against having stores refers more to carriers’ business focus (i.e. energy and resources) rather than raw retail profitability. “It may soon be time for carriers to decide which business they want to focus on: wireless communications (i.e. improving their networks and data delivery) or retail.”

Peers explains that, since the U.S. wireless market is basically saturated, carriers should become more concerned with extracting more revenue from existing customers, rather than attracting new customers. “(The big four U.S. carriers) operate 7,600 stores of their own, in addition to selling through lots of outlets owned by others,” he writes. “By comparison, Best Buy operates just over 1,000 stores in the U.S., while RadioShack has nearly 4,500.”

To sum up, Peers makes the following points:

• It made sense for carriers to operate store chains back when there was a flood of new subscribers – carriers could ensure salespeople didn’t suggest rival services.
• The cellphone market has changed: postpaid contracts are decreasing; smartphone use is going up. It’s more profitable to convert postpaid feature phone users to postpaid smartphone data plans than it is to operate a vast network of stores nationwide. Carriers don’t need branded stores to make this conversion; non-carrier stores still generate revenue for carriers.
• This conversion revenue won’t last forever, though, and carrier stores will eventually become more customer support centers (which operate at a cost) than revenue generators.
• Consumers prefer to buy a new phone (particularly a complicated device) in person.** “Google learned that the hard way,” wrote Peers. The company recently abandoned its strategy of selling its Nexus One smartphone online, in favor of traditional retail outlets.

** In a survey announced last February, Accenture found that 75 percent of consumers want to visit a retail store when buying communications-related products and services.

According to IDC analyst Ramon T. Llamas, in a FierceWireless column (May 27), consumers are increasingly buying handsets from retailers like Best Buy, Target and Wal-Mart:

• A 2008 IDC survey found 18 percent of respondents said they would buy their next mobile phone from a retailer instead of from a carrier.
• A 2009 IDC survey found 27 percent of smartphone owners (and 32 percent of feature phone owners) polled actually bought their phone through a retailer, not a carrier.

What These Trends Mean for Wireless Retailers

Naturally, all of this is welcome news to wireless retailers, whether they operate independently or with carriers. It represents an opportunity for retailers to capitalize on the consumer trend to adopt smartphones and data plans, and also the importance of offering better customer service, knowledge and support than competitors, especially versus big-box stores, like Best Buy (see Customer Experience).

“What it boils down to is the experience,” writes Llamas. “After all, a handset is still a handset, whether purchased from a carrier or a retailer, and at the end – even start of the day – a handset needs a carrier's network in order to function.

“Of course, the experience easily varies from one retailer to the next, just as it does from one carrier to the next. Still, this underscores the importance of consumer behavior and purchase experience within the context of purchasing a mobile phone.”

- newsletter@iQmetrix.com

* To read more about Consumer and Carrier Trends, check out the following articles from iQmetrix News & Views:

Do You Sell the Network or the Device?

Reduce E-Waste, Conserve Energy, Increase Smartphone Adoption with Ditto

What Customers Want: Top 3 Smartphone Features

Don't Let Your Product Knowledge Kill Sales

Quality Assurance: The Balance between Good Service and Profitability