Australian Convenience Store News

When ASS&CSN looked at the phone card business in September 1998, its value at retail was thought to be $180 million per year. Since then, the prepaid communications business has grown to a staggering $600 million in Australia. About $150 million of that is going on prepaid phone cards and around $400 million on mobile cards.

Phone cards began with stored value cards which could be inserted into Telstra pay phones. Customers liked them because they didnít have to fiddle with coins. Vandals didnít like them because they had less reason to demolish the pay phone and dash with the cash.

What are the Products?
In the last couple of years the industry has moved to remote access technology, which means that phone cards can be used on any phone, at any time and in any place. To place a call, the customer dials a pre-set number (usually a 1-1800), keys in their PIN numbers and then dials the number he or she wants to call. With mobile phone cards, the customer keys in a code that appears under a scratch panel on the card. Telstra also has prepaid cards for home phone services, suitable for shared households and prepaid cards for Big Pond internet access.

Prepaid cards can be used for local and international calls; so can mobile cards, provided that the mobile phone will work in the designated country and the service provider has a facility there.

There are also post-paid phone cards. These operate in a similar manner to the prepaid card, with the exception that the cardholder receives a monthly account. These cards are said to be particularly popular with business people and heavy phone users.

"A good sized convenience store can easily do $2,000 a week in phone card sales," said Andrew Ayoub, Managing Director of Prepaid World Pty Ltd, a company which distributes all of the leading calling card brands nationally, including Vodaphone, Optus, Telstra, One.Tel and the recently launched Lime City.

Lime City is a One.Tel product that boasts very low rates on local and international calls. The One.Tel calling card an be used both as a calling card or as a mobile phone recharge card and was launched just before Christmas.

"I know of a couple of tobacconists who are selling $7,000 worth of phone cards every week. At average margins of around 20%, thatís a big contribution to profit," Mr Ayoub said. "But at least fifty per cent of our business is going through service stations and convenience stores."

Fiona Jackson is Marketing Manager for Global Card Services, an Optus subsidiary, which markets Optus product as well as its own "Ratesaver" brand. These cards come in multiples of $10, $20 and $50 and, like other prepaid cards, can be used on most touch phones.

Whoís Buying Them?
"The appeal of prepaid cards is that customers know upfront what theyíre spending," Ms Jackson said. "And they are especially good for people travelling because a call can be made on the rates applicable to the card, not the rates charged by the hotel youíre staying at.

"While adults in the 25-35 age group tend to carry a mobile phone with its own service account," she said, "over 40ís are tending to go with prepaid cards and kids from eleven years of age to young adults in their early twenties are tending to opt for mobile cards.

"But itís hard to generalise because there are so many different cards being marketed in many different ways. In the lead-up to the holiday period, we saw something of a price war, with a number of suppliers pitching for the lowest per minute rate," she said.

"I think heavy price promotion is particularly targeted at the backpacker market, which is very rate sensitive. Older users tend to opt for brand strength over rock bottom rates. So the brands you stock at your convenience store should reflect your regular customers as well as your passing trade.

"But you can over do it," Ms Jackson said. "I sometimes see newsagents with half a dozen or more flags flying over the shop, each with a different phone card brand. Choice is great, but too much choice is confusing to the consumer and I think retailers would be better off sticking with just one or two suppliers."

Simon Proctor is a Group Manager with Telstra Retail. Telstra is a key player in the phone card business.

"This is an slightly unusual segment for us," said Mr Proctor, "because we donít have a direct relationship with the end users like we do with our other customers in the fixed line market. Although there are a number of channels of distribution, calling cards are overwhelmingly a retail product and service stations and convenience stores are an important part of the business.

"Competition in the business is fierce and retailers as well as consumers need to be aware of what they are actually getting when they buy phone cards. In a market that is often driven by headline prices, people need to look before they buy"

Mr Proctor said that, unlike most other cards, Telstra had had untimed local calls. On some Telstra cards there are additional features like free access to voicemail, credit card refresh and refresh through Westpac ATMs.

Are You Stocking a Good Range?
"Australians have adopted this technology very quickly," Mr Proctor said. "but we havenít seen the rapid rise of promