Cellular Profit
Tedeschi Food Shops is taking the consumer trend for cell phone and electronic accessories all the way to the bank, building a destination in-store for the high-margin items
Consumers' insatiable appetite for technology, from the BlackBerry and iPhone, to the iPod and Kindle, continues to increase with each new gadget released to the market. Along with each gadget, an unending supply of accessories inevitably follows, and savvy retailers in the c-store space are capitalizing on the high-margin trend â offering a supply of car chargers, earbuds, cell phone cases and Bluetooth devices.
"People ask: 'Why would somebody come to a [c-store] for that?' but you see people come in who say, 'My cell phone battery just ran out, and I need a charger,'" said Mike Turco, category manager, overseeing the grocery, general merchandise, prepaid, publications and HBC categories at Tedeschi Food Shops, based in Rockland, Mass., and operating 189 corporate and franchised locations in four states. "Our No. 1 store for cell accessory sales is on an interstate where we have a lot of truckers."
A year ago, Tedeschi decided to test a wire rack program with mobile phone accessories from Mizco International in 10 stores, offering car chargers, cell phone cases, cassette adapters, Bluetooth devices and more. Mizco brands such as Cellular Innovations, Digipower and iEssentials came from Garber Bros. Inc., a local distributor supplying the products to the chain, and today, more than 100 stores offer the products, with plans to roll the program out chainwide.
"We look more for quality than price," Turco said. "If customers buy a product that only lasts a couple of uses, they won't come back. Our company has been in business since 1923, and our customers have built a trust in the products we sell, so it was important for us to find a company that is respected in this type of business. Mizco has been around for 20 years with Cellular Innovations."
The biggest sellers in electronics accessories, which Tedeschi segments out under the general merchandise subcategory of telecommunications, are the cell phone, BlackBerry and iPod chargers, as well as earbuds and Bluetooth devices. The accessories category accounts for up to 4 percent of the telecommunications category, and cell phones have always been a big seller for the company, said Turco. Last year during the holiday season, the stores offered a combo rack with cell phones and Bluetooth devices, offering the option of a camera phone, and it sold so well the chain is planning to offer it again this year.
"We started selling Bluetooth devices in November, and then we ran the combo promotions from Thanksgiving through January, and it did very well," he said. "We were very happy with it, and we plan on doing it again."
The company carries two price points on cell phone hardware, "which is very attractive to consumers," Turco explained. "In urban locations, we are known for our wireless products."
While the company started with cell phones in the late '90s, the stores also sell a lot of PIN-based products, including minute plans for $10 or $50 worth of cell phone minutes, along with gift cards and reloadable cards, Turco noted. Tedeschi also is in the process of developing a destination in-store for all of the products to be offered in one section, which should be rolled out by the end of this month.
"We will have a prepaid wireless section with cell phones, accessories and prepaid cards. It will be in a high-traffic area, either the front end or on an encap where someone would notice it when they enter the store," said Turco, explaining it will be roughly three feet wide by 3½ feet to four feet tall. "Right now we have a rack with 24 spots to hang product from a peg, but the new section will increase the space and also encompass related products."
Based on the surrounding demographics, each Tedeschi store decides which products to carry from the electronics accessories line. For example, some of the college area stores might also stock flash drives, camera memory cards and SIM cards, while others only carry chargers and Bluetooth devices. However, once the destination stations are ready, more products will be sold in each store, Turco noted.
"Right now we have them in racks on the sales floor or behind the counter in the prepaid section," he said. "Part of the 10-store test was deciding where we should display the items. We decided the sales floor is the best spot because people want to test them and try them out. In some high-security areas, the product on the floor isn't live until it is brought to the register."
One of the biggest benefits to Tedeschi is the products are "guaranteed sells," said Turco. If he puts them in a store and the products don't sell, Mizco will either take them back or put them in another store. "They also guarantee it will fit your phone, and they stand behind their products 100 percent," he noted. "If it's defective, we give the customer credit, and the company reimburses us."
Best of all, the prices of each item at Tedeschi stores are comparable to other stores, and the margin ranges from 40 percent to 50 percent, depending on the distributor, Turco said.
"Success is based on location, and while some took off right away, others picked up with the summer influx," he noted. "But as time goes by, and people know we offer these items, we are starting to see more and more products moving."
For comments, please contact Tammy Mastroberte, Executive Editor, at [email protected].
Bottom Line
- Tedeschi Food Shops sells cell phone and iPod chargers; earbuds; and Bluetooth devices.
- Combos of phones and Bluetooth devices sell very well during the holiday season, and products offer a 40 percent to 50 percent margin.
- The company is planning to expand the section to include all prepaid offerings in one section of each store.