Should Wireless Carriers Drop Their Retail Stores?
Once upon a time, the reasoning in a Wall Street Journal article goes,
it made sense for wireless carriers to operate retail stores because not everyone
had a mobile phone and the focus was on signing up new subscribers. That reality
led to the major cell phone companies opening thousands of retail locations.
Today, however, the focus has shifted on generating more revenues and profits
from existing subscribers with added services and faster connections. That
change in the market, according to the Journal piece, makes operating
stores much less critical than in the past. In fact, with Best Buy (1,000 stores),
RadioShack (4,500) and others making big pushes into the wireless business,
it might just make more sense for retailers to handle the heavy lifting.
Dan Hays, a partner with consulting firm PRTM, told the Journal that
major carriers invest about $500,000 a year to operate each retail store. That,
in the case of Verizon, added up to $1.1 billion or 1.7 percent of its revenue
last year.
Discussion Questions: Do you think the time is right for wireless carriers
to get out of the business of operating retail stores or is there some necessary
benefit that would be lost should they follow this course? What do you see
as the next big thing in wireless technology and how will it affect retailing
of these products?
If those numbers are right, 1.7% of revenue seems like a very small price to pay for the value Verizon (for example) gets out of its store network. I personally like picking out phones at the carrier’s store, and when I’m in the store I see plenty of other sales prospects as well. In addition, it gives me peace of mind to know I can go in for service (and in general, my carrier has done a good job with service issues in store).
If I were the carriers, I would be looking closely at the impact of Best Buy and RadioShack as they become more mobility oriented, but I’d move cautiously to close down such an important channel.
Having their own stores not only allowed them to sign up new subscribers, but also to have at least two other things–control over the phones that were shown and what was being said about them. This allowed the carriers to differentiate themselves (mostly based on the phones they “controlled” and not on the qualities of their networks. Once they give this up to a Best Buy or RadioShack it will force the differentiation to be based on the technology they offer. I anticipate that this will signal the commoditization of wireless service.
No, do not get rid of the stores as in my experience, the carrier is the only one that can really help you out when your phone needs service. Retail stores seem to always play the blame game and do not take responsibility for the items they sell. At least the carrier is making money on the phone bill each month so why shouldn’t they also service and support it?
My iPhone has been a problem on more than one occasion, and the AT&T store at least tried to help me. The Apple Genius’s took one look at my “PC” which needed to be synced with my phone and said I can’t help you!
Keep the carrier stores.
I agree with Jonathon. 1.7% is a small price to pay for face time with customers. I only visit my Verizon store 2 to 3 times each year for either a technical support or to upgrade my phone. Regardless of the time of day, the store has between 5-12 customers shopping or working with technical support.
I spend a fare amount with Verizon and I have been a steady customer for over 10 years. Two reasons for this: 1) the phone service is excellent. Rarely do I lose a call 2) when I have an issue or question, I know I can walk into a store and speak with an expert not a support person overseas reading a script.
Looking at it another way, you would only need to lose roughly 250 customers (each spending on average $2,000 per year) to eat up the savings of closing one store that costs you $500,000. That assumes you don’t sell any additional phone supplies including wireless ear pieces etc… Are you willing to take that chance?
Every time I’m in a wireless store, it is packed. I think people like to feel, touch and see. The time has not come to eliminate the stores but I do think they should evolve into something more value added. Partnering with Radio Shack or Best Buy, Sam’s makes a lot of sense. Let them have the expense of brick and mortar and draw on their traffic.
The challenge for a carrier is that most of these other stores also sell their competitors services too. I’m a firm believer that the carrier needs to keep a balanced portfolio and not be overly dependent on one retailer or channel.
While I believe that most carriers should continue to operate their own stores, there are some carriers that have great third-party companies that do so as well. I just think a company should never lose the opportunity to work directly with and learn from their end-users.
Wireless carriers would be crazy to get out of retailing. After all, wireless customer loyalty is fleeting.
