Retailers should be pleased to carry phone cards. After all, they represent a brand new category with high gross-margins, high gross-profit dollars and minuscule shelf space.
But chain officials in various retail segments also note that the category hasn't surged as much as some proponents initially anticipated. They stress the importance of manufacturer support -- not just in terms of promotion, but in education for both consumers and store employees.
Arnie Ross, marketing manager at Fay's Drug Stores, Liverpool, N.Y., said he interviewed several major telephone companies before going with Frontier's Call Time card. He cited the supplier's "education process, which we couldn't do alone."
Ross said he looked beyond pricing. "You need service if the consumer has trouble using the card, and service for stores if we have trouble with supply." This, he added, can involve nothing more complicated than a toll-free number that is answered -- not always the case with some companies -- and efficient follow-through.
Frontier helped Fay's put together a customized pamphlet "in lay language" that served as a consumer handout on the advantages and savings of phone cards. To educate retail staffers, the supplier did a live closed-circuit TV broadcast and followed it up with a training kit.
"More people are becoming familiar with what a phone card is, so this eases the chore for employees," Ross commented. Fay's sells the cards at checkout because people at the service desk wear too many hats and thus aren't able to give full assistance with phone-card questions. "If we've done our job right with ads and POP, questions can be quickly handled at the checkout," Ross noted.
Manufacturer support is also stressed by Jerry Haight, vice president of marketing at Downey, Calif.-based Thrifty Oil Co., which operates gas stations and convenience stores. "The most important manufacturer support is POS or reducing the cost of calls for promotional periods. The latter really induces trial," he said.
Haight likes phone cards because they're virtually the highest-ticket item in his stores. The chain carries the SmarTalk brand. "Even though we don't sell a lot of them, they have high gross-margin and high gross-profit dollars."
Thrifty Oil's distributor handles employee training. Each employee receives a card to try out prior to the sessions. Then a trainer comes in to review what the cards are all about.
Haight said he believes it will take a while for the phone-card category to reach maturity. "For such a new concept, the consumer needs education and word-of-mouth," he said. To minimize theft concerns, Thrifty merchandises SmarTalk cards on a plastic three-card hanging display behind store checkouts.
The chain's prime customers are Hispanics, which Haight keys to Thrifty's southern California locations, making the cards "an easy way to call home."
Phone cards have become a "pretty good" item at Store 24, the Waltham, Mass.-based convenience-store chain. Steve Ferrera, executive vice president for marketing and operations, said sales were slow to build because a phone card is such a small item, necessitating point-of-sale and employee education.
Ferrera said cards work better in urban rather than suburban locations since a number of low-income people either don't have phones or phone credit cards. College markets are also big. Consumers, in general, have become more aware, inquiring about such matters as rates per minute, Ferrera said.
He added that a big advantage of his supplier, Sprint, is that it stays on top of operational procedures, including inventory management and card activation, and kicks out data on sales per store, triggered by POS activation. "It's better to have a good margin with a reliable company than a high margin on a fly-by-night product," Ferrera said.
One supermarket operator that has enjoyed success with phone cards is the Milwaukee division of Oklahoma City-based Fleming Cos., in no small part because the cards feature Green Bay Packers legends. Said advertising director Ron Henningsen, from Sept. 1, 1995, to last July 1, 35,000 cards were sold from courtesy booths, preferred over checkouts since checkers don't have time to explain the cards.
Stores near campuses do well with the cards, although Milwaukee low-income units are a mixed bag, said Henningsen, whose supplier is Synergy Group, Brookfield, Wis. "In small towns, some stores consistently order because kids use them, and husbands call when away," he commented.
A $6.99-for-30-minutes promotion began in July and runs through Christmas, with Henningsen noting that the cost per minute has dropped considerably in the past year because of competition.
Grand Union, Wayne, N.J., has moved into using prepaid card vending machines for $10 and $20 denominations. L. Andrew DePaolis, vice president of advertising and sales promotion, called this easier for the consumer since waiting is eliminated.
In general, DePaolis said, "cards aren't exactly electrifying the supermarket industry, but they're a nice convenience item. They seem to do better in college areas but have made modest progress otherwise, except for spikes in such gift periods as back-to-school and holidays."
A few chains market cards in two store locations. Montvale, N.J.-based A&P sells Sprint's Spree card at checkout and the Western Union card at service centers. "We're just testing the two options," said Mike Rourke, senior vice president. "There's nothing about a particular card in a particular location regarding type of sales."
Rourke added that consumer use of cards is not yet as strong as he thinks it will be down the road: "It will take time to grow."
