this is BB stock..qcBroadening the base
POSA helps prepaid telecom providers expand their retail presence
By Scott Cullen
Executive Summary: As more prepaid telecom providers reach out to larger
retailers, being able to offer a point-of-sale activation (POSA) solution is
becoming more critical. It’s clear that providers who don’t jump on board
the POSA bandwagon may get left behind.
Mike Herold, president of Cell Cards, a Chicago-based distributor of prepaid
telecom and point-of-sale activation (POSA) products, knows a good thing when
he sees it and when he sells it. Herold, who was in the check-cashing
business – and still is – was turned on to prepaid telecom when a reseller
dropped off some prepaid phone cards two years ago.
Customers snapped up the cards as fast as he could stock them. His ability to
think outside of the box and beyond the cards inspired him to take this
infatuation with prepaid telecom to a whole other level. Rather than just
reaping the rewards of cards sold in his business, he became a distributor
himself, convincing other check cashers and retailers that there was gold in
prepaid telecom.
Identifying and seizing an opportunity are second nature to Herold. After
learning about POSA, it was only natural that Cell Cards begin offering this
capability to its clients. The company began installing QComm POSA terminals
in client locations five months ago. It now has more than 300 systems up and
running and another 300 to 400 in the works. Although most of Cell Cards’
initial POSA customers have been check cashers, Herold reports that clients
encompass all the usual suspects weaned on traditional prepaid phone cards –
convenience stores, pawnshops, rent-to-own stores and gas stations.
An expanding market
While POSA still requires a push to get it into most retailers, pockets of
the retail community are pulling for it. "Retailers are becoming familiar
with other retailers (who are using POSA) and are demanding it," says John
Hickey, marketing director for QComm, a provider of prepaid
telecommunications products and information services that specializes in
POSA.
Retailers may still be in an early adopter stage, but what Hickey calls the
"early majority" is fast approaching. Most retailers implementing POSA are
those who have already been selling traditional prepaid telecom products.
"Retailers who are phone card savvy like the product," adds Carl Saling,
president of Clariti, a Philadelphia-based provider of telecommunication
products. "People who have never sold them before need more education."
Considering that POSA is still an evolving technology, there’s plenty of room
for growth. Providers, resellers, agents and carriers all agree that once
retailers understand the benefits of POSA, the market has no place to go but
up. And once additional POSA products and services are rolled out, retail
outlets will function as the ideal venue for reaching a broader demographic
than those typically served by traditional prepaid products.
POSA’s benefits
You don’t have to sell Herold on the benefits of POSA. He’s seen them first
hand. One of the benefits he cites is the ability to provide customers with a
broader range of products and services beyond the traditional prepaid phone
card, such as prepaid wireless and prepaid dialtone service.
By implementing a POSA system, inventory can be reduced or eliminated
altogether, increasing the retailer’s cash flow. Because POSA prepaid
products are not activated until sold, merchants don’t have to pay for their
virtual inventory until the customer purchases the product and the card is
activated. POSA also allows for automatic replenishment, prevents stock
outages and reduces shrinkage from customers and employees.
Customized reporting is another huge benefit. CTW Prepaid is a company
focused on automating the distribution of phone cards. Mark Rubenstein, the
company’s director, touts the reporting capabilities of POSA. He sees POSA
providing merchants with a better idea of what they are selling and when they
are selling these products.
The bottom line, in Rubenstein’s view, is that POSA provides information. "We
can take that information and drive the sale of phone cards," he says. He
suggests retailers can sell 30 percent more phone cards just by encouraging
clerks to ask customers if they’d like a phone card at the point of sale.
However, to make this happen, Rubenstein believes incentives such as contests
are necessary – with the POSA system administering the contests.
Resellers and agents who are offering POSA to retailers also are reaping the
rewards. Not only does it help them protect their current business, it
reduces service by as much as two-thirds, according to QComm’s Hickey. With
traditional prepaid products, resellers might visit a retail location weekly
to restock. With POSA, Hickey says, visiting a store to check inventories and
to restock is no longer necessary, which means resellers could limit visits
to once every three to four weeks. "This helps resellers build their business
faster," says Hickey.
