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How to Start a Cell Phone Store - Part 2
continued from Part I
To read How to Create Your Own Cell Phone Store Part 1, click on the link.
Getting Familiar with the Lingo
To get yourself more familiar with the business of cellular phones, here are some lingos that you'll be using on a daily basis. It'll be nice to have a command of the lingo to sound like you are an experienced professional in this business.
Accessories include anything from cases, Bluetooth headsets, chargers, and cell phone protectors. There are many different accessory suppliers available for you to use in Step 10 of this guide. You will need to contact them, and setup an account with them to purchase what you need. Accessory margins are usually very good, where you can sell something that you buy for $0.50 wholesale for anywhere between $7-12 retail at your store. However, eBay is a competitor when it comes to accessory sales because there are merchants out there that sell it for a huge discount.
Activation is the process of getting your phone active and working. You will start out with a phone that is "dead" in your inventory, but through an online or telephone activation process, you assign the phone a phone number. Activations process is almost immediate, taking only a couple minutes for the phone to start working. Whether you are working on a contract phone or a prepaid phone, the process of getting the phone to work is called an activation.
Add on is a term used when you are adding extra features to the regular phone activation. An add-on can be anything from a text message package, Internet package, to a BlackBerry add. Up selling extra features on to the postpaid phone sale is called an add-on. When you do an activation via the phone, an activation rep will often times ask you, "would you like any add-ons?" during the activation process. Know what they are talking about?
Anytime minutes are minutes you use during the course of the day that are not nights and weekend minutes or mobile-to-mobile minutes. Anytime minutes usually start around 6AM, and lasts until 9PM. They are the minutes that you use during this time. The standard single line plan may include 450, 900, or 1000 Any Time minutes for $39.99 per month.
Bluetooth technology allows you to connect your phone to another device without any wires. It is a short range wireless technology. Bluetooth technology is often used for headsets or connecting to a laptop to sync your data.
Carrier is a standard term to describe cellular phone companies in this business. Major carriers are AT&T, Verizon, Sprint, Alltel, and T-Mobile. There are also many prepaid carriers that exist as well.
Cases are protective casings that one would use to put over your phone, or use it to store your phone while you are on the go. Cell phone stores often up sell to their customers by offering cases to their customers. There are very many accessory dealers around the United States that offer a wide range of cases, from plastic, leather, to rubber. Shop around to see what kind of cases will be appealing to your customer base.
Chargeback are commission repayments that occurs when a customer cancels service their cell phone service prior to their contract being up. Usually for an indirect dealer, there is a chargeback period of 6 months or 180 days. Hence, if your customers cancel prior to this period is up, you will need to repay the commission back to your carrier. You can remedy this situation by making your customers sign a second contract that will allow you to charge a fee if they cancel during this period.
Chargers are another popular accessory items designed to recharge the cell phone battery. Almost all accessory stores offer chargers for sale, and they can be either the wall chargers or the car chargers. Costs of these chargers are always very low at a wholesaler, but be sure to check its quality, since many of the chargers can be of low quality.
Churn is an industry term used when a customer switches cellular phone companies after their contract is up. Churn is unfavorable to a carrier, and they want to see a low churn ratio from the customers that you activate. Churn is bad for carriers, but usually good for you as you can earn a higher commission promoting churn to your customers. This is the biggest conflict of interest that the carriers have with their indirect dealers.
CDMA stands for code division multiple access and it is the standard network technology that many carriers use. The major carriers on the CDMA network are Sprint and Verizon. Also the MVNOs that are under Sprint and Verizon also use CDMA.
Co-ops are advertisement money that you can obtain from your master dealer or your carrier to help promote their brand as well as your store. Upon making consistently good sales for a given carrier, they can provide you with some or all of the money for you to use to advertise their brand in your local newspaper, magazines, or other medium. Always ask for co-op money, and use this as a leverage to try and increase your commission from a carrier.
Coverage is the amount of reception you can get using a given carrier. All carriers have a coverage check tool that you can use to check a customer's coverage area prior to you activating that line for your customer. Doing a coverage check insures that your customers have coverage in their area, and they will be satisfied with your service.
Data plans are add-on features such as Internet, Text Message, or BlackBerry plans. They are often called data plans as opposed to a voice plan. The phone section is the voice plan, and these other features that involve more data transmission are called data plans.
Dealer lines are nice perks that you can get as you activate a good number of lines consistently at your store. Dealer lines provide you with a great number of minutes and features for a tremendous discount. It is intended for you to try out and get familiar to a carrier's services so that you can effectively communicate their service benefits to your customers.
Dealer perks are benefits you gain as a dealer selling a carrier's services. Carrier run dealer perk programs include dealer lines, co-ops, reward programs, and providing you with collateral for your business. Master dealers also provide you with dealer perks in the method of contests, free phones, and party events that you can provide.
