"This is a new and significant trend and shift in the way telecommunications services are marketed," said Jeffrey Kagan, president of consultancy Kagan Telecom Associates. "Retailers love it because all of the sudden they have a new product to sell."
PRE-PAID CELLULAR TAKES OFF
Among the newest products to hit the market is the pre-paid cellular phone. AT&T Wireless, Bell Atlantic Mobile, BellSouth Mobility and Omnipoint in recent months have found success with pre-paid cell phones that allow a fixed dollar amount to be spent until the phone is "reloaded" with more minutes.
The forerunner of these new efforts was the pre-paid calling card, the first and most popular retail product so far. Pre-paid calling cards generate $1.5 billion a year in revenue and are expected to grow to $3 billion in the next few years, according to analysts' estimates.
Retailer 7-Eleven is aggressively promoting several telecom services, including pre-paid cellular minutes, pre-paid local service, pagers and paging service. The retailer is working with PageMart Wireless and L.A. Cellular Telephone Co. (controlled by AT&T Wireless and BellSouth Cellular).
The convenience-store chain will roll national with its pre-paid cell phone service by the fourth quarter, and is testing pre-paid local telephone service in Texas and Florida.
"We are very aggressively looking at ways to bring those kinds of services to our customers,' said Mark Hagen, category manager at 7-Eleven.
With a customer base that's more male than female and a high percentage of blue-collar workers and minorities, 7-Eleven is second only to the U.S. Postal Service in providing services such as money orders. This is the target the pre-paid programs are intended to serve, Mr. Hagen said.
SUCCESS AT RADIO SHACK
Sprint Corp.'s deal last fall with Tandy Corp.'s RadioShack to put Sprint telecom services has helped boost same-store sales by double digits each month for the past 5 months, said David Edmondson, senior VP-marketing and advertising.
About 5% of Sprint's consumer long-distance sales will be from retail in 1998, up from less than 1% in 1997, said Terri Morrow Tansey, assistant VP-emerging markets.
"Every customer has different needs, and retail is the best place for us to showcase all of our products," she said.
Sprint, which also uses other retailers including Circle K and Kroger Co. to sell pre-paid cards, is expected to announce within the next month two new relationships: one for pre-paid cards and another smaller deal similar to the one with RadioShack.
FROM BLOCKBUSTER TO WAL-MART
MCI Communications Corp., which sells pre-paid cards via Wal-Mart Stores and other retailers, made its first push with long distance and Internet services last summer at Blockbuster Video. Customers who sign up for the service at Blockbuster receive four free videos and get an additional free rental for every $25 spent with MCI.
"We would certainly like to take this successful model and move to other retail establishments," said Jeffrey Grosman, MCI's director of partner marketing. "Retail is an important channel, but the key is to find the right partners."
BellSouth is the first telcom to sell second phone lines, packaged in boxes, off store shelves. Through retailers including Kroger and Office Depot it offers the TeenLine Pack, and coming soon are packages for home office, families and Internet access.