Smartphone Retail: Investor Intelligence
Jane is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Will the negative publicity about the low wages, no-commission policy, and extreme expectations at Apple (NASDAQ: AAPL) Retail, which sells the iPhone, cool the love affair with the brand? Could it morph from cult identity to social-value liability like Wal-Mart?
That could happen. Encounters with the smartphone on the front lines of retail - as consumers, sales representatives, and/or job applicants - have evolved into a kind of universal experience. That’s a lot like the phenomenon of television when the small screen became the medium. It shaped perceptions of value, from the stock of CBS to that of advertisers like Procter & Gamble. During 2011, IDC estimates, 491.4 million smartphones were sold worldwide. From the best restaurants in Manhattan to the aisles of the dollar stores people are consumed with their smartphones.
Based on that “craze,” there can be, at least, short-term assessments of value about the companies behind those front lines of retail. The game is changing too fast to even think longer term. Interestingly there are also fascinating ripple effects. For example, because of the success of the Apple retail model which he helped launch J.C. Penney (NYSE: JCP) chief executive officer Ron Johnson has borrowed some practices. One of them – ending commissions in some departments such as jewelry and shoes - might not turn out to be a best one for Penney. Media, including influential Business Insider, are ridiculing the continual changes, including this one on commissions. The Penney stock, at $22.56, is near the 52 week low of $21.57. The high had been $43.18.
Moment of Truth Encounter One
At distressed Best Buy, it’s no surprise that no sales representative greets the customer, at least not me when I was in the store. Perhaps because their employment might be short term, the front lines, mostly composed of Generation Y, seem more focused on socializing with each other than concern with the customer. AT&T (NYSE: T) zeroes in on this factor. In its post-purchase survey it asks how long did it take for the sales associate to do that. That was immediate when I went to its North Haven, Connecticut branch on Universal Drive, which has been several times. At Verizon (NYSE: VZ), in the same shopping center, that was also instant when I accompanied Baby Boomer friends to return iPhones and androids and cancel two-year contracts. At Staples (NASDAQ: SPLS), across the street from Verizon, the third-party sales rep, employed by Wireless Advocates, never ventured out from the mobile phone store within a store. However, doing that is part of the procedures taught in the training. The stock is at $12.74, near the 52 week low of $11.94 and far from the high of $16.93. At Apple retail, the sales wizards acquired the magic touch of seeming to be always available without being intrusive.
Moment of Truth Encounter Two
The second moment of truth in these seminal retail encounters is the approach during the actual purchasing process. Leaders Apple, AT&T, and Verizon have sales reps so well trained that they are confident enough to listen. The quality of the training could be a significant variable. When I applied for (and didn’t get) a part-time smartphone selling position with AT&T, even for that there was a month of in-person full-time instruction. The part-time sales position I was hired for (but dropped out of after the third day of training) for Wireless Advocates had about a week of in-person full-time instruction. The leaders’ retail has been packed. Staples’ mobile store within a store never has been when I was there. During random visits from November 2011 until the present, I only witnessed two phones being purchased.
Moment of Truth Encounter Three
The third key indicator is what goes on post-sale. Verizon’s front lines don’t seem to try to preserve the sale in a return situation. Depending on the customer that could be a plus or a minus. If the return is within the terms of the contract, they will simply take it back and that’s that. For overwhelmed customers, especially Baby Boomers like my acquaintances, that was wonderful. They had tried smartphones and had decided to downshift back to dumbphones. However, sales and a long term relationship could have been sacrificed by not discussing more suitable products and service contracts. With AT&T, managing the whole customer relationship seems to be center stage. After all, in addition to smartphone contracts, the company also is making plenty of revenue through subscriptions to DSL lines and businesses which still need those pricey landlines.
Since April 2012, I have been in the AT&T North Haven branch about five times. Those primarily have been associated with problems experienced because of the Nokia Lumia 900 hardware, Microsoft Windows 7 software, and/or the reality that I am a digital immigrant. Whatever. Both the sales reps and manager pulled out all stops to keep me a customer (although I probably had ceased to be profitable). Last week the manager allowed me to replace the Nokia with an iPhone, waiving the restocking fee. The partcular sales consultant took the time to tutor me in the basic features. To my surprise, my chubby Italian 60+ year old fingers eventually were flying on the keyboard. Of course, my positive word of mouth about AT&T has become downright aggressive.
In the future, however, the quality of the sales force could recede in importance when assessing the value of the particular company. What could dominate are the terms and conditions that the current wireless carriers provide consumers. At the top of the list are the pricing per se, particularly the policies regarding data, and the length of the contract or rather the existence of any contract.
The playing field could reconfigure as competitors such as Sprint Nextel provide lower-cost no-contract services through WiFi or some combination of that and wireless. That option, which Sprint has made possible through its partner Republic Wireless, whose parent is Bandwidth.com, could become the new game-changer.
janegenova has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Staples. Motley Fool newsletter services recommend Apple and Staples. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.