Profits Calling

Telco

• Telecommunication shoppers spend three times more than the average shopper per visit.
• 29% of telecommunications shoppers also purchase a beverage on their visit.



Telecommunications – Top 10 = 74% of total Telecommunication sales

Item Description	Manufacturer	Brand
Willem II Wee Willem Blue 10s	Swedish Match	Willem II Wee Willem
Captain Black Dark Crema 20s	BATA	Captain Black
Cafe Creme Blue 10s	Henri Wintermans P/L	Cafe Creme
Henri Wintermans Short Panatella 5s	Henri Wintermans P/L	Henri Wintermans
Willem II Wee Willem Regular 10s	Swedish Match	Willem II Wee Willem
Cafe Creme Regular 10s	Henri Wintermans P/L	Cafe Creme
Captain Black Sweet Cherry 20s	BATA	Captain Black
Captain Black Classic Filter 20s	BATA	Captain Black
Henri Wintermans Long Panatella 5s	Henri Wintermans P/L	Henri Wintermans
Henri Wintermans Half Corona 5s	Henri Wintermans P/L	Henri Wintermans

Source: Aztec

AT A GLANCE • Prepaid mobile phone and internet consumers expect to be able to buy top up at convenience outlets and, if stores advertise that they carry recharge, it can act as a foot flow driver, increasing in-store traffic and driving additional sales. • Prepaid mobile broadband is a massive growth area and sales are increasing quickly as the offers become more competitive. • The fact that recharge cannot be physically seen in-store means convenience store operators should clearly promote products with items such as point of sale range includes brochures, brochure holders, flyers, posters, wobblers, tent cards, flags and window stickers. • C&I operators can increase profits and margins by stocking a range of activation products such as starter packs or phones, as well as recharge and calling cards.

Innovative telco products ring the changes

In just a few years, the mobile communications revolution has transformed the established convenience and impulse profit pecking order ... and given outlets a healthy bottom line boost along the way.

Telco products have quickly established themselves as a must-have item and C&I operators who fail to stock and manage them properly do so at their peril.

In terms of revenue, mobile recharge always ranks within the top three or four categories in the convenience channel. And it’s not hard to see why. Nothing symbolises the rise and rise of our increasingly in-a-rush, on-the-go lifestyle more effectively than the ubiquitous mobile phone, and nowhere is more suited to selling prepaid recharge than C&I.

Convenience has the advantage

Recharge for both phones and internet is normally available on electronic terminals but, as some customers prefer a physical card, that facility is generally offered also. Electronic is obviously the fastest way to dispense recharge, and an effective way for outlets to ensure they have the products and services to meet consumer demand. Selling a recharge card or voucher is an easy process for the retailer.

Through their electronic providers, C&I outlet retailers can access all denomination amounts with the press of a button. The speed with which recharge can be sold is obviously good for both the operator and the busy customer ... and when you add healthy margins to the mix, telco and convenience really is a match made in heaven.

It is a happy fact that just about everyone that purchases prepaid mobile recharge or calling cards will do so at some time at a convenience store. Prepaid is ideal for all customers who wish to control what they spend on their mobile service, as there are no monthly bills. And, as mobile recharge is very much a convenience item, C&I outlets with their longer opening hours have an advantage in serving consumers who may buy at any time of the day or night.

Certainly, prepaid consumers expect to be able to buy top up at convenience outlets and, if stores advertise that they carry recharge, it acts as a foot flow driver, increasing in-store traffic and driving additional sales. Besides increasing the traffic in-store and therefore impulse buying, selling calling cards or recharge vouchers also gives C&I operators the opportunity to up-sell on these products.

Mobile recharge on the up & up

Mobile recharge makes up the vast majority of telco sales when compared to calling cards ... and with the introduction of dedicated SIMS for long distance calling to overseas destinations, this figure is expected to increase over the coming months. Although the much higher profit margins on calling cards make these highly attractive.

Even traditional giants of the calling card world such as the gotalk group – which includes the CardCall, World Telecom and gotalk companies – are now quickly developing and heavily pushing their mobile recharge products. gotalk says that in the past 12 months its prepaid mobile recharge has been increasing quickly with more than 25% average growth per month.

