Rapid growth in the sales of smartphones, notebooks, and tablets has created new opportunities for channel pros serving the SMB market, even though the business of reselling carriers’ mobile devices, voice, and data plans can be problematic at times.
Demand-wise, in the United States, smartphone sales alone are expected to grow from 67 million units in 2010 to 95 million units in 2011, according to a 2011 report from Gartner Inc. And the small business component of that market is currently underserved by the major carriers, “because they can’t afford to assign direct salespeople to businesses that activate less than 50 lines,” according to John Lauer, head of Manomet Computer Associates, a Clinton, Mass.-based IT firm that has been reselling devices, voice, and data services since 2003, and currently activates smartphones for major carriers.
On Making (And Not Making) Money
While this presents opportunities for channel pros to step in as value-added resellers, the market comes with its own set of challenges. For starters, reselling mobile devices and plans is typically not a high-profit business, notes Lauer. In a stocking-dealer relationship with a carrier (such as Manomet has with T-Mobile) the dealer/VAR keeps devices in stock and sells them to customers at deep discounts. The carrier then pays the dealer an activation commission some 60 days after the end of the month in which the deal is finalized.
In not-unusual situations where commissions are in the $300 to $400 range, but discounts on high-end devices can exceed $300, “you’re making something like $50 per transaction, which is not very profitable,” says Lauer.
To complicate matters further, customers can take delivery of these discounted devices and then cancel service or not pay their bill prior to commissions being paid, to the detriment of the VAR that sold the device. This situation is obviated somewhat when dealing with Verizon, Sprint, and AT&T, Lauer says, “where devices are ordered at the customer’s best price and delivered activated directly from the carrier, and you [the VAR] have no position in the hardware.”
New Source of Help?
The challenges Manomet faces are not unusual, according to Greg Parsonson, vice president of client systems and mobility product marketing for Tech Data Corp., the Clearwater, Fla.-based technology distributor.
“It has been a big challenge [for channel pros] to work directly with each different carrier to determine the appropriate voice and/or data plan, and then the associated piece of hardware, when they are onboarding a new customer,” says Parsonson. Meanwhile, given the commission structures of the carriers, “it can also be a challenge to determine exactly when payments are going to be made.”
Tech Data has joined Miami-based wireless services/solutions provider Brightstar Corp. in a joint venture that provides VARs with a single source of mobility devices and services for their business customers in the form of a Platform as a Service, or PaaS, dubbed TDMobility. Along with helping VARs with activations and renewals, TDMobility provides data services, software, hardware, accessories, technical support, billing management, asset management, and training and installation services.
Launched on a limited basis to Tech Data customers in the spring of 2011 and set to go market-wide this month, TDMobility positions itself as a distributor that comes between resellers and a list of carriers that, as of press time, included AT&T, Sprint, and T-Mobile, with discussions under way with Verizon.
“We alleviate the need for the reseller to have to deal direct with the carrier, and all the problems associated with that,” Parsonson says. In particular, he adds, when it comes to commissions, “We work with the carriers to ensure that the customer is paid on day 30.”
Participating resellers wanting to move beyond simple activations and data-plan sales, meanwhile, can take advantage of TDMobility University. Graduates of the program, which offers training in all aspects of mobility sales, can access a “demo pool” of what now numbers about 100 devices, according to Heather Murray, Tech Data’s director of mobility product marketing, “where they can get a demo unit to play with to help them decide if it is the type of product they want to provide to their customers.”