July 15, 2004

Prepaid and Cstores

Andrew Chung owns and operates Fairway One Stop #14, a c-store located off of I-85 South in Thomasville, N.C. The location includes a gas station and a Subway franchise inside. The store reports gas sales of 200,000 gallons per month and inside store sales of $85,000 per month, of which prepaid sales are $5,000 monthly.

Point of sale
By: Theresa Ward

Editors note: This is the first in a continuing series of retailer profiles. If youre a retailer and are interested in sharing your experience in selling prepaid products, please send an e-mail to [email protected]

Andrew Chung owns and operates Fairway One Stop #14, a c-store located off of I-85 South in Thomasville, N.C. The location includes a gas station and a Subway franchise inside. The store reports gas sales of 200,000 gallons per month and inside store sales of $85,000 per month, of which prepaid sales are $5,000 monthly.

Chung has been selling scratch prepaid cards for about five years. It was only last year that he began offering a POSA system that now allows him to sell a multitude of prepaid products.

He made the decision to switch to POSA so he would no longer be limited to carrying prepaid cellular cards from one carrier. He says customers were coming in and asking for cards he wasnt carrying, and he couldnt service them. "Since I started offering a POSA system," Chung says, "I can offer customers different products, and I can provide better customer service. Since then, business has picked up quite a bit."

He says hes getting repeat business from the same customers, and he also has new customers coming in and out since he is located off an interstate. Many repeat customers frequent Chungs location to refuel and have also grown accustomed to adding time to their prepaid cards or cell phones.

Spectrum Wireless, Chungs wholesaler, provides him with a turnkey POSA system and PINs for wireless and long distance. The company also provides Chung with signage, counter mats, window clings and other collateral materials.

Chung carries a full range of prepaid wireless programs including Cingular, the No.1 seller in the region. He currently is selling a promotional refurbished program with Cingular that is selling very well. He also sells Verizon, AT&T, Alltel, TracFone and T-Mobile, which doesnt operate in the region, but travelers coming through will buy additional minutes while roaming on Cingular in North Carolina. The one reseller program Chung is carrying is Omni.

Matching customer needs

Assisting customers in selecting a prepaid wireless program, Chung asks questions to help determine their needs. "Sometimes customers want fewer minutes; some are on a limited budget and want to spread out fees even if the price per minute is high. It also depends on the handsets. There are some customers who want a small phone, but it also depends on the per-minute rates. Some want lower rates, and that will drive the handset purchase decision."

A key determiner of the handset purchase is based on the customers budget, Chung says. "If the customers budget is tight," he says, "he will veer toward a cheap handset vs. an expensive one. If the customers budget is sufficient, he is looking for a nicer handset. It really depends on how much money the customer has in his hand."

Spectrum Wireless, Chungs wholesaler, is responsible for keeping a steady supply of handset inventory in place. Todd Grindstaff, executive director, Spectrum Holdings LLC, says its his companys job to ensure Chung is aware of the newest programs and products. "We're introducing Chung to new reseller wireless programs. He's taking the time to learn about them as well as the underlying carrier for each of the programs," Grindstaff says.

As the owner and operator of Fairway, Chung says he doesnt want to carry a large quantity of certain handsets. He prefers to try a couple of them, see how customers respond and then hell order accordingly. "Spectrum Wireless does a good job of stocking inventory so I can receive handsets on time instead of having a customer wait," he says.

Grindstaff notes that in the case of selling Cingular service, its a direct relationship whereby Spectrum handles the customer service. To activate service, the customer calls Spectrum and not Cingular. "This helps us sell phones to the c-stores because were adding that extra value service," Grindstaff says. Chung knows the customer will be taken care of once the purchase is made. "Not many people come in complaining, but if there is an issue, we will make an exchange," Chung says.

Customer preferences

While prepaid wireless is a large draw at this store, Chung also must carry traditional scratch prepaid phone cards. He says that repeat customers, many of whom are Hispanic, are brand loyal and will return to his store to buy new cards. He hasnt seen a move from this particular consumer base to switch to mag-stripe rechargeable phone cards.

