One of the most powerful tenets of retail sales is the law of retail location. Seemingly irrespective of what the actual product is, without strong retail distribution points, your product is doomed to failure. There are exceptions these days, such as music and books, which have both proved that the Web is a distribution outlet in its own right … for some products.
But wireless still needs retail: The phone is the eye-candy of the industry and is a product begging to be touched, held, even caressed in certain cases (iPhone anyone?). After all, the choice of phone increasingly says a lot about you as an individual and there is a desire to see the reality of your choice before plunking down the cash.
While this may seem rather obvious, there are several defunct mobile virtual network operators that still made this (apparently) fundamental judgment error, spurning the high cost of a retail store distribution model in favor of the siren-song of cheaper Web sales. Mobile ESPN, Disney Mobile, and even Amp’d Mobile Inc. all favored the Web first, only later leaping into the arms of a waiting retailer in a last gasp hope . too late. The fact that InPhonic, an early pioneer of Web-only distribution recently closed its doors further highlights the plight of this Web-only model.
Carrier control
But while it is easy to look back and derisively mock these carriers for their foolhardy Web strategies, did they have much of a choice? The major carriers clearly have an advantage in the retail space, and a glance around any local mall highlights their dominance. Further, until recently, the big box retailers have provided an appalling alternative, with poorly ordered displays and very limited selections. The one exception has been Circuit City, which has an excellent display . as long as you only want to buy Verizon Wireless service. As such, the barrier to entry is rather steep for any newly emergent carrier looking for a creditable, mainstream retail strategy.
Handset headache
And it is not only the MVNO wannabes that are frustrated by the lack of retail freedom: Ask any handset carrier about the U.S. retail strategy, and they begin to get upset. The fact that they cannot easily find a distribution point for their phones without having clear-cut carrier approval has long been a bone of contention for them and one that clearly places limits on their business models and ability to get the latest and greatest devices into the hands of the consumer. Compare this to the European model where – thanks to a large number of independent distributors – there is far more of a handset free-for-all.
Change coming
The good news is that the U.S. model is already beginning to change for the better. Best Buy’s relationship with the U.K.’s Carphone Warehouse has already led to the creation of a more effective “Best Buy Mobile” store-within-a-store solution that offers a wider array of carrier-offered devices as well as (gasp) a number of unlocked devices. The result is a more formidable alternative to the carrier stores, which will in turn help to reduce the dominance (and therefore controlling power) of the carriers.
Open says me
A second, more significant step comes as a result of pressure from Google Inc. (among others) that has “persuaded” carriers to either open up their networks – or retroactively claim that they always were “open” to alternative devices. Either way, the result is that consumers will now have a greater say in the devices that they can use and this will in turn result in an increase in retail outlets selling devices. Indeed, it should even begin to help drive Web sales, albeit slowly, as the number of potential devices increases.
While the Web can expand to fit in all the devices one would hope to deliver, the retail store needs to remain focused on key devices due to physical size constraints of the store and the risk of a resulting chaotic display if too many options are provided. But don’t hold your breath on that last point . the Web as a mainstream point of sales won’t move beyond the early adopter phase in 2008.
Eddie Hold is VP of Consumer Services at Current Analysis. The research firm provides competitive response solutions that enable companies to effectively anticipate and counter competitive threats, and win more business. This is achieved through the rapid delivery of tactical, actionable intelligence to help fast-paced companies compete in the highly volatile telecommunications, networking, and business software markets. For more information, visit www.currentanalysis.com.
