Does Retail Still Rule?

How will you sell wireless services in the next few years? Chances are that you'll have a lot more options.

Consumers today don't need to visit stores to purchase phones and services. They can click on the banner ad at Yahoo! and get the latest deal from AT&T Wireless. They can stop by a convenience store to pick up coffee and prepaid on their way to work. When they open their mail, they can find a direct-mail piece offering the latest rate plans and phone.

Even so, consumers still visit retail stores to purchase services and handsets.

"We are still seeing a rather traditional distribution model," said Callie Pottorf, IDC research analyst, mobile and wireless communications. "Although more people are buying wireless online, it tends to be people who have had wireless in the past."

In IDC's Personal Wireless Communications User Survey 2000, only 0.6% of the 900 respondents purchased their most recent handsets via the Internet. Company-owned stores, direct sales and retail partners such as RadioShack were the top-three channels.

Nevertheless, you must find creative distribution channels and innovative ways to reach customers.

Don't Discount Online Stores
Pottorf said that by 2003, about 5% of activations will come from online sources.

"Company-owned stores and other channels will remain dominant as they are also used as a source of education for potential customers," she said. "They give (them) the chance to see, touch and hold the phone."

Verizon Wireless' customers still shop in its company-owned stores more than in its other distribution channels, said Andrea Linskey, spokesperson. Although it has partner agreements with dot-coms and buys banner ads on several sites, Verizon Wireless primarily promotes its Web site through newspapers, TV and radio ads.

Microcell is developing an online store. Sean Dalton, vice president of marketing, said that the Internet will become an even more important distribution channel.

"We believe our online retail store will make up about 25% of our total sales in the next few years," he said.

Microcell promotes its post-paid Fido PCS and prepaid Fido-matic services via retail partners, its own stores and kiosks, a business-sales channel, and affinity and strategic alliances, which is more of a direct consumer channel. In conjunction with promotions over the past year, Microcell has used banner ads on portals such as Canoe.com, media and entertainment sites, and investment sites such as invest.com. Three or four promos are featured each year and run with banner ads to drive traffic to www.fido.ca. Microcell usually puts banner ads on sites that generate a lot of traffic on their own. Dalton said advertising prepaid with banner ads on entertainment sites is a good idea because prepaid will attract those sites' young visitors.

Microcell's Christmas campaign, promoted via banner ads, allowed consumers to send online cards to friends. If the recipient opened the Christmas card and then clicked through to the provider's site, the sender could win prizes, including airtime, handsets and accessories.

GTE Wireless doesn't run banner ads on other sites but does sell services through sites it has distribution agreements with as well as on its own site. It has partnered with retailers such as RadioShack, Best Buy and Circuit City, and has set its sights on online e-tailers and destination sites.

"Internet is not currently more effective than retail, nor is it the most effective channel, but we feel that it is a growth channel and could account for a significant percentage of sales within five years," said Doug Carswell, GTE Wireless director of distribution development.

Strategic Partnerships
Verizon Wireless has distribution relationships with Amazon.com, Radio Shack and other outlets online and off.

"Obviously, the more doors that people can go through — physical doors as well as virtual doors — the better it is and the easier it will be to purchase Verizon Wireless service," Linskey said.

For Microcell, even post offices have proved effective.

"We're in Canada Post selling prepaid vouchers, and we'll start selling phones there, too," Dalton said. "It has been a surprisingly strong channel for us."

One year ago, Microcell began partnering with associations, financial institutions and universities to sell service. For example, with Banque Nationale, Microcell creates credit-card-statement inserts for the bank's customers. So far, the program has netted around 600 new subscribers.

"This is the first step," Dalton said. "Eventually, what you'll see is a world where your phone is your ATM. You need those types of partners to get to mobile commerce, where your phone is your credit card, debit card and everything is built in."

Microcell uses direct mail to target University of Montreal alumni-association members who receive a special rate. The association receives a royalty when mem bers sign up for service.

"(These) relationships are great because you can lock in the up-and-coming customers," Dalton said. "It's just like a credit card: The first one you get into someone's pocket is the one that's going to stick for a long time."

Buying a Fido PCS kit through the Canadian Automobile Association gets you a mobile kit that includes a cigarette-lighter adapter, headset and phone stand to encourage safe driving. Microcell also has programs with professional associations such as the Canadian Nurses' Association.

"We've used (these partnerships) to target, we believe, the right audience for our products: people that are doing a lot of driving, university alumni, professionals," Dalton said.

Although it's early, Dalton predicts a significantly lower churn rate among subscribers acquired via Microcell's partnerships than those from other channels.

"We believe by 2005 (this distribution channel) should be 25% of our sales, if not greater."

What About WAP?
WAP also could help providers use the Internet as a sales channel.

"(WAP) will make every single handset a retail environment," said Dalton. "WAP applications will have a significant impact on e-commerce over the next five years but probably won't have a significant impact on new wireless-customer growth as a distribution channel."

But WAP will impact loyalty and revenue growth, Carswell said. A customer with a WAP-enabled device is already a wireless subscriber and won't be as inclined to subscribe to new wireless service through a wireless e-commerce application. Linskey said there will be a lot more purchasing power in handsets, particularly with the introduction of WAP. This power will extend beyond wireless providers.

"Verizon Wireless has 24 million customers nationwide," Linskey said. "If you are trying to reach a broad consumer base — a restaurant, online clothing store or book distributor — what better way to reach a broad base than to work through Verizon Wireless? The prize is to have access to Verizon's customers, and that's a pretty compelling proposition."