Wireless Stores Make A Play For CE Dollars

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NEW YORK – Legions of consumer electronics stores have turned into memories in recent years, but carrierowned stores and independent wireless specialty stores have emerged to take their place in selling consumer electronics devices that connect to smartphones.

The products include stereo headphones, Bluetooth and Wi-Fi speakers, smart watches, fitness bands and trackers, mini HDMI projectors, action cameras, and home-automation systems.

The stores are leveraging store traffic to sell high-margin add-ons, sell solutions, and increase the value of the wireless service they sell by showing consumers what they can do with a smartphone. And the margins aren’t bad either, ranging from 30 to 35 points on a majority of smartphone-connected products. That doesn’t approach the 45 to 70 points available with such accessories as cases, car chargers and screen protectors, one retailer said, but the effort is worth it because of declining smartphone margins and maturing smartphone and tablet sales.

Carriers and independents alike are rolling out new store designs to merchandise the products aggressively.

“Mobile stores and consumer electronic stores are converging worldwide,” said Neil Mawston, executive director of Strategy Analytics’ global wireless practice. There are two main reasons, he said. “First, mobile stores are searching for fresh revenue streams beyond smartphones, such as accessories, wearables, tablets and so forth. Second, consumers are moving into a multiscreen, multiplatform world, and they increasingly want to shop in multiproduct stores. Apple is leading the way, and has been ahead for some time.”

Diversification “is a normal smart retail play,” added Steve Baker, The NPD Group’s industry analysis VP. The stores are monetizing the traffic they generate by selling “the No. 1 consumer electronics product,” which is the smartphone. “When people come in to buy, you want to have a whole lot to sell them. It’s margin enhancement.”

In addition, he said, “when a smartphone is the central controlling authority in the home or the center of how you access media, then when you sell a phone, it makes sense to offer those corollary products.”

“The ecosystem around the phone is expanding, and wireless stores want to sell into that ecosystem too,” he continued.

T.J. Dailey, accessories product manager for The Cellular Connection chain, agreed. “Some products are a foregone conclusion as an attachment to a smartphone,” he said. Dailey is tasked with expanding the selection of smartphoneconnected products in the company’s owned-and-operated stores, which number about 300. Another 300 stores are operated by franchisees. All stores specialize in Verizon phones and service.

The potential for attachment sales will grow because carriers are aggressively promoting early-upgrade programs that promise to accelerate the replacement cycle of smartphones, Baker said.

For carrier-owned stores, smartphoneconnected products “increase the value of our services,” said Daryl Evans, AT&T Mobility’s advertising and marketing communications VP. Merchandising the products enables AT&T salespeople to engage in solution selling, “show people what’s possible with our wireless network,” drive LTE data usage, and promote customer loyalty, he said.

Growing consumer awareness of smartphone-connected products is also driving wireless stores to add new categories, Evans said.

Advantages, Challenges: Selling select CE products through wireless stores is advantageous for CE suppliers because of the stores’ focused sales force, analysts and suppliers said. “Carriers stores do a good job at moving Bluetooth speakers,” said Steve Schlangen, product development VP for Sakar’s Altec Lansing brand. “Carrier salespeople do a good job of selling and taking the guesswork out of compatibility.”

Dailey of the Cellular Connection agreed. Wireless-store salespeople have an opportunity “to make an attachment when the consumer isn’t coming in for it,” he said. They take the time to learn about the customer’s lifestyle, and because it takes a while to activate a phone, consumers have time to browse for add-ons, he noted.

Challenges, however, are rife.

One is store size, said NPD’s Baker. Wireless stores “struggle with selection” because of their small footprints compared with larger CE stores, he said. Then there’s the issue of when consumers buy smartphone add-ons. “Accessories don’t get purchased in the same cycle as the phone,” he said. “People often buy them later and then think of another store.” For wireless stores, he said, the challenge is “how do we get our fair share of the nonattached marketplace? How do we get them to think about us when they think about a Bluetooth speaker?”

Wireless stores, Baker concluded, “have a long way to go to capture their fair share of the market,” but they have “a lot of room for growth.”

The Cellular Connection thinks it has come up with one way to get its fair share. The chain last year launched a finance program for accessories and CE products priced up to $240. The financing is free with a phone upgrade.

Challenges remain, however. One is that wireless-store salespeople “already have a lot to remember,” said Dailey, pointing to the wide range of phones and plans available. Perhaps the biggest challenge, however, is “being able to offer a competitive price” compared to large chains, he said.

Evolution: Wireless-store diversification started with stereo headphones as smartphone and feature phones turned into dual-use products combining communications and MP3 players, Baker said. The stores also added iPhone-docking speakers but later, like other retailers, switched their focus to Bluetooth-connected speakers.

Now, as the ecosystem of smartphone-connected devices expands, so are the product categories merchandised in wireless stores.

The Cellular Connection, for example, is expanding its selection of CE products and will likely end up with 100 SKUs from the current 50, Dailey said, as the company expands its audio, wearable and smart-home SKUs. Headphones and speakers are in all 300 stores, and the selection is expanding to about 40 SKUs this month from a current 30. Sonos wireless multiroom-audio products are sold in select stores.

Wearables are available in about 100 stores and are targeted for availability in all stores in about six months. Seven SKUs will grow to up to 10. In smart-home products, the chain began six months ago to sell Belkin’s Wi-Fi-based light-switch dimmers and wall plugs along with a Belkin security camera, and the company wants to expand the smart-home selection over the next 12 to 18 months.

Audio and wearables took on key roles in the design of the company’s Indianapolis flagship store, which was redesigned in early 2013. The design has been implemented in about 30 corporate stores to date and will eventually be rolled out to all corporate stores. Franchisees also have the option to implement the design.

The store includes a Vibe section with Bluetooth speakers, higher-end audio, and over-the-ear headsets and earbuds. The Pulse section is an active lifestyle section featuring outdoor and fitness solutions, including fitness monitors and lifestyle trackers. Also included are products such as waterproof phone cases and sport headsets.

Signaling the company’s interest in wearables and home automation, the Pulse section will eventually be replaced by a wearables section, and a home automation section is in the works.


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