The evolution of the wireless industry has had a profound effect on the players involved. Within all levels of the market, companies have had to scramble to adapt to changing demands and conditions. And the rollercoaster isn’t likely to slow down-for anyone.
From carriers to handset makers to infrastructure providers, everyone has had to respond to the market’s advancements. Mobile virtual network operators are proliferating, carriers have consolidated, third-generation networks have finally surfaced, wireless has largely overtaken wireline-and the changes show no sign of slowing. The reverberations of such progress stretch far and wide; every section of the wireless industry has had to react.
Even the simplest, most straightforward segments of the industry have been forced to respond. Within the retail sector, the basic act of selling a mobile phone has slowly but unmistakably changed over the course of the past decade, such that retailers today have little in common with those of the previous century.
“It’s getting more complicated for a user to understand what’s available,” said Anurag Gupta, senior vice president of global strategy with Brightpoint Inc. The company distributes phones in the United States and internationally, and handled 27 million phones in 2004.
Gupta explained that the wireless industry is quickly converging with a range of other high-tech markets-including broadband Internet, Voice over Internet Protocol, digital music and TV-and the retail sector must keep up. Complexity is at an all-time high.
“Supporting those types of products has become more complicated,” Gupta said.
At the dawn of wireless, operators to a large extent relied on independent dealers to get their phones into the hands of subscribers. At that time the market was relatively clean cut: Users paid for phones and service, and used their phones to place and receive calls. Dealers would sell service from a variety of carriers, and the single most important factor was price, followed closely by coverage.
As the market began to mature though, things began to change. Carriers started making money on the networks they spent billions building, which meant they had the cash to wrest control over shoppers’ retail experience away from independent dealers and agents. Carrier-owned stores began springing up across the country.
At the same time, carriers began dabbling in wireless data. First it was WAP, then downloadable ringtones and games. Today it’s streaming live TV and music.
And perhaps most notably, wireless became a standard accoutrement for most Americans. The cell phone is no longer a strange new gadget, but an everyday appliance-such that mobile phones are now breeding on the shelves of Wal-Mart Stores Inc. and Target Corp. Wireless has hit the big time.
Today, the wireless retail landscape is fractured among carrier-owned stores, big-box retailers, Internet vendors, independent retail outlets and a smattering of mom-and-pop stores and specialty locations.
“We are focused on balanced distribution,” said Glenn Lurie, president of distribution for Cingular Wireless L.L.C.
Lurie explained that Cingular is working to “flatten out” its distribution channel following the carrier’s acquisition of AT&T Wireless Services Inc. in late 2004. The carrier is in the midst of closing overlapping Cingular and AWS stores and opening new stores in new locations in order to spread out its influence. The overall number of Cingular-owned stores has declined from 2,700 immediately after the acquisition to around 2,100 today.
Lurie said Cingular is also working to balance its direct sales with its indirect channel. The carrier deals with agents, resellers and retailers like RadioShack Corp., Wal-Mart and Best Buy Co. Inc.
Interestingly, Lurie said Cingular makes about the same amount of money through indirect sales channels as through its own stores. He said the quality of customer is also about the same.
“We are very pleased with our distribution strategy,” Lurie said.
Others in the market also seem pleased with their current retail situation.
“There is a nice balance,” said Farid Virani, chief executive officer of wireless retailer Prime Communications. The six-year-old company is an authorized dealer for Verizon Wireless and Cingular, operating 121 stores in Texas and the Gulf region. The company oversees the sale of around 17,000 phones per month.
Virani explained that the nation’s carriers have focused their retail efforts on large metro areas where their retail investments can reap the most benefit. In smaller markets, Virani said carriers rely on authorized dealers to boost subscriber numbers.
“They will need smaller agents like us,” he said.
As for big-box retailers, their place largely rests with the likes of Cingular’s GoPhone, TracFone Wireless Inc.’s offering and other prepaid products. Such “pick and go” products, as Brightpoint’s Gupta calls them, require little sales effort. Consequently, complicated products like Research In Motion Ltd.’s BlackBerry e-mail gadget are likely to remain inside carrier stores or specialty outlets.
Wireless has also tracked with the growth of the Internet. Web surfers today can compare prices and buy service with the click of a mouse, all without leaving their homes. Indeed, companies like InPhonic Inc. and LetsTalk.com Inc. have staked their future on the success of Internet sales.
However, Prime’s Virani argues that there will always be shoppers who prefer touching and feeling to surfing and clicking.
Interestingly, some handset vendors themselves are getting into the retail game. Nokia Corp., the world’s largest mobile-phone maker, is toeing outside the standard sales model in the United States with its own retail enterprises.
In the United States, carrier subsidies typically tie phones and service together, so handset makers essentially are relegated to a business-to-business sales model. The situation is much different in Europe, where users can easily switch phones from one service to another.
Nokia has opened around 30 “experience centers” in various shopping malls throughout the United States. The centers feature a variety of Nokia products, along with Nokia employees trained in the details of all things Nokia. The experience centers don’t actually sell the products on display; their purpose is more to drive the brand than the cash register.
“It’s partially for sales, but it’s more of a brand-building exercise,” explained Keith Nowak, a Nokia spokesman. “It’s basically a way to drive traffic” to the Nokia brand.
Nokia has also teamed with RitzCamera.com to sell its N90 camera phone, and with Neiman Marcus to sell its high-end 8801 phone online.
So what does the future hold for the wireless retail space? Gupta argues that specialty retailers will become more and more necessary in a converged world. Indeed, Brightpoint recently launched its Fono Wireless brand, which is available to licensees to sell service from Sprint Nextel Corp., Virgin Mobile USA L.L.C. and Vonage Holdings Inc.. Mitch Black, Brightpoint’s senior vice president of sales and distribution and head of the company’s Fono effort, describes Fono stores as a place for shoppers to go to get solid, informed advice on a range of products.
Some shoppers “are going to have a lot more questions that they won’t be able to get answered at a Wal-Mart or a Target,” he said.
“There is still a strong need for specialty stores,” Gupta added.
Ultimately though, wireless will have to make sure its products are easy to use and worth buying. Cingular’s Lurie said the carrier’s primary goal for its new 3G devices “is to make them easy to sell.”