There is no doubt that there has been something of a migration in behaviour to calling overseas direct from mobile phones since the introduction of new prepaid SIM packs. Australia is ethnically diverse and with so many tourists, migrants and foreign students eager to communicate with family and friends back home there is a real and growing market.

Optus now has a $10 prepaid SIM pack called ‘international calls for less’ which gives very cheap international rates and free 10 minute calls on the Optus network. Virgin Mobile also has its $10 ‘Home Made’ Sim which gives very cheap rates to select international destinations.

gotalk Prepaid Mobile offers cheap 24 hour international rates from ½c per minute (plus bonus National minutes), and it has also recently launched the Aussie Extra Plan with ½ cents per second for national callers. Aussie Extra with no connection fee and Australia wide calls billed per second means customers only pay for the time they talk.

These cheap international and national mobile call options are not the only recent innovation which has given a lift to the prepaid recharge environment, and therefore delivered stronger growth to C&I outlets.

Telstra has recently broken with tradition and introduced ‘pre-paid cap pricing’, whereby the customer receives certain amounts of other services – such as data downloads and texts – in addition to the call value of the recharge. These are being heavily advertised and promoted by Telstra.

The telco giant has made becoming a market leader on prepaid mobile one of its key goals … and that could be good news for C&I outlets selling recharge.

Price points provide opportunity

The new Telstra Pre Paid Cap offers certainly make the $30 and $40 recharge points very attractive and the various other networks also have offers designed to drive customers to higher recharge value points. It is up to customers to balance between benefits and cost to choose the deal that suits them best ... but the sales opportunity is obvious.

The $30 Optus recharge is very popular at the moment as it represents $200 of value on the Optus Turbo Cap. Virgin Mobile also has a $35 cap voucher which represents good value ($180) and includes free same network calls and text.

Recharge is sold in a variety of denominations. For example, Telstra recharge cards are available in $20, $30, $40, $50, $60 and $100, with the best selling cards being $20 and $30.

Optus starts at $10, and includes $20, $30, $50, $70 and $100. They also have $80 and $130 for mobile broadband.

gotalk Prepaid Mobile says its most popular denomination sold is $10 although they have an average value of around $15, with up to $100 also available.

For the C&I operator, margins can vary but generally start at around 4%. Many retailers can enjoy a higher margin dependent on support and sales of SIMS and handsets.

Peter Ciliberto, the Chief Executive Officer of Telstra product distributor, C-Direct, says that by stocking Telstra activation products, such as starter packs or phones, C&I operators can double the margin on recharge to some 8%. The Telstra Promotional Program requires the retailer to purchase six activation products per quarter to earn the extra margin.

“We supply both starter kits and handset bundles to convenience,” said Mr Ciliberto. “The lower priced bundles are more popular in this channel, with customers preferring to go to a ‘specialist’ for the more expensive phones.”

Similarly, Jenlist Distributors offers a range of product to the convenience channel, from prepaid mobile SIM packs to prepaid mobile handsets from Optus, Boost Mobile and Virgin Mobile, along with a wide range of accessories including car and wall chargers, leather pouches and the like.

“We even offer digital cameras and binoculars from Olympus, iPod docks and Mp3/Mp4 players, as well as many technology based products suitable for sale in convenience outlets,” said James Simadas, Managing Director of Jenlist Distributors.“It is important to have an in-store presence, with a good display of handsets and SIMS, and we provide free merchandise material and display units to the convenience channel.”

Yes Distribution also sells Optus, Boost, and Virgin Mobile starter kits, handsets and mobile broadband. The company’s Marketing Manager Matthew Smith says these help to drive the overall category sales, and offer opportunities to get additional margin on recharge ... but it’s not just about the phone.