While Herold agrees in concept with Hickey, he emphasizes that this is a
relationship business and that POSA doesn’t mean that resellers or agents
should be calling on clients any less. Visiting customers ensures that
signage promoting POSA products is still prominently displayed at the retail
location, that new clerks in a revolving-door environment know how to use the
system and that the retailer is informed about new POSA products and
services.
Carriers also are catching on to the benefits of POSA at retail in terms of
increased distribution. Hickey notes that the carriers QComm has partnered
with are doing so because of QComm’s existing POSA network. He expects
carrier interest to grow as more begin to promote their prepaid products
nationally. Herold has found little resistance to POSA as most of the
retailers he’s encountered understand the benefits. "It’s been an easy
sell," he says. "All the guys who believed me are making money."
Obstacle course
In a perfect world, retailers would be clamoring to POSA en masse. So why are
only 20 percent of retailers using POSA? Some are hesitant to take on another
technology-oriented device or don’t want to get involved in training staff –
no matter how simple the system.
Rubenstein sees the inability of POSA providers to fully comprehend the
retail environment as a barrier. "The weakness in many systems is that they
are proprietary to the phone card industry instead of being incorporated into
the merchant’s processing system." This boils down to a lack of counter space
for dedicated terminals, which Rubenstein cites as the biggest objection he’s
encountered from retailers. He feels POSA systems should integrate with
existing equipment, but concedes this isn’t realistic in many cases.
Another obstacle Hickey sees is the ACH (automated clearing-house) function
of many POSA systems. Some retailers are unsure of systems that deduct funds
from their bank account whenever they sell a POSA product. "It’s a matter of
trust," Hickey says, who adds that these retailers are concerned about the
ACH malfunctioning and cleaning out their accounts. "Overcoming this fear is
the biggest issue," he says.
Clariti’s Saling also has found some retailers leery of POSA’s ACH
capabilities. "Once we upsell the benefits, they don’t have too big a problem
with it," he adds.
The enhanced reporting capabilities of POSA, which many consider one of its
best benefits, concerns some smaller retailers, particularly those who
habitually take prepaid telecom profits and pocket them rather than report
them. But that’s an area few in the industry want to broach in an interview.
By and large, Hickey feels that fewer and fewer retailers are concerned about
reporting issues. "Retailers are becoming familiar with other retailers doing
electronic reporting and are demanding it."
Tech talk
POSA generally involves technology at the point of sale – whether it’s a
POSA terminal, cash register, credit card terminal or printer – that allows
for two-way, real-time communications to activate the card. Depending on the
type of system, the type of customer and how many locations, implementation
can be a simple process or a complicated one. It all comes down to having an
infrastructure and network in place.
While POSA offers retailers a litany of benefits, standards are virtually
non-existent, leading to a wealth of providers with a dearth of proprietary
systems. What’s needed, according to POSA technology consultant Steve Frazee,
are neutral systems that can handle all types of products. He’s confident
that this model will play out in the long term. "In the end, it needs to be
easy for the consumer and the clerk."
Clariti’s POSA system can either be a host-to-host connection or operate
through the merchant’s Visa terminal. Saling notes that larger retailers with
multiple locations and a centralized processing system typically implement a
host-to-host system while smaller retailers typically opt for the Visa-based
system, since it’s already in place. "Retailers want a turnkey system they
don’t have to mess with," says Saling.
Proprietary or not, most existing POSA systems are easy to use. QComm’s
Hickey says that operating a POSA system is no more difficult than using a
fax machine. Frazee agrees. "The technology isn’t hard," he says, adding that
if retailers can do debit and credit card authorizations electronically, they
can handle POSA.
