Prepaid Convenience store.

The Convenience store is so many things to so many people...from buying milk to razor blades, diapers to lottery tickets – one thing comes to mind – I need that products and I need it now. However, one product range outpaces pretty much all of them put together - that of telecommunications and particularly the prepaid cell phone segment.

Right now if you happened to walk into a convenience store you would find everything from a wide range of calling cards and mobile phone recharge options to handset packages and VOIP starter kits – and this bleeding edge technology is available at your friendly convenient store.
The question is, how did we get so far so fast...
It's been estimated that the typical aged prepaid consumer is under 33, but this is not the case in all locations. One of the biggest networks in Australia - Telstra believes this demographic makes the convenience channel ideal for selling many of its products. The abundance of locations also helps in allowing customers a quick and easy drop in.
Prepaid customers choose convenience

The major Australian Carriers (Telstra, Optus and 3) offer prepaid mobile recharge products in both a physical card and a virtual voucher. The business model for store owners is music to their ears. Generally speaking when a store owner sells a product he has physical inventory – he has paid for that product and his money is sitting now in a physical good – often with a use by date stamped right onto the product.

An indepependant study In June 2005 estimated that some 47% of mobile users were prepaid, and this number is expected to grow to shoot past the 50% mark by April 2008. These percentages mean big demand and for store owners – the simple economic equation of demand and supply rings loud. When a prepaid customer uses all of her minutes – juts like gasoline – the phone needs gas...this drives many repeat purchases of prepaid minutes at the store level.

When virtual recharge kicked off – the business model was music to the store owner's ears. No stock, no excess inventory, no sell by date, no out of stock, no product training for store staff – just on the fly fulfilment according to the purchasers needs – whomever the carriers, whatever the recharge value...what an idea!!!

Gavin French – a convenience store owner is Sydney Australia commented "When I was approached to put an electronic voucher terminal into my store I was bowled over at the sheer benefits. I don't know anybody without a cell phone these days and the fact that I could supply this market in a no risk manner really got me excited".

Generally speaking the margins are low on reselling airtime however the convenience store owners is in a winning situation because when a customer drives in for a litre of milk and a newspaper – the sale of $30 worth of Optus top up air time, generates a positive blended margin product assortment.

The carriers are supporting the store operators by allowing them to use their segmented advertising campaigns of their products, with point-of-sale material and in-store promotions to further drive demand.

The success of prepaid cell phone products at the store level has opened the door for further products to be added to the product assortment including prepaid credit cards, prepaid music, prepaid gift cards, prepaid games and more to come including prepaid utilities such as electricity and water.

C-Stores set to benefit from rising opportunities

In today's world as compared to five years ago, the wireless Cell phone serves a multitude of purposes...

With the arrival of the 3G network, consumers with "3G enabled" handsets can experience a wide range of benefits such as: sending and receiving email; internet access to - news updates, getting the latest score, checking your favourite stock price; music downloads ringtones, video clips; and watching an episode of the Sopranos' while on the bus home.

3G services however, have not grown dramatically rather are growing organically. The move to acceptance is happening day by day- the trend and tide is building and by 2010, it's been predicted by industry pundits 50% of Australia's mobile subscriber base will migrate to 3G. A key element to the critical mass equation will be handset pricing and the mix between post-paid and prepaid .Optus has been quoted as saying that they remain committed to their strategy of maintaining market share, managing their costs and investing for serious growth. Optus has recently expanded its prepaid Turbocharge products to offer a broader range of prepaid capped plans.

Vodafone Australia is another of the major Australian Telco players that emphasizes the key role of convenience store in the future of mobile phone recharge.

When a customer goes to buy milk or sugar, that customer could very well be a Vodafone or Optus customer as well, and the carriers see huge value in being able to touch them at the point of purchase of every day household items. Currently, Vodafone offers recharge packs in convenience stores and all recharge vouchers were sold in an electronic transaction, whereby customers register their recharge via Vodafone's customer care centre.

You either going forwards or backwards...

Incremental sales are the Holy Grail in the prepaid industry price erosion and increased competition demand players to always increase sales.

A day is not too far off when the convenience store will start challenging the speciality telecom store for market share.

Gavin French remarks "I never ever thought I would be selling Telco products let alone grabbing market share from speciality stores – it was just never in my business plan setting out"

The prepaid product offerings will continue to grow – it was recently announced that prepaid broadband will become a major growth area for the internet network suppliers.

Pre- paid long distance calling cards has hit a certain level of maturity and VOIP access through prepaid broadband offers an attractive defensive positioning.

Calling cards however will not disappear – by no means – from humble beginnings in the "traveller or a backpacker" community these cards moved firmly into the mainstream in late 1998"

Convenience stores will still sell physical long distance calling cards because some customers prefer to have something they can actually put in their wallet.

Techno Innovation = Big opportunities
An informed store operator is a powerful maven in today's high pace, completive landscape.
The old saying holds true even today – KNOW your customer and by focusing on what their customers seek out and purchase operators can substantially increase profitability and per customer profitability. The carriers are powerful, well funded, marketing machines and by working with them to further segment and drive repeat purchases Convenience store operators are definitely in the Pound seat.
The carriers offer such a big range of products and by knowing demand trends operators can give more shelf space to targeted products and, the higher the quality of the point of sale material, the less time he or she will have to spend explaining how it all works to the consumer. Win - Win.
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