“Prepaid mobile broadband is a massive growth area and we are starting to see good sales numbers as the offers become more competitive,” said Mr Smith. “There is a genuine consumer desire for online content on the move and prepaid mobile broadband helps to customers to achieve that.”

gotalk sells its prepaid mobile starter kits in major convenience store chains and independent convenience stores. It says the gotalk prepaid mobile starter kits, gotalk global starter kits and wireless broadband starter kits offer great margins of some 30%, with its mobile recharge offering retailers a huge margin of 8% - 12%.

Travelex Distribution Unit (TDU) provides all Telstra prepaid physical products through convenience and impulse outlets. This ranges from handsets, starter kits, prepaid wireless broadband products through to phone and recharge cards.

TDU Manager, Ken Grant, says there are a number of reasons for C&I operators to stock prepaid mobile products and these include the cross-sell opportunities, the up-sell opportunities, the growing market, and the increased revenue.

Up-to-date point of sale is key

“The key for any C-store retailer to make the most of the prepaid mobile opportunities is clear in-store execution, with effective in store point of sale,” he said. “Travelex Distribution Unit offers a full range of Point of Sale (POS) where retailers can look to fulfil their own requirements.”

Peter Cilberto from C-Direct agrees.

“Stores should display the POS materials provided,” he said. “Telcos spend a huge amount on advertising and the POS material helps tie the store into campaigns and promotional offers, and it is therefore important to ensure the material is current.”

James Simadas from Jenlist picks up on the point.

“Optus continually advertises above the line on television, radio and in the press,” he said. “Outlets must make sure the store ties in with above the line advertising so they don’t miss out on sales.”

He says the trick is to capture the original sale and then make it work for you with add-on sales.
Optus is running national campaigns in the lead-up to Christmas and there will be point of sale available which retailers can utilise to maximise impact of the campaign.

“Stores that have a dedicated telco area achieve additional recharge sales as well as increased sales of SIMS and handsets,” said Matthew Smith from Yes Distribution. “Yes Distribution has cabinets available to help drive the category and can help maximise slat wall areas and create telco bays if needed.”

He says that point of sale is also essential and posters and flags are available from Yes Distribution.
Similarly, gotalk says the fact that recharge cannot be physically seen in-store means convenience store operators should clearly promote products. Its free point of sale range includes brochures, brochure holders, flyers, posters, wobblers, tent cards, flags and window stickers.

“To cater for our ethnic target market we also have a ethnic point-of-sale range which includes a variety of translated point-of-sale,” said Sigrid Hamacher, gotalk’s Group Manager, Retail Product & Channel Marketing. “Ethnic point-of-sale options include: English, Arabic, Chinese, Indian, Vietnamese, Tagalog, Japanese and Korean, and we also provide a multi-lingual customer service team.”

gotalk has invested more than a million dollars in marketing campaigns which involves radio, newspaper advertising, web advertising, prize draws, point-of-sale and attending and sponsoring ethnic events.

Telco products are, by their very nature, innovative and the features available on prepaid mobile are forever growing.

gotalk, for example, says the range of new features is impacting positively on recharge and it expects its recharge figures to grow even further with the launch of its gotalk Super Packs.

“Super Packs give customers extra value on SMS, data and national calls,” said Ms Hamacher. “Customers simply buy the super pack that best suits their needs and the value of the pack is deducted from their existing balance.”

As well as just unveiling Australia’s first prepaid wireless broadband CAP, gotalk has also just launched gotalk global, which is a roaming SIM designed for customers that travel overseas and want to stay connected to family and friends. It can make and receive calls and SMS in more than 200 countries. The whole range of gotalk prepaid products including mobile, Broadband and even its Roaming SIM, gotalk Global, all use the same recharge voucher.

Ms Hamacher says while currently phone cards make up 80% of the gotalk group’s sales and 20% is for gotalk prepaid mobile recharges, the company expects new innovations and services to deliver huge growth in the next 12 months.

All in all, it’s very exciting – and potentially very, very profitable – time for C&I outlets to be analysing and reviewing their telco product offer. The growth to date through this channel has been spectacular and, the ever growing importance of mobile communications technology to increasing numbers of consumers, means it is likely to continue to be so for many years to come. As far as C&I outlets are concerned, this innovative and fast-moving category should be pressing all the right buttons.