MVNO - food stores

Phones and Food - What's the Connection?

Recent news that the convenience store food chain 7-Eleven is expanding its MVNO service beyond the U.S. and Canada - first to Taiwan and now to Singapore - caught our eye this week. It's just the latest entry in a long line of food stores offering phone service (see the list below), and it got us thinking about what the MVNO model needs to succeed. Even as content-oriented MVNOs have fallen by the wayside, and high-spending MVNOs have either failed or been merged away from their pure approach, simple prepaid phones, SIMs and cards seem to be working just fine for grocery stores across the developed world:

• Tesco based in the U.K., with branches in Europe
• Aldi based in Germany, with branches around the world
• Auchan in France
• Carrefour ranging across much of Europe
• Kroger in the U.S., Canada and elsewhere
• Plus several other smaller examples

In each case, the food store has emphasized cost savings, simplicity or both for its base brand offerings, and it has tailored the phone service to match. High-end handsets generally are not offered, and customers don't get to do much with pictures, video or live multimedia content: They just phone and text at prices close to the bottom of the market. Certainly, these are low-end customers who are unlikely to attract the MVNO players that are providing the access and other services needed by these branded operations. But the match has real synergy on a number of levels:

• People who like to save money usually like to save money on everything.
• Staffing costs for these simple prepaid phones are nonexistent for the food chains, which compares favorably to the costs of dedicated staff at major-carrier kiosks. Similarly, follow-up customer care is minimized by the fact that it is a simple, low-end service, and customers who come in to shop for food twice a week will have little trouble finding the customer service desk with any questions or problems they have. Alternately, they can make use of call centers in the manner of other MVNOs, run by the network operator or run independently.
• Low-end phones, SIMs and prepaid cards can be bought or topped off in an off-the-shelf fashion, such as for the store's other products.
• Unlike many other retail MVNOs, those associated with large grocery chains have the distribution network to really challenge the carriers in terms of convenience and reach.
• Again, as a result of their size and scale, grocery store MVNOs may not need to move up the value chain, because mobile service margins already compare favorably to margins of many kinds of food, and the incremental cost of stocking these items is fairly low.

While we have yet to see any MVNO really challenging for market leadership (and we don't think any ever will), it's very likely that this version of player could have a long "shelf life," to abuse the phrase. What will be truly interesting is to see whether any of these chains exploit the potential for synergy with customers who use their phones and buy their food. The opportunities to gather data and effectively cross-market are both obvious and substantial, and there is some evidence that folks would be less resentful of a marketing attempt through their grocers than they would be of the carriers behind them. Here is where most chains will likely need substantial assistance to execute properly, with either the MVNO or an MVNE. Either of those partners will also need to develop their listening and partnership skills in order to craft out a mutually beneficial exchange.