ESN number is the equipment serial number used by a carrier that uses the CDMA network. Each phone inventory will have a unique ESN number that will identify the phone. You use it during the activation process to identify the phone you will be using to activate the phone. For GSM technology, it is equivalent to the SIM number.
Equipment is a lingo used to refer to the actual cell phones. It is often used to refer to phones that are still in inventory, but can be used for live phones as well. It is often used when speaking to a wholesale dealer or the warehouse manager about the phone they may carry.
Hands-free is synonymous to hands-free headsets. Accessory dealers will use this term frequently when referring to their headsets in stock. When they refer to hands-free just remember they are talking about their headsets.
GSM stands for Global System for Mobile communications and it is considered the most popular form of technology throughout the world. GSM phones are great because they can be brought to another country, and can be used right away. European customers can come into your store with a phone they used in Europe, and as long as you switch the SIM Card and at times its Mhz setting, they will be able to use it here in the United States. GSM technology requires you a phone and a SIM card to get it to work. In the United States, major carriers that use GSM technology are T-Mobile and AT&T.
An IMEI number stand for International Mobile Equipment Identity and it is a unique serial number assigned for each GSM phone. Although IMEI is needed in the activation process for identification and record purposes, it is not as critical as the ESN number for a CDMA technology. You will see that the IMEI number is collected by the carrier often for record keeping purposes. Even if you have the wrong IMEI number or no number at all, you can still activate a GSM number as long as you have a SIM number.
Master dealer has been described in detail in earlier chapters. They are the dealers that work directly with the carriers to serve indirect or sub-dealers like us. To become a Master Dealer, you will need to hit approximately 300-600 activations per month. A master dealer can own its own stores or solely serve sub-dealers to sell activations for them.
Mobile to Mobile
Mobile-to-mobile is calls made within the same carrier. So if a customer with a T-Mobile phone call another customer with T-Mobile, the call is considered a mobile-to-mobile call. Often times, mobile-to-mobile calls are free, though at some carriers, you will have to pay to add on the mobile to mobile feature. M2M plans work well if you have a big family, and they all use the same carrier, or if you talk with a group of friends a lot having the same carrier will reduce the costs for everyone involved.
Nights and Weekends
Nights and weekend refers to the free minutes that a carrier will provide to their customers. Most of the major carriers offer free nights and weekends, but the start time of the night minutes may differ between carriers. Most carriers define night minutes as anything that started after 9PM. Some carriers sweeten the deal by defining night minutes as anything that start after 7PM.
Overage minutes are any minutes that you incur after you have used up the Anytime Minutes in your plan. Overage minutes can be extremely expensive, and it is normal for carriers to charge $0.45 per minute for each overage that a customer has. Overage charges are usually the biggest reason of customer complaints, and at the same time it is one of the biggest profit centers for the carrier. Be sure to advise your customers to check their minutes often by using the self service options available on the phone or via their online accounts.
Porting a Number
Porting a number means to switch cellular phone companies. A person can port a number to a new carrier, and this will count as a new activation for you. Porting a number can be done from another cellular phone, and also from landlines, prepaid phones, or at times IP phones. Porting a number from a contract phone to a prepaid phone can be disallowed at times. In the business, you often call it a simply as a "port."
Post paid phones are contract phones. If a customer signs a 1 or 2 year contract to obtain a phone for free, you have just activated them on a post paid plan. Post paid activations are the main priority of your business, and they are the money makers for you. You can get a decent commission for a one year contract, and at times, a one year contract can be better for a customer. It is however, standard to do a two year contract for each of your customers. Carriers like it, you get a higher commission, and a customer gets a better phone. It's a win-win to do a 2 year contract.
Prepaid phones are no contract phone where you pay upfront to get service on them. Prepaid phones have been relatively trendy in recent years. The reason for their popularity are because a customer may not be approved for a post paid phone due to credit issues, a customer may not want to sign a contract, a customer may be elderly and don't need to use the phone very much, or a customer may be from a different county and do not have a social security number. Although prepaid phones are not going to be your major profit center, there is always a need for prepaid phones at your store. You can also get residual income from the air card sales that will occur on a regular basis.
SIM Card stands for Subscriber Identity Module and it is a smart card that you need to activate a GSM phone on. SIM card number is the equivalent of an ESN number for CDMA technology. Without a SIM card number, you are unable to activate a line for service. SIM cards are used for GSM phones, and the great thing about them is that by switching the SIM card to any GSM phone, you will be able to instantly use it. Some customers may come in to purchase the SIM card only because they may have bought their phone already on eBay for cheap. Customers like this are a great source of profit because you can keep all of the commission profit for yourself without having to deduct it for the inventory costs. Master dealers are very strict on using SIM cards purchased from them because that is how they track your commission.
