April 27, 2004 11:57 AM PDT
7-Eleven rings in cell phone service
The convenience store giant on Tuesday began selling its Speak Out cell phone service in 1,400 stores and announced plans to offer the phones in the majority of its 5,300 stores by July.
Speak Out is a prepaid phone service, so the phones come loaded with a finite number of minutes that can later be renewed. Consumers aren't required to sign a service contract. About 11 percent of all U.S. cell phone users are currently on prepaid service plans.
"Our goal is to be in every market and in most of our stores," said 7-Eleven spokeswoman Margaret Chabris.
While once thought to be a farfetched strategy, several nationally known retailers are expected to launch cell phone services under their own brands in the coming year. Strategy Analytics market analyst David Kerr said he has made a friendly wager that Wal-Mart Stores will be the next giant entrant to sell wireless phones under its own brand. Other candidates are Costco, Kohl's and Home Depot, he said.
It's not that big of a jump for many of these retailers, which already offer other company's prepaid phones and minute refill cards, analysts said. "7-Eleven has been selling prepaid services and prepaid top-up cards for several national carriers for some years now," said Cliff Raskind, director of wireless enterprise strategies at Strategy Analytics. "Why shouldn't they take a more direct approach to the market?"
Because they don't require a contract, the services are expected to be popular with teenagers, as well as those without sufficient credit histories--who make up 20 percent to 25 percent of the U.S. population.
U.K. entrepreneur Richard Branson pioneered the "mobile virtual network operator" concept two years ago with the launch of Virgin Mobile USA. The company bought airtime and phones from U.S. carrier Sprint, then stocked its stores with inexpensive phones that came preloaded with a certain number of minutes. Virgin also didn't require a contract. It has since sold hundreds of thousands of phones.
7-Eleven hired Dallas-based start-up Ztar Mobile to manage the service and provide two Nokia handsets, the post-rebate $90 3560 color phone and the Nokia 2260, which is $50 after rebate. Minute refills cost between $25 and $100.