Carrier-Direct Share To Hold Steady As CE Retailers' Share Slips: Study

Boston— Small wireless specialty retailers will lose 10 percentage points of market share between 2001-2006, but CE retailers will lose only 5 percentage points during that time, according to Yankee Group estimates.

In contrast, carrier-direct channels will largely maintain their share, while Internet sellers and value-added resellers/systems integrators will gain share over the next few years (see chart). Value-added resellers (VARs) target enterprises with a suite of wireless voice and data solutions, Yankee said.

Smaller wireless specialty retailers will encounter "the most significant decline" in the next few years, said senior analyst Linda Barrabee. That's because they have had difficulty maintaining traction amid the intense competition from mass-market retailers, where sales representatives are more adept at selling a suite of consumer electronics products and foot traffic is significantly greater," she explained. In 2006, they'll account for only 5 percent of sales, dropping steadily every year from 2001, when share hit 15 percent.

CE retailers, in contrast, will gain a little before falling back. CE retailers' share rose to 32 percent in 2002 from the previous year's 31 percent, and share will rise again in 2003 to 33 percent. After that, however, their share will drop to 31, 30, and 28 percent, respectively, in 2004, 2005 and 2006.

Carriers' direct channels will maintain their 51-52 percent share during that time, but the percentage of sales through carrier-owned retail stores will decline as other direct-marketing efforts, particularly direct sales to enterprises, gain share, said Barrabee.

Sales through carrier stores will decline from 34 percent of market share in 2001 to 28 percent in 2006, while other carrier-direct channels will grow from 16 percent of industry share in 2001 to 24 percent in 2006.

Besides sales through carrier-owned stores, carrier-direct sales include enterprise sales, telemarketing, carrier web sites, and the like.

VAR gains: In 2006, VARs will garner 10 percent share, up from only 1 percent in 2001, as "as enterprise sales and a suite of solutions become more of a focus for carriers selling both voice and data," Barrabee said.

Noncarrier Internet sales will also grow to achieve 5-percent share in 2006, up from only 1 percent in 2001, Yankee said.

Although indirect retail continues to be a major component of carriers' sales strategies, " carriers have made a concerted effort during the past couple of years to refocus on direct channels," Barrabee said. "Carriers often find that their carrier-branded stores and direct-sales teams are typically more successful channels and produce the highest value customers, which makes the carriers more hesitant to heavily invest in third-party outlets," she said.

This effort has had some success, she said. In a 2002 consumer survey, Yankee found that 62% of surveyed phone owners said they purchased their handset directly through a carrier-branded store, up from 45% in 2000.