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How Walmart Became A Cellular Player

6/06/2010 09:08:00 AM Eastern

BENTONVILLE, ARK. - Walmart's rise as the dominant player among
national retailers in cellphone unit share started in 2001, when the
high-traffic, high-volume retailer began to jettison the cellular kiosks that
carriers operated at the front of its stores.

The company began to replace the kiosks with its own cellular
departments, previously called Connection Centers but now called Walmart
Wireless.

In the departments, consumers can seek assistance from a
dedicated Walmart associate who activates phones onsite. Alternately, consumers
can use a point-of-sale touchscreen to select the right phone, carrier and
service plan for them.

The rollout "began to reach critical mass in stores around 2003
and 2004," a spokesperson said.

The carrier-operated kiosks, said Greg Hall, Walmart media and
services VP, were "essentially a leased operation, but we saw it [cellular] as
a viable business and a growth business, and we brought it back into the
electronics department, using Walmart systems and investing a good deal in
[associate] training." Creating the Connection Centers, he said "allows us to
have iPhone, Droid and HTV Evo 4G."

In mid-2009, the national retailer took another step to raise its
cellular profile, increasing its assortment by 30 percent, expanding the
display areas, and redesigning the department, mostly by lowering the counters
to improve interaction between customer and associates. The cellular department
changes, part of a company-wide remodeling program called Project Impact, had
been implemented in about 600 stores at the end of 2009. Project Impact and the
cellular department redesign will be rolled out to the rest of the chain's
stores over the next three years.

Coinciding with the remodeling, Walmart is stepping up its
cellular commitment in other ways, such as teaming up late last year with
prepaid MVNO TracFone Wireless to launch the StraightTalk brand of prepaid
phones and monthly service, available exclusively through Walmart.

The chain is also launching a second Walmart-exclusive prepaid
brand, Common Cents Mobile, which provides pay-as-you-go prepaid service in
collaboration with Sprint. The service became available through more than 700
Walmart stores beginning May 15 and is available through Walmart.com.

And Walmart is expanding its mobile broadband selection with a
dedicated area for pay-as-you-go prepaid mobile broadband. Products and
services from Verizon, Cricket and Virgin, as well as an exclusive product from
AT&T, rolled out in stores in May.

The retailer also expanded its smartphone assortment by almost 60
percent compared with a year ago, having launched the iPhone in late 2008. In
June, the company plans to be among the first retailers to offer the country's
first 3G/4G phone, Sprint's HTC-made Android-based Evo smartphone.

The changes - combined with a U.S. store count of almost 3,600 -
helped propel Walmart into capturing the top market share in sales in the
indirect channel, market research company ComScore statistics show. (See table
below.)

From March 2009 through March 2010, the latest statistics show,
Walmart led the indirect retail channel in the number of people, on average,
who activated phones during the preceding three-month period. For the
three-month period ending March 2010, 1.3 million people purchased one or more
wireless devices from the retailer, ComScore said in citing its consumer
surveys. Best Buy, Amazon, RadioShack and Target followed in that order.

Also abetting Walmart's rise to cellular prominence is the
cellular industry's shift to mass-market status, analysts told TWICE. "CE and
cellular have moved from luxury goods to necessity products," said Stephen
Baker, NPD's industry analysis VP.

As a result, consumers expect to find cellphones in mass-market
outlets such as Walmart, he and other analysts said.

Retailers such as Walmart realize that cellphones have such a
broad penetration in the consumer market that they "drive more traffic into
stores," Baker added. Today's consumers are also more willing to buy phones
from outlets other than carrier-owned stores, he added. That in turn presents
Walmart with "an opportunity to present itself as a disinterested third party"
that gives consumers more choices of service providers, he said.

"It's all about choice," Walmart's Hall agreed. "We offer
multiple options and showcase all the major carriers, compared to the carrier
stores that offer only one choice."

Many Walmart stores, however, offer postpaid service from only
three of four national carriers at a time, just like Best Buy and other
national chains, although "some [Walmart] stores will sell all four major
carriers if all are offered there," a spokeswoman said.

The industry consensus, explained one major retailer, "is that
four carriers - with respective plans, handsets and other details - would offer
too many options for the customer to sort out in the retail environment and too
many options for the retail associate to explain in a timely and efficient
manner."

For a specific retail location, therefore, retailers select
"which three postpaid carriers represent an ideal combination for the specific
retail location," the retail executive continued. At one location, for example,
a retailer might include AT&T "at the high end for both rate plans and
creditworthiness, with Sprint and T-Mobile with successively easier credit
requirements and more competitive rate plans."

Walmart doesn't offer phones from regional postpaid carriers.

 

 

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