Regional Chain Uses Net For National Presence

By Joseph Palenchar -- TWICE, 7/26/1999

Regional wireless retail chain Totally Wireless has soft-launched an e-commerce site that turns the company into a national retail presence with the cooperation of major wireless carriers, chairman Mike Merrill said.

The strategy represents a shift from earlier plans to grow into a national presence by acquiring wireless stores. "We looked at acquisitions, but the Internet is a more cost-effective way to expand," he said. "We might [build] more of our own stores in the future, but nothing is planned yet."

The company has signed agreements with 44 wireless phone carriers to sell phones and service in all major markets in the U.S via its e-commerce site, said Merrill. But the 19-store company, which closed four stores in the past 18 months, will continue to operate its brick-and-mortar outlets in Salt Lake City, Seattle and Northern California. The four closed stores, he noted, were "real estate mistakes."

The new site, totallywireless.com, "is the first to sell a complete range of wireless products and services online nationwide along with the fulfillment and customer support to back it up," he said. Most other sites "are limited to selling one service or limited to selling service in specific geographic regions."

Merrill's strategy includes an as-yet undisclosed formula for "using the Internet to make our retail stores more competitive." Totally Wireless, he said, "is not abandoning retail like Egghead did."

To launch the site, the company raised $14 million in financing from U.S. Venture Partners, Alta Partners and Alta Communications. "The lion's share will be spent on marketing," Merrill said.

The site sells cellular and PCS phones, pagers, wireless modems, residential long-distance service from Qwest, and wireless data products such as Motorola's electronic organizer, which clips onto StarTac phones. Merrill also plans to sell the Palm VII organizer, which is equipped with a wireless packet-data radiomodem to retrieve web-based information.

The wireless phone selection includes Ericsson, Motorola, Nokia, Qualcomm, Samsung, and Sony.

During the soft-launch phase, Merrill said, "a lot of functionality is still not in," but the site currently does transactions, features 55,000 different rate plans, and provides data on phones whose prices are dynamically changed when a consumer selects a rate plan.

"In most markets, we offer service from at least three carriers, and in some, four or five," said Merrill said. Service is available in all SMSAs, and "we're working on fill-ins." Participating wireless voice carriers include AT&T Wireless, GTE Wireless, MCI Worldcom, Nextel and Sprint PCS. The site's paging carriers include PageMart.

For some carriers, he admitted, Internet selling "was a huge issue." Some feared it would "undercut their national retailers or their own retail stores." For other carriers, online sales weren't a big issue, yet some of these carriers were reluctant "to pay much because of the perception" of a low cost of doing business, Merrill said. "Their first thought is that it's a lower cost of distribution, but in reality, commissions can't be next to nothing."

Totally Wireless was able to overcome initial carrier skepticism, he said, because it has been in business 11 years and has "longstanding relationships" with carriers as well as distributors. On top of that, "we started discussions several years ago with various carriers nationwide [when the company planned a national acquisition strategy]. Therefore, we built the business case for national sales, and that translates to our Internet strategy."

Nonetheless, "every carrier has different restrictions that we adhere to," Merrill said. The restrictions aren't geographic but include such stipulations as not soliciting existing Totally Wireless customers to sell them another carrier's service.

Besides dealing with restrictions that vary by carrier, Merrill must also cope with 34 different activation procedures among the company's 44 phone carriers. "Some carriers still want customer signatures, and some do activation over the phone," he said. Totally Wireless does the activation and programming itself as well as fulfillment, including boxing and shipping.

Besides selling, the company provides another service to carriers: maintaining online user's manuals for phones. The service could mean fewer calls to carriers' customer-service lines, Merrill said.

In comparing his operation to about a half dozen other wireless sites in various stages of operation, he noted that other sites have agreements with only one or two carriers to sell service, and in some cases, those agreements are regional, not nationwide.

Another site, point.com (formerly wirelessdimension.com) provides information on every carrier, market and rate plan, but few are available to buy online, he contended. And the site itself doesn't sell phones; it hyperlinks consumers to a carrier site that sells online and owns the customers. Point.com gets a referral fee for each sale. The site also refers customers to dealers.