Spiff is extra commission you can receive for performance of a certain activity. Most of the time, spiff is obtained for attaining higher activation figures then before. A carrier may also provide you with Spiff to promote increased sales or a sale of a particular phone or a feature. Spiffs play a big role in determining your commission and profit, so always understand the criteria involved in obtaining the spiff. The carriers like to come out with different criteria all the time for you to earn your spiff. If your master dealer is not providing any spiff, be sure to inquire about them so that you can earn more money. Some master dealers that we've dealt with kept their spiff to themselves, so watch out for that kind of activity.
Share plan is the industry term used to describe family plans. As a consumer, we know it as a family share plan. In the industry, they like to use the term share plan, because essentially a family plan is a group plan that shares a batch of minutes. To be a share plan it doesn't necessarily have to be a family. It can be a group of friends, a business, or other organization of people sharing a batch of minutes within the group. The carriers have this idea, so they refer these plans as share plans more frequently than a family plan.
Sub-dealers are dealers that work under a master dealer. Sub-dealers are also known as indirect dealers. They differ from the direct channel which are store outlets owned directly by the dealers. Sub-dealers are at times also called VAR or Value Added Reseller. A VAR is more specified then a sub-dealer in its niche that it can pursue. If they have access to a select group of people that no other dealers or carrier can get to, a sub-dealer maybe considered a VAR.
Upgrades occur when a customer is out of contract or almost out of contract. The customer would like to obtain a new phone, retain the same carrier, and extend their contract another 2 years. Upgrades will not be a great source of revenue for you, and some dealers even send their customers to a direct channel store to do upgrades. Upgrades are a good source to find customers and get referrals out of. You can always explore the options with the customers, and possibly assist them with adding a few features for you to make it worth while.
Voice plan is the "phone" part of the customer's monthly plan. It is contrary to the data plan. On a regular plan, you have the voice plan and the data plan. This fact is nice to know when you are talking with a customer service rep at a given carrier and you need to reference a certain plan with them.
Now that you have a good idea on the "lingo" in the business, it is now time to talk about the details involved in the activation process. The activation process is required mainly for the contract, post-paid phone activations. Prepaid phone activations are a lot easier to do, and many stores let the customers go through the activation process. That being said, here are the activation processes involved in a post-paid activation.
- Application and Signatures
- Credit Check & Approval
- Phone or Online Activation
- Dealer Contract
Application and Signatures
Once your customer decides on the phone they would like to get, the first step is for them to fill in the carrier approved application form or contract with you. The contracts will be provided by your carrier, so you do not need to worry about creating it yourself. It is usually a legal sized sheet with carbon copies available for you, your customer, and the carrier.
The most critical thing here is that you do need to ID the customer by obtaining a copy of their social security card, driver's license, or other government form of identification such as a passport. The customer will fill in their name, address, phone number, social security number, and driver's license on the application form.
You will need to explain to the customer about a few points where it requires them to either initial or sign the contract form. Some items such as the term of the contract, features, insurance decline, and agreement signature should be explained with the customer to obtain their understanding, and protect yourself if they come back later to dispute anything.
The application form is relatively straight forward, so you should not have too much problems with it. You may want to highlight some of the absolute necessary portions prior so that your employees and your customers will know where to fill in. Doing so tends to make the process much speedier.
Credit Check & Approval
After the customer has filled out the application form, it is now time to call in or use your online activation tools to do a credit check for your customers. The activation rep on the phone or the online system will tell you if the customer got approved for a line or not.
If you have access to the online activation tool, some carriers have recommended applying for the maximum amount of lines possible for the customer. Some customers may not know that they can get approved for 10 lines. You can apply for 10 lines, and they may get all 10 or maybe 5 lines. By letting your customer know that they were approved for 10 lines will make them feel good, and possibly come back again to activate additional lines at a later time. Should you apply for 10 lines, and they get approved for only one line, just tell your customer that they were approved for the one line, and everything is good to go.
In cases, where a customer is not approved, there are usually options. You can activate them on a pre-paid phone or a special program that some carriers offer for people with bad credit. They also do have the option of paying a security deposit to get the line approved. Security deposits depend on the customer's credit rating as well as the carrier's policy on security deposits. Security deposits usually range from $150-$500 per line.
