There used to be essentially two types of places to buy wireless: directly from the carrier store, or through an indirect retailer. But as online sales become an increasingly important part of the overall buying experience for customers, what was once a two-way tug-of-war between direct and indirect retailers is now a four-way tussle to capture the attention of customers-particularly the coveted big spenders.
Although things are slowly changing, most customers still end up buying through carrier stores, despite opportunities to go through the carrier online, a third party online, or a separate retailer like Best Buy.
“It speaks to the value of direct customer visibility and the investment that the operators have made in controlling and owning the channel, and therefore the customer experience-which grows in importance as the services and handsets become much more sophisticated,” said John Jackson, vice president of M:Metrics.
Revenue left on table
Those stores, however, are expensive to operate, and several carriers have revamped their Web sites in recent months as they attempt to attract customers to do more than simply research purchases online. The functionality of those sites varies, however. For instance, while Cingular Wireless L.L.C. offers family-plan customers the ability to add on services for each line as they decide on the purchase, Sprint Nextel Corp. only allows the services to be added through its Web site after the phones are purchased and received.
Although national carriers can’t afford not to have their products offered in retailers such as RadioShack, Best Buy or Wal-Mart, Jackson said, they might be leaving important data revenue on the table. Carriers have much less control over training initiatives and how launches of service are handled, he said, than in their own, “high-touch” stores where customers might be successfully steered toward a more expensive phone or plan, or convinced that they need a data add-on.
“You simply don’t get that, pulling something off a rack for a prepaid offering at Wal-Mart,” Jackson added. “For example, your phone is highly likely to be able to send text messages, use the Internet or send picture messages, or download a push-to-talk client-but without a bit of handholding at the retail point of sale, the likelihood that you’ll ever use any of those features goes down exponentially.”
Matching customer to product
Or, as Strand Consult put it in a recent research note, retailers used to be able to get by simply by selling a low-end phone and service, because “any customer was considered a good customer.”
“That’s not the case today, where it is increasingly becoming the retailer’s task to sell the right mobile handsets and get the right customers,” the company observed. And right, of course, means whatever is most profitable for the carriers, and right now that is data services.
“Retailers will to a much greater extent than previously have to teach mobile users how to order and use mobile services. This is directly connected to mobile operators being under pressure on their revenue from sales of voice telephone and SMS . and they have therefore moved focus towards an increase in revenue from sales of data services,” Strand concluded.
However, the Internet isn’t exactly coming up short on generating average revenue per user. According to M:Metrics, operator Web sites were the second-largest channel for capturing customers who spent more than $60 per month on wireless service. Although they were a distant second behind the carrier stores themselves, they produced more high-value customers then indirect retailers such as RadioShack and Best Buy, and four times as many as non-carrier Web sites.
The 2-percent difference
Compete Inc., which focuses on online consumer behavior, has found that subscribers who buy via the Internet typically spend almost as much on plans as an in-store customer; there is only about a 2-percent difference, according to Karen Parker, a Compete director. While there are more individual than family plans purchased online, she attributed that difference to the functionality of the carrier Web sites themselves and whether they allow upgrades and adding a line.
The real difference in in-store vs. online sales revenue, Parker said, comes down to the price that consumers pay for their phone. Online buyers “tended to mostly be people buying phones for free to $29.99,” she said.
“When it comes to the highest-end phones, people tend to do a lot of research online, but they do tend to buy those off-line.”
