprint Nextel Corp., Virgin Mobile and Vonage Holdings under the Fono Wireless name. Brightpoint, which opened the first store in Noblesville, Ind., said it intends to license the brand to retailers who will own and operate each store.
Others are building “mini-chains” of mobile retail-snapping up mom-and-pop outlets that are being squeezed between operators and national chains. New entrants are lured by the increasing number of high-end replacement phone sales-as opposed to handsets sold with a service contract-that are driving the price of new handsets skyward.
“I think consumers are willing to spend more for the device because the device is becoming more valuable to them,” said Mark Howell, Brightpoint president. “I think there is increased demand for full-featured devices that can be media-savvy phones.”
Operators also are looking to minimize buildout costs for new outlets by establishing store-within-a-store relationships with warehouse grocery companies and other chains. Carriers operate the stores themselves, allowing them to train and manage staffers at a high-visibility storefront with guaranteed walk-up traffic.
Increasingly, though, operators are focused on building stand-alone, brick-and-mortar locations to expand their presence and own the customer. They’re finding that taking a customer by the hand, showcasing a phone’s capabilities and establishing a face-to-face relationship builds both data revenues and customer loyalty.
“One of the points of pain for operators is that the services are getting more complex; the phones are getting more complex,” said Yankee Group’s Jackson. “They need to sort of `CRM’ their way to success. They want a more sophisticated, hands-on level of interaction with the subscriber.”
