It seems there’s a new mobile virtual network operator for just about every interest, age and ethnic group in the United States. And each operator has a different strategy about how to reach its target.
Retailing strategies were simpler when the first couple of MVNOs came to market: Strike a deal with a few big-box retailers and electronics chains to grab some shelf space and compete head-to-head against the Tier 1 carriers. Indeed, Virgin Mobile USA L.L.C. has gained substantial traction by placing its offerings in RadioShack Corp. outlets, supermarkets and drugstores.
But as more service providers come to market, MVNOs are struggling with ways to differentiate themselves without having to build their own branded stores. Except for Sprint Nextel Corp., which sells Virgin Mobile’s wares along with its own Boost Mobile L.L.C. prepaid service, no MVNO has garnered shelf space in a carrier-branded outlet. So while bargain-basement prepaid services wage price wars, higher-end, content-focused MVNOs are looking to new sales channels and unorthodox partners to get in front of consumers.
“If you go to a Target and you’ve got seven or eight different manufacturers, different network operators, MVNOs and regular carriers, and each has four phones, you’re going to have 30 different offerings,” said Robert J. Laikin, chief executive officer for wireless distributor Brightpoint Inc. “It’s going to be fairly confusing.”
Indeed, distribution is one of the most difficult hurdles the new wave of operators face-and the path to success for them is teeming with challenges. A recent report from Pyramid Research found that “the MVNO model is a lot less financially attractive than the hype would suggest,” with most new operators either losing money or barely reaching profitability.
Sister operators Disney Mobile and Mobile ESPN have a substantial edge against many competitors, of course. In addition to deep pockets and first-rate brand identities, the companies are looking to leverage complementary phone services to target entire families.
Their offerings-which are designed to allow dad to opt for a sports-focused service while mom and the kids pick up more family-centric phones-will be sold from two-sided kiosks in 60 U.S. malls in a test slated for later this year or early in 2007. Brightpoint, which has inked distribution and logistics deals with several MVNOs, will manage independent mobile dealers to operate the retail locations.
“Shopping malls will be essential to reaching our family audience and we think it is a great retail channel for us,” George Grobar, Disney Mobile’s senior vice president and general manager, said earlier this year.
The strategy marks a big opportunity for kiosk managers, who are among the least visible members of the wireless retail value chain. Laikin said kiosk owners represent a substantial portion of Brightpoint’s 2,000 to 3,000 independent retailers.
“A lot of our (kiosk) dealers may have two stores in strip centers or five in shopping malls,” he explained. “Some are multi-city, and some have 100 locations.”
Disney Mobile has said it plans to expand to traditional retail locations later this year. Mobile ESPN, on the other hand, initially launched nationwide in February under an exclusive deal with Best Buy, and recently signed a deal to begin distribution in at least 500 Sprint Nextel retail outlets later this year.
Meanwhile, Amp’d Mobile Inc. is looking to ring up sales at the virtual sales counter. While Internet storefronts largely have been disappointing for wireless retailers, Amp’d believes its 18- to 24-year-old target audience will be more willing to shop and purchase online.
The least traditional retail strategy among the new operators may be that of Helio L.L.C., however. The EarthLink Inc.-SK Telecom joint venture is teaming with unlikely partners including music stores Tower Records, Sam Goody and FYE, and also plans to push its wares in more than 100 college bookstores nationwide. Helio also has tapped several “master agents”-dealers that provide end-to-end distribution and logistics services-that are charged with striking relationships with other nontraditional, youth-focused outlets. Helio also plans on selling its service through stand-alone company-branded stores.
As unlikely as some of the alliances may seem, though, they’re likely to be outdone by partnerships between more niche-focused MVNOs and distributors in coming years. The less brand recognition an operator has, the more important it will be to find innovative ways to get offerings to market.
“A lot of people forget about the distribution,” said Laikin. “You have to have points of presence. They’re critical for an MVNO to be successful.”