Picking up the tab
Implementing POSA requires an up-front investment, but who foots the bill? Is
it the retailer, the reseller or the provider? It all depends, although the
retailer is usually the one left out of the equation.
Hickey estimates costs of $400 to $500 per unit at the low end and about $800
at the high end for a POSA terminal. If a reseller has 1,000 stores, that’s a
lot of money invested in POSA terminals. Rubenstein sees the distributor
footing the bill, although he is aware of exceptions where retailers are
picking up the tab. Frazee believes implementation should be considered part
of the cost of providing the retailer with the service.
Some providers and resellers are placing POSA systems with retailers under a
minimum sales agreement. For example, Cell Cards doesn’t charge its retailers
for the box as long as they hit a pre-specified gross sales target.
Otherwise, they pay $6.95 a week for the terminal.
Ultimately, Rubenstein believes that the quality of service will have the
greatest impact on POSA’s success at retail. Getting the terminals into
retail outlets, servicing them, training store personnel, providing an array
of products as well as following up with the retailer are essential in his
estimation. "This is not an easy business," says Rubenstein. "It’s highly
service oriented and personality oriented. Anyone who thinks they can put it
together, sustain it and maintain it is highly delusional."
Nor does POSA mean an exponential increase in the number of prepaid phone
cards sold. At least according to Cell Cards’ Herold. "The machine doesn’t
facilitate a sale, it’s a method of distribution."
Rubenstein is a bit more optimistic as to POSA’s impact on prepaid product
sales, but emphasizes the importance of merchandising. "Telecom products need
to be properly merchandised," he maintains. "Merchandising is the best kept
secret in the industry. No one is doing promotions to stimulate phone card
sales." According to Rubenstein, the trick to selling 30 percent more phone
cards is simply getting the clerk to ask customers, "Do you need a phone
card?"
Future focus
While some in the industry believe that the future of POSA at retail
transcends prepaid telecom, others feel that prepaid telecom products will
always be where the bulk of the action is. QComm’s Hickey sees it
successfully branching out to prepaid gas, car washes and Internet access,
although he maintains prepaid telecom will continue its reign as the leading
POSA product.
Herold is not as enamored of prepaid Internet. "The typical prepaid customer
isn’t on the Internet as much as we think, or they are finding another way to
get on," says Herold. He sees the prepaid POSA market evolving to prepaid gas
and prepaid utilities. Clariti’s Saling sees a wealth of new opportunities on
the horizon, including gift cards and debit cards – both POSA products that
Clariti will be introducing soon.
Hickey believes prepaid wireless offers the largest POSA retail opportunity.
No wonder, industry estimates size up the current market at 10 million
subscribers – a figure estimated to grow to more than 30 million by 2004.
Considering that prepaid phone cards sold at retail top out at $20, prepaid
wireless products could top out at $200. "That’s the equivalent of selling
ten times the maximum prepaid phone card," says Hickey, explaining why he
thinks retailers are poised to make a killing with prepaid wireless.
Frazee, who views POSA as a subset of electronic services, envisions a future
where retailers will stock virtual products that will be acquired via POSA.
As a result, retailers would maintain a zero inventory on certain products
and services. Customers might pay bills via POSA or pay for an item they
acquired via an online auction at retail locations using the retailer’s POSA
system. "These systems will help drive the convergence between bricks and
clicks," predicts Frazee.
Retail ready
As retailers look at new ways to strengthen their bottom line, POSA is
positioned squarely at the forefront of the new products and services they’ll
be providing to customers in the future. Sure there are technical issues that
need to be addressed, but that’s to be expected, considering POSA is only at
the beginning of its evolutionary curve.
Meanwhile, industry pundits such as Frazee remain optimistic that technical
issues will eventually be resolved. "All these things will eventually
converge, and someone will understand that this has to happen in an
intelligent way," says Frazee.
When this occurs, the smart money will be on POSA for expanding the customer
base for prepaid telecom products as well as other types of products and
services within the retail sector.
http://www.intelecard.com/features/May_POSA.htm
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