Phone or Online Activation
Once you clear the credit approval situation for your customer, the next process is the actual activation for the customer. At this point, you will need the SIM Card/IMEI number on a GSM phone or the ESN number on a CDMA phone. You will need to enter that information online or tell it to the activation rep over the phone. Ask ahead of time of area code the customer will like to get so that you can get them a phone number in that specific area code. If you have the online activation tool, and the customer is in front of you, you do have the option to get them an area code of their preference as well as the first three digits of their phone number. Many customer like to get a phone number that they can easily remember, so letting them choose is another way to provide excellent customer service.
Once the phone number is assigned, and activation is completed, you may need to program the phone. GSM phones are usually activated without any programming, while CDMA phones usually require additional activation by calling into the carrier's automatic activation system. The activation is usually instantaneous taking less than 5 minutes, but in rare occasions, it may take up to 2 hours to fully activate a line.
After the phone has been fully activated, the online activation tool will allow you to print out a contract form again with their phone number and a place for them to sign. It is good practice to print this out, and getting it signed by your customer one more time for your safety. If activation was done over the phone, the original contract form will be sufficient.
In addition to the contract that was produced online, you will need to get your customer to sign another contract that is independently supplied by you. This contract will protect you against any chargeback should a customer decide to cancel their service prior to your chargeback period defined by the carrier. The chargeback period is usually 6 months or 180 days, and if a customer cancels their contract prior to this period, you will owe the entire commission back to the carrier.
To protect yourself from this unexpected event, you will need to get the customer to sign a second contract that will allow you to charge their credit card should they cancel their service within 180 days. The contract will allow you to charge the customer the amount of commission that you have to give away, or a set amount that you choose to draw should there be a cancellation by the customer. The contract will usually state that you will charge $250-300 per line should the customer cancel their service prior to the chargeback period. You must do this to protect yourself from any chargeback by the customer.
Be sure to get the customer's understanding about this, and explain it well so that they understand. You are in business, and if they cancel prior to the chargeback period, it will mean that you are giving away the phone for free to them with a huge loss on your part. Make sure that the customer knows that if they cancel their service prior to 180 days of the activation date, they will have to pay the early termination fee of $175-200 with the carrier and another $250-300 from you. It is a big amount, so you will need to explain it in detail with them to obtain their understanding.
A copy of the dealer contract can be found on the next page. Keep in mind that this is only a sample, and it should be modified accordingly to meet your situation.
Sample Contract Between (Dealer) and (Customer)
Here is a sample contract form that you may consider using for your store. Be sure to modify it for your needs and consult a lawyer should you feel it is necessary to keep your interests protected.
(Customer) has agreed to provide a promotional payment to (Dealer) for each qualified Authorized User who purchased a wireless telephone from (Dealer) and contracts with (Customer) to use their service and continues to use (Customer) continuously and uninterrupted for 181 days. The promotional payment enables (Dealer) to sell below mentioned equipment to the Authorized User at a purchase price, which is greatly reduced from the actual selling price.
Accordingly, (Dealer) and Authorized User agree as follows:
- Purchase the below mentioned phone equipment from (Dealer)
- Enter in to a service agreement with (Customer) for phone service.
- Use service for at least 181 day consecutively and uninterrupted.
- Remain on the original airtime rate plan or higher selected when service was established.
- Pay all wireless phone bills in full and on time.
- To hereby grant (Dealer) a security interest in the lien upon the below mentioned telephone equipment to secure the Authorized User's financial obligation to (Dealer)
In addition, Authorized User states that they have not had service with (Customer) in the past 365 days.
Should the Authorized User breach or cancel the agreement or otherwise discontinue service with (Customer) before 181 days of continuous and uninterrupted service, the Authorized User, upon request of (Dealer) to pay (Dealer) the sum of three hundred dollars ($300.00) immediately. The payment covers damages incurred under this agreement, including reasonable attorney's fees, and the loss of the below mentioned promotional payment.
I HAVE CAREFULLY READ THIS CONTRACT AND AGREE TO PAY MY WIRELESS PHONE BILLS IN FULL AND ON TIME. I FURTHER AGREE NOT TO CANCEL MY SERVICE OR CHANGE MY RATE PLAN TO A LOWER PLAN FOR ANY REASON, INCLUDING THEFT, DAMAGE OR MALFUNCTION, DURING THE FIRST 181 DAYS OF SERVICE. IF THIS CONTRACT IS BREACHED I AUTHORIZE (DEALER) TO CHARGE MY CREDIT CARD AND HEREBY PROVIDE AND IMPRINT FOR THAT PURPOSE.
Credit Card Type:
Authorized User Name:
Phone Type: ESN/SIM#:
Signature of Authorized User:
*FOR REFERENCE PURPOSES ONLY*
Continued on to Part 3
I'm not sure if HubPages has a limit on the number of words you can publish on a given hub, and I can't seem to post my next section on this hub...
So it'll be continued on to the next section.
Also, if interested, you can find the master dealer list here.