Retailers dial into a new wireless potential.
“My very first presentation about product partners in 2004 started with [two carriers], followed by 1-800 Tow Truck,” says Frank Squilla, senior vice president of sales for InComm, Atlanta, referring to the explosion of products and services in the prepaid and gift-card categories since. “Five years from now, who knows?”
Bring Your Own Phone
The idea of a bring-your-own-phone kit may have been too strange for consumers to grasp five years ago, but times have changed as mobile phones have become more imperative to people in recent years, according to Anthony Martinez, senior director of wireless services for InComm.
Just last year, smartphone sales jumped 42%, Martinez says. Such expansion didn’t exist five years ago. A second trend that was just emerging was bill payment via online or mobile. Five years ago, it was 10% of the business, he says. Today, it’s 45%.
“That’s why we’ve seen a decline at some locations,” Martinez says. The traditional customer was cash-based, someone who ran out of minutes, came in and topped up. The new customer is signing up for a $50 rate plan due every 30 days. They pay digitally and want a feature or smartphone.”
Overall, the no-contract wireless business has been growing, going from $24.5 billion today to a projected $38.2 billion in five years, Martinez says. The number of subscribers will go from 79 million as of 2012 to 129 million by 2017. “It’s a healthy, growing business, but it’s changing,” he says.
Internal InComm research shows the main barrier to people switching from post-pay to no-carrier plans is education. In its survey of customers conducted last December, as many as 53% of customers with a post-pay plan either “don’t understand no contract” or “did not know anything about it.”
For retailers, many positives exist. The product is a no-fuss, prepackaged kit, housing a SIM card that comes with a certain number of minutes. The product hangs on shelving units. Margins are strong. The risk of theft and loss is reduced and the c-store becomes a point of activation, so the new carrier now sees greater value in the channel. Martinez could not discuss specifics at press time.
While in various stages of development, other products in the category are also starting to heat up, ranging from momentum within the tried-and-true to state deregulation opening new opportunities, says Squilla of InComm.
Among the tried-and-true products are general-purpose reloadable cards. Much in the same way no-contract cards are becoming popular with higher-income customers, so are prepaid reloadable cards. The growing need to control budgets or to better handle teenagers and their financial needs has led many to use prepaid, Squilla says. These cards are undergoing packaging and messaging changes to better connect with parents and other more upscale customers.
Gaming or, more specifically, gambling—including online lottery and poker games—is opening up to the prepaid market. Many states facing budget deficits are introducing online gaming, with some lawmakers mindful of retailers and traditional brick-and-mortar channels. Some of these states, for instance, are requiring that customers fill their accounts via prepaid cards purchased in stores.