Retailers: Worthy challengers to carriers

This weekend Wal-Mart will officially begin selling its exclusive, cheap prepaid wireless service, Straight Talk, in more than 3200 stores nationwide. It isn’t the first retailer to take on the wireless carriers either. Best Buy is looking to grow its share of mobile phone sales by using its “blue shirts” as neutral voices in the decision-making process, as well as offering consumers a buyer’s guide of devices, carriers and prices to encourage unfettered cross-carrier browsing. To solidify their connection to carrier’s valuable consumers, at CTIA Best Buy also launched mIQ, a free Web site on which consumers can manage their mobile content.

Retailers like Best Buy have a unique advantage over carriers in that, in addition to choice of handset, they offer consumers a choice of carrier. In the case of Wal-Mart, its advantage is owning the cheapest wireless plan on the market. TracFone, a mobile virtual network operator of Verizon Wireless, is offering the contract-free service — albeit with limited handset selection — in $30 or $35 monthly plans. TracFone is the biggest prepaid provider in the U.S. — with 11.8 million subscribers, it is more than twice the size of many of its competitors.

As both the largest and cheapest prepaid provider, TracFone’s new Wal-Mart-sold plans could put millions of consumers who are already considering ditching their contracts over the edge, according to New Millennium Research. The firm forecast in March that millions of Americans would shift to lower prepaid plans to save money and — at only $30 for 1000 minutes and texts per month — TracFone could be the tipping point for these consumers “who associate the massive retailer with the experience of buying goods and services at the lowest possible price,” said Allen Hepner, executive director, in a research note.

The low cost of the TracFone plan would clearly be a huge driver in convincing people to cut out the contract, but Wal-Mart’s role as the retail channel is no less significant. Poor customer service is an oft-cited complaint of consumers, and the need for carriers to improve their retail stores isn’t anything new. Although online sites provide a lot of resources and tools for comparison-shopping, consumers like to visit retail locations, touch and use their new device, talk to experts and walk out with it right away. They aren’t, however, necessarily attached to their wireless carriers’ stores in particular.

I’ve purchased phones for myself and family members several times and am among those who don’t find the experience to be particularly pleasant. Carriers are taking strides to make it better both in brick-and-mortar and online, but even with great customer service, they’ll never have an impartial perspective. Retailers like Best Buy and Wal-Mart don’t yet make up any significant portion of cell phone sales, but with cheap plans and more selection, they could become worthy opponents.

E-mail me at sarah.reedy@penton.com.