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Wal-Mart - The New Wireless Powerhouse?

With the retail environment for wireless phones and services becoming more competitive day-by-day, retailers of all types need to be aware one particular retail behemoth is making inroads onto the wireless space – Wal-Mart.

While other stores such as CompUSA and start-up IMO focus on providing high-end devices and a better customer experience, and while traditional electronics chains like Best Buy and Radio Shack struggle to maintain their share of the wireless consumer market, Wal-Mart has quietly and steadily increased its own share.

NPD’s Mobile Phone Track, which tracks handsets purchased in the U.S. market, shows that in the past 12 months, Wal-Mart has increased its wireless retail share by nearly four percentage points. While this may not seem like a huge number, it translates to millions of devices sold. For example, in the second quarter of 2005, Wal-Mart sold slightly more than one million mobile phones. By the first quarter of this year, there were more than two million devices sold by Wal-Mart. Moreover, Wal-Mart has overtaken T-Mobile company-owned stores as the fourth most popular place to buy mobile phones. Carrier retail stores from Cingular, Verizon and Sprint/Nextel lead the list.

At one time, Wal-Mart customers who wanted wireless had limited choices available to them – just a handful of prepaid offerings. But lately Wal-Mart has beefed up its offering, not only offering more prepaid and MVNOs, but also most notably offering post-paid plans from the major carriers and “cool” cutting-edge devices such as the RAZR.

So why has Wal-Mart managed to see strong growth in just a few quarters? Based on NPD Mobile Phone Track data and other NPD industry research, there are several reasons for this demonstrated growth:

Wal-Mart has given wireless prime placement at the entrance to their electronics departments. Unlike cordless phones, blank CDs or other less-popular electronic staples, mobile phones are placed where there is maximum traffic.
Wal-Mart appears to have trained the personnel working in the electronics section. In fact, on one recent visit to Wal-Mart, I eavesdropped on a Wal-Mart associate explaining to a customer that Virgin Mobile and Sprint PCS had the same coverage, because they both used the same network.
Wal-Mart buys in volume and competes on price. While their prices on devices are only slightly lower than the prices at carrier stores or other retailers, saving a few dollars still matters to millions of Americans.
Finally, it could be said that the fact that Wal-Mart is selling more devices, and different types of service plans, demonstrates the evolution of the wireless market. In a way, it highlights the effect of increased market saturation. The prime target customers, such as business users and consumers in the higher income brackets, have all had wireless phones for many years now. The types of customers left to acquire are those in lower income levels, or older and more price-sensitive consumers.

While Wal-Mart is gaining traction, it remains to be seen how far they can go. For one thing carriers still prefer to acquire customers at their company-owned stores (operators claim that acquiring customers at their own stores generally translates into customers who spend more on voice and data services).

While it is harder for retailers to battle with Wal-Mart – especially on price, and for some communities, in convenience – it is possible for other wireless retailers to compete in the wireless retail space. For one thing, Wal-Mart does not appeal to all demographic groups. Buyers who are looking for a more upscale shopping experience are not as likely to shop at Wal-Mart. In addition, rumors to the contrary notwithstanding, Wal-Mart is still not on every street corner. Most importantly, many consumers still do not associate Wal-Mart with selling brand-name wireless services and devices. This is one idea that may take time to change, which can provide other retailers with breathing room as they consider ways to keep the Wal-Mart retail leviathan from eating away at more wireless market share.

- Charul Vyas, Senior Wireless Specialist