Independents Answer Cell Phone Sales Call

CHICAGO | Saturday, October 01, 2005

The emergence of unaffiliated stores offering cell phone service ratchets up the competition for locations operated by major carriers

It is hard to pass a strip mall these days without seeing a store selling mobile phone service from one of the nation's largest carriers.

Whether it is a storefront for Verizon, Cingular or Sprint, these wireless shops seemingly have sprung up overnight to meet the nation's growing affinity for mobility.

Annual U.S. handset sales have reached the $100 billion level, said Adam Zawel, director of U.S. wireless research for the Yankee Group, a tech consulting firm.

"Five years ago, we had barely over a third of that," Zawel said. "The focus now is to keep customers more so than acquiring new ones." Keeping customers is not that easy these days. Cingular Wireless, which has about 50 million subscribers, loses about 2 percent of its customers each month, Zawel estimated. Which means Cingular needs to add 1 million new subscribers a month to stay even.

The churn of customers has created good deals for phone shoppers, as well as opportunities for wireless service providers to lure new customers.

But customers have more choices than going to carrier-supported stores. Independent dealers offering plans from all of the major carriers and, in some cases, hard-to-find phones are another option.

These one-stop shops can help people like Chicago resident Marguerite McCurry sift through a maze of options.

"I run a business out of my home and already had service with Sprint, but I needed a second phone and a separate list of charges for business calls," McCurry said. "I was told that wasn't possible [through Sprint], so I had to go with a different carrier." She went to Wireless Toyz at Broadway and Bryn Mawr Avenue in Chicago, a growing chain that offers a variety phones and plans from different carriers.

"The plan I purchased worked the best for me, and Wireless Toyz deterred me from a more expensive plan," McCurry said. "I had looked at a Verizon plan, but according to my needs the T-Mobile plan was better and more economical." Wanda Mazzone of Schiller Park also liked the freedom to choose from many plans. She, too, opted for a T-Mobile plan, which consisted of 1,000 shared minutes a month for her family and herself.

"I liked the fact there was only a year contract, if I wanted to get out of the plan, and I can honestly say this was the most pleasant shopping experience I've had," she said. "All of the phones, plans and accessories were there." For those shopping mostly for voice service, independent stores provide a good option to compare pricing plans, said Andy Castonguay, a senior analyst at the Yankee Group. But if the customer wants a heavy-use data service, such as a phone for e-mailing or accessing the Web, the carrier stores probably offer a better depth of knowledge, Castonguay said.

The number of carrier-specific stores, compared with independent dealers selling multiple carriers, is not clear cut, he said.

In 2004, for example, Cingular had about 2,600 company-owned stores after its merger with AT&T Wireless, Castonguay said. Meanwhile, there were approximately 16,000 retail locations that were authorized to sell Cingular service. The figures are roughly similar for Verizon Wireless, he said.

Authorized locations include independent wireless retailers as well as retailers that sell other consumer electronics, such as Radio Shack or Best Buy.

A new direction Joe Barbat, president and founder of Wireless Toyz, said his vision took off after he added a communication devices department to a video store run by his father.

"About 10 years ago, I added a small section with pagers and other communication devices available at the time, and after three months we were making more money from that small section than the rest of the video store," Barbat said. "I figured we were in the wrong business." About a year later, Barbat began working with a wireless carrier he eventually discontinued, but the move led him to negotiate contracts with multiple carriers he represents today.

"The first company I worked with wouldn't agree to offer me a non-exclusive agreement, so I dropped them and began acquiring other providers," Barbat said. "Today, people can come in and get plans tailored to their budget, the number of calls they need and other services." Based in Farmington Hills, Mich., Barbat has big plans for Wireless Toyz. He has opened 101 stores in 19 states, including five in Illinois, with plans to add more locations this year.

A place for independents Most independent retailers don't have such economic muscle, yet Zawel argues there is a place in the market for them.

"It's sort of a timing thing as well as a coverage issue," he said. "The amount of data available on phones today means you need more expertise explaining things to customers.

"I think this drive to keep customers and offering more knowledge about product use is driving both carrier and independent stores." Edwin Castillo, who operates Personal Electronic Solutions in Chicago, said he offers service from the top wireless carriers as well as other goodies, including the latest phones from overseas markets.

"I am able to offer phones from the Japanese and European market before they are mass released in this country," Castillo said. "Since I'm located here downtown in Chicago, I find my customers are looking for high-end products and want the latest technology." Zawel believes independents may push clients toward one carrier or another based on incentives. On the other hand, those same stores earn points for service and flexibility.

But carrier stores have an edge in service, said Chris Comes, director of communications for the Great Lakes region for Cingular Wireless. He said the stores offer regular training to keep salespeople up to date on the latest offerings.

"We have products we can offer that an independent agent can't get, and we know from our data that customers look for overall value," Comes said.

Castillo agreed that carrier stores have some advantages. They "can offer things like a free second phone, whereas the costs I have don't allow me to do that," he said. "On the other hand, I often carry products carrier stores don't have." Nonetheless, research from the Yankee Group shows that consumers are attracted to the carrier stores. Five years ago, 57 percent of wireless customers bought from carrier-branded storefronts, Zawel said.

"Our surveys show that five years later, those numbers haven't changed at all and, in fact, are climbing," he said. "There are now different distribution strategies. With the Internet, another 5 percent of those sales are from the carrier's Web site, which makes the totals even higher."

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