When asked why this customer is reluctant to try a rechargeable phone card, Chung thinks its a matter of habit, and he says theyre not comfortable with a mag-stripe card. At the same time, he says that many Hispanic customers are interested in prepaid wireless. "Some Hispanic customers do not have home phone service, and they want a good rate to call their homeland using their prepaid cell phone. I explain the rates to various destinations from the various wireless carriers."

He also points out that some immigrants still prefer scratch cards to call their homeland because international rates on prepaid wireless plans are higher. Many will buy scratch cards with their prepaid wireless handsets. Chung is definitely seeing increased usage of prepaid wireless. "Prepaid wireless revenues will definitely go up instead of long distance because of the trends Im seeing right now. Prepaid wireless is definitely eating the long distance markets, especially international long distance cards."

On the subject of customer purchasing habits, Chung says it varies. Some customers specifically come in to buy prepaid cards, and some buy on impulse at the counter. Customers can also come in to buy a sandwich at Subway or purchase a money order and notice the prepaid products, he says.

"Its probably half and half as far as impulse buy vs. destination," Grindstaff says. "Chung has an interstate location, and customers come in to buy a sandwich and remember they need to buy a new Cingular card along with a pack of cigarettes," he says.

More products

With the POSA system in place, Chungs store is able to offer additional prepaid services including prepaid MasterCard. Grindstaff says that at the present time, there isnt a large demand for the product. "Demographically, its just not taking off," Grindstaff says. But he explains its important to carry it, as other competitors are offering it. He says that some store customers are doing from $500 to $1,000 a day, but he says that its the extreme and not the norm. "We, as providers," says Grindstaff, "make very little money on the MasterCard program, and it increases our back-end costs because we have to ACH and debit daily rather than twice a week like we normally would do. But we recognize there is a value in carrying the prepaid MasterCard product."

The POSA system also supports home dialtone, which Grindstaff describes as a "neighborhood" product, one that sells in a location frequented by local traffic. He says that product is selling well.

Other ancillary products offered are roadside assistance and ring tones, which Grindstaff says are just beginning to be marketed. All products reside on the POSA device, and its up to Grindstaff to keep Chung and other retail customers informed as well as to develop promotions to drive usage.

Grindstaff explains that mom and pop locations see POSA as a profit center that has a core base business of prepaid wireless and prepaid long distance, and the other products are gravy.

Accessories

"Wireless accessories are big items for us," Chung says. "Theres a huge profit on them as well. When we sell the prepaid wireless handsets, we can also offer customers additional accessories, so it works out well."

Distributors role

When asked ways in which Spectrum can help his business, Chung says its important that he be kept informed of new products that can translate into additional profits. He says its important for him to be educated on new products and how they work so he can tell his customers.

Spectrum sends out newsletters informing its retailers about new products and updates from the carriers. Also, the company is finishing up a complete printed catalog of all of its offerings. In addition, at Spectrums headquarters, which is about 30 minutes away from Chungs store, there is a showroom with product demos including the POSA delivery method. In addition, all the different prepaid wireless carriers products are displayed in cases, and prepaid long distance rate posters are displayed on the walls.

For now, Chung continues to build his c-store operation by staying informed about new products that can improve his bottom line. With prepaid wireless going up in sales, its a sure thing hell be keeping an eye on new prepaid programs. ICN

retailer feedback

Andrew Chung, owner and operator of Fairway One Stop #14, shares his preferences and observations:

Best time for sales to visit: in the morning after rush-hour traffic

A distributor/sales person should wait until hes finished handling any customer in the store

If the store is busy, a distributor/sales person can leave a note letting him know when hell come by again or when hell be calling

Prepaid card providers come in once a week and discuss new products not associated with Spectrum Wireless

$10 denomination scratch cards are most popular

Among Hispanic users, scratch cards still most popular

To call internationally, Hispanic users still using prepaid long distance cards in conjunction with prepaid wireless handset

Prepaid wireless taking over prepaid long distance cards Reseller prepaid wireless programs offer better margins than carrier plans

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Posted by Craig at July 15, 2004 02:35 PM