Look at the phenomenon of Apple at work in retailing. It is the busiest store in most malls, filled with enthusiasts who want to pick up the word on the latest app.
My Verizon store has a bit of that feeling. It is a nice blend of what’s new, technical tips, and repair. As Verizon brands more of its stuff and drops more deeply into software and service, it has a chance to reach Apple’s lofty heights.
If Verizon Wireless and its ilk leave the heavy lifting to Best Buy and Radio Shack, they will have commoditized themselves.
Cingular (now AT&T) and Verizon were able to define the market via the establishment of these stores. They not only attracted the early adopters of cell phones, they opened up the door for the next wave of purchasers and curiosity shoppers.
Doubtful that other Retailers would have provided enough space, product samples, or service expertise to bridge consumers to higher usage. With 3G and 4G on the horizon (moving forward for the early adopters), these retail outlets haven’t run their course yet.
If the other retailers were filling the bill for the wireless companies (in particular Verizon), there stores would not be packed and have a line each and every time I have visited.
With the costs rising and the value associated, it is the way to stay close to your customers, limit switching, and ensure value to the subscriber.
Our local stores while busy are helpful and the associates servicing the customers are highly knowledgeable not only about the new products and features but also the plans and effectiveness of each for the need of the subscriber.
It would be a huge mistake to turn these services completely over to a third party. Huge mistake!
I have a problem with the 1.7% statistic being the total cost to revenue for the wireless carriers to operate a store. I would think it has to be higher. And even if it were doubled to around 3%; that would be little reason to change the model and reduce or eliminate the retail outlets.
My thinking is the retail outlets make the marketing and advertising work successfully. Have you ever gone in a wireless carrier’s retail outlet and not found customers buying, changing or looking for something new and improved? My wife did just that two months ago. I doubt we would have even thought of going to a Best Buy or even RadioShack for the same reason. Other major electronic retailers will certainly be able to “sell” the product. But they will not know how to show you the nuances of so many different models and brands.
So, this person’s opinion is the time is not right to back out of the retail store model and put your fate in the hands of a non trained clerk in another store to sell your products.
Typical bird-brained idea from a twenty something MBA on Wall Street. Note hardly anyone in the retail industry agrees with the idea. Was this the same guy who wanted Costco to get their labor rates in line with Sam’s or was it the guy who had Circuit City get rid of their full time sales staff?
There is good value in wireless carriers owning their own stores–an important way to differentiate in a very crowded and competitive market. The electronics retailers have different drivers for sales, and will help buyers comparison shop against competitors. Having someone who understands the carrier network, plans, features, and all the factors that influence purchase is important in maintaining loyalty. A place for great customer service to shine. It also is an avenue for carriers to get better feedback about what is working and what needs attention.
I know of no retail store that is constantly more crowded than the local Verizon store. I find the same at the other brand name stores. Obviously, these stores are filling a need that other retailers are not.
Overtime, I suspect that the Best Buys, et al will gain more traffic and business related to cell phones. However, as long as the phones are unique to the service provider, no one seems to know better than the local retail staff. Phone support is worthless. The mom and pop stores are staffed with less than capable people.
What is next? Watch out for Google. They are the game changer in this competition.
Boy!! Here I was ready to defend the old brick and mortar – or more precisely galvanized steel, drywall and plastic – presence on the grounds — that it was good advertising (the same logic that allows Fifth Ave landlords to charge $$$$/sq ft for space that only nets $$ in sales) and I find that not a single person wants to drop it. Anyway…I guess mall operators will have one less thing to worry about.
Wireless is perhaps more complicated than ever. This is the absolutely wrong time to pull back on stores.
In fact, the stores continue to offer value to consumers – value that should be reflected in price if the carrier is savvy enough to make sure it happens.
There is a value in having the wireless carrier brands on the street. If the retail stores close and the brands become embedded in an electronics retailer such as Best Buy, etc., the opportunity for differentiation through service and added value knowledge will be lost.
If stores are to stay open, then the accessory area needs to be expanded to capture more wallet share of an initial purchase. Customers should not feel that they need to go to the Apple Store or flea market to find a vendor with the right case, but often the choices in AT&T stores are limited.
It is worth thinking through if the stores should close for retail purposes and lower cost service only stores could be maintained for local support. The thought of buying a phone from a non-telco retail outlet is not out of question, but having to manage all service needs by phone and mail would negatively impact customer experience.
These days only the carriers’ retail stores offer a near to complete shopping experience. They offer all currently available phones and most if not all on display are active. Chains like Best Buy and RadioShack offer only the most popular phones for the carriers they represent and most if not all phones on display are not functional.
I am with Sprint and my local Best Buy offers only ten Sprint phones on display. At least a couple are duplicates of others in a different color. None are active so you can’t get a true experience of functionality, quality or even clarity of the screen. This is a minimal sampling of what is available at a Sprint store.
Best Buy personnel have told me that models that don’t sell well initially are quickly removed from the store but may be available online. These associates feel this process eliminates some phones that are among the best.
A local RadioShack manager saw me casually browsing and tried to sell me an old-model, poorly regarded smart phone as being ‘almost the same’ as an iPhone.
Once when I visited a Best Buy store to take advantage of a sale price. I was informed that activating any phone through BB would irrevocably change my plan. I have a great old plan and don’t want it altered. Other BB sales people had reviewed my account previously but none had informed me of this danger.
Let’s not get rid of the one of the best aspects of mobile phone retailing.
I recently wrote a piece about Best Buy’s ambitious plans to vastly expand its mobile stores platform. It touches on these points and more. You can read it here.
All of the carriers need to stick to their core competencies and stop losing large amounts of revenue in trying to create unique retail stores to get a “share of pocket and share of eyeballs” of the modern consumer. Why spend all of these resources when they can simply allow the large retailers in all of their categories to offer their goods? The wireless carriers need to think of their products like Coke or Duracell, and focus on placement in all channels, while allowing the retailer to driver their business forward with the end user.
Direct retail distribution is essential for wireless carriers, in spite of the economics. The carriers are faceless entities, existing in the invisibility of wireless spectrum, online and in call centers. Retail provides a tangible and human-to-human touch point for direct contact with subscribers and prospects. In addition, retail is a primary point of service, both for billing (problems and payments) and equipment service/repair.
While indirect retail partners drive greater and greater volume, for the most part they sell all carriers’ service and equipment. Further, they do this at a steep price (i.e., commission) to the carriers and have a greater cost than company-owned channels.
Finally, should the carriers opt out of direct retail, they lose the ability to deliver their brand on their terms in a physical/brick-and-mortar setting. Look at the retail channels of others brands – from Sony to Nike to airlines pop-up stores. There are benefits beyond pure profit to these ventures, even when short-lived.
Quick, somebody tell the throngs of people milling around the AT&T store in Chevy Chase that the store may close!
New batteries, queries about service terms, advice to parents on which phone to choose for a picky teen, accessories, and advice about how to keep the phone looking great are just some of the services that the plucky young men who staff my AT&T store provide. I bet most average shoppers would be shocked to learn that those stores may close. Why fix it if it’s not broken?
Think about it like this: Apple does sell its products through an extensive network of third party retailers–and yet Apple’s own stores are the cornerstone of its brand differentiation.
The real question isn’t whether the wireless companies should continue to have stores. It is whether they are leveraging those stores effectively enough in the goal of creating and delivering a differentiated brand experience. Which of course has to be consistently matched by their phone and online service.
And that is where we see that the wireless companies are still stuck in the stone age. They aren’t really ambitious enough or good enough at valuing the customer. And they’re more interested in things like obtuse pricing plans, lock-in via proprietary technology + contract phones and establishing or jacking up “early termination” fees.
In fact the wireless companies should instead be asking themselves what they are doing wrong that customers would want to leave so often–and focus on using all their channels–including their own stores–to provide better value.