There may be a cell phone in every pocket, but the trend in the wireless industry is moving away from a store on every block.
An extreme example of this is Helio, a new cell phone service directed at young, tech-savvy users, which is about to open its first storefront in Manhattan. Helio, which boasts features like access to MySpace.com and a global positioning system that tells you if your friends are nearby, is looking to open an Apple Store-type flagship. The company has secured 2,300 square feet of selling space at 622 Broadway off Houston Street and expects to open its doors in the coming months.
Unlike Verizon, which has stated that it wants to be within five minutes of every consumer, Helio is an example of a broader trend towards the consolidation of cell phone stores.
“We’re not looking to be for everybody. What we want is to be spot-on for our clientele,” said Rick Heineman, Helio’s director of communications. That clientele is young people, 15 to 35, who are “looking for a very high level of connectivity,” according to Bill Melville, senior managing director at Lansco Corp., who represented Helio in the lease negotiations.
Helio’s first store in New York joins its four other stores around the country, in Denver, Los Angeles, Palo Alto and San Diego. “There’s been no indication that there will be franchise stores,” Melville said of Helio’s business model.
Flashy corporate stores
Heineman said his company is trying to break the mold for an industry whose traditional approach he labeled as “stale.” The new Helio store is “where people walk by, where people go,” Heineman stressed. Everything from the location to the product design will reflect Helio’s efforts to build a brand that is “the latest, the greatest, the most tech-savvy,” he said.
Many brokers interviewed agreed that the entire industry is pulling back from its rapid expansion of the last few years, and many companies are focusing their energies on fewer, but bigger, stores.
“What’s happened in the cell phone industry is things have consolidated,” explained Richard Hodos, principal at Madison HGCD. As an example of consolidation, Hodos cites Best Buy’s launch of Best Buy Mobile.
As cell phones are sold more and more at large retailers, Hodos said Best Buy will be able to provide the access to far-flung customers that franchisees used to. “The dominant players will squeeze out the little guys,” he predicted.
As the technology booms and cell phones develop more functions, “companies are going to be much more proprietary about their stores,” said Jeffrey Roseman, executive vice president at Newmark Knight Frank Retail.
A larger web
Not every company is following suit, however. If mobile phone companies are supposed to be cutting back on their stores, no one told Verizon, according to David Samberg, a public relations manager for the service provider.
“We have a feeling that some people will never walk into a Verizon company communications store,” he said, so they plan to continue to aggressively market their phones with franchisees, which may be smaller and more local in focus, but must sell only Verizon products.
“The goal is to have a Verizon location within five minutes of every customer,” he added. Still, Verizon’s store growth has slowed since the company’s first store opened in Manhattan in 1996. In 2000, Verizon had eight stores in New York City and grew to 27 stores by 2004. The company currently has 34 company-owned stores in the five boroughs.
The business model is similar to AT & T’s, “to have as many points of distribution as possible,” said Ellen Webner, spokeswoman for the company, which recently bought Cingular.
The services have merged and will soon operate solely under the AT & T name.
AT & T currently has 22 company-owned stores in Manhattan and more than 1,000 additional points of distribution that include other retailers like Best Buy and Wal Mart. It is planning to add 10 new company-owned stores in the area in 2007, up from three last year.
Even at franchise stores, the trend toward the creation of more impressive stores is reverberating throughout the industry. “The look of an authorized agent is changing,” Samberg said. “They’re often as impressive as company-owned stores.”
Just as Verizon uses its company-owned stores to show off its technology and services — by displaying its phones’ capabilities on flat-screen televisions and providing technical support, bill payment and sales services — authorized agents are amping up their look to compete.
As the expanding technology makes the market more competitive, “small stores just don’t cut it anymore,” Samberg said. “Authorized agents who are successful are much more polished.”
Better tenants
All this sprucing up of stores is making cell phone companies more attractive tenants. Roseman said that while landlords may have traditionally feared a franchisee who sold all sorts of phones, the advent of Helio and Best Buy Mobile has changed the face of leasing space to wireless providers.
“It’s still not the ideal use, but with a Helio or a Best Buy Mobile, there’s good credit and better quality of build-out,” he said. “It’ll attract other retailers.
“The traditional franchise user will spend $1,000 to fix up a store. Helio or Best Buy are spending thousands if not millions,” he added. With help from their parent companies, even franchisees may spend more than they have in the past.
Sprint, having recently merged with Nextel, takes a different approach.
Mark Elliott, the company’s communication manager for the northeast, said the company had closed some stores where the merger gave them over-coverage of a certain area.
Next up is a reconfiguration of their stores that will see them devote some locations to sales and others to technical support. This is a departure from what appears to be the industry impulse to consolidate all services under one roof, like in Verizon’s one-stop shopping plan.
Sprint/Nextel is also working on store redesigns to make them “more customer-friendly but also customer-experience friendly,” Elliott said. Elliott talked about a fresher design for stores that would have music and kiosks to test out new technology. The elements reflect what seems to be an industry-wide push to make cell phone stores a place people want to be, rather than simply places people need to be.