Based on current information, it appears likely that US wireless
carriers will continue to be strongly interested in owning and
operating their own retail stores in the future. I have been unable
to locate any sources suggesting the carriers are interested in
outsourcing the operation of their retail locations. Given the
considerable impact the stores' performance have on their financial
results, I seriously doubt they would be interested in turning over
control of such an important asset to a third party.
Wireless carriers dominate retail sales through their carrier-owned
stores, amounting to 68% of all retail sales of wireless services.
These stores are therefore extremely important to the wireless service
providers. Carriers believe the stores are more cost-effective than
independent retailers, providing a cheaper way to sell new services
and support existing customers. Carriers have invested significantly
in new stores. For example, prior to its acquisition by Cingular,
AT&T Wireless opened 149 stores in 2003 and 125 stores in 2002.
Cingular had about 1700 company-owned stores as of early 2004.
As the competition for new subscribers increases because of higher
penetration rates, carriers are likely to continue to invest in their
retail stores. Recent customer satisfaction surveys indicate that
wireless carriers' retail stores are not doing as well in satisfying
customers as do competing outlets. Carriers believe they deliver a
better sales experience that reduces customer churn and promotes the
sale of more sophisticated handsets and services. Analysts believe
that carriers are likely to continue to be the largest player in
wireless retail and note that they are working to improve customers'
shopping experience at their stores by investing in sales force
training and store remodels.
The increasing competition also makes outsourcing less likely because
wireless carriers are not going to want to incur increased costs by
paying a third-party. Even if the third-party offer to run the stores
for less than what the carrier was currently paying, gambling that
such a move would not adversely affect the customer experience strikes
me as being very unlikely. The wireless carriers are simply too
dependent upon sales from their company-owned stores. Furthermore,
despite recent surveys suggesting a significant amount of customer
dissatisfaction, the wireless carriers firmly believe that retail
selling is a core competence and an opportunity for differentiation.
Based on this interpretation of my research, I believe that
company-owned stores will continue to be an extremely important part
of US wireless carriers' operations. With fewer first-time wireless
customers being available in the marketplace, providing excellent
customer service to existing customers becomes ever more important.
Having a large network of company-owned stores to provide quality
service will be critical to customer retention efforts. According to
one survey in 2003, 21% of customer service interactions with existing
consumers occur through the carrier's retail store. Therefore, I
expect US wireless carriers to continue to open new stores and
continue to own and operate their stores.
Sincerely,
Wonko
Sources:
"Survey: Carrier Stores Offer Worst Shopping Experience" By Joseph
Palenchar, TWICE (12/5/2005)
http://www.twice.com/article/CA6288903.html
"Survey Finds Consumers Unhappy with Wireless Phone Stores"
consumeraffairs.com (November 23, 2005)
http://www.consumeraffairs.com/news04/2005/wireless_stores_survey.html
"Property Repercussions Could Follow Big Merger" By Alex Frangos, The
Wall Street Journal Online (February 25, 2004)
http://www.realestatejournal.com/propertyreport/retail/20040225-frangos.html?refresh=on
"J.D. Power and Associates Reports: Customer Switching is Increasing
among Wireless Customers Who Are Most Dissatisfied With the Retail
Sales Experience" JD Power and Associates (October 5, 2005)
http://www.jdpower.com/news/releases/pressrelease.asp?ID=2005187
"Service Is Key To Holding Cell Phone Customers, Survey Shows" By
Antone Gonsalves, TechWeb.com (August 28, 2003)
http://www.techweb.com/wire/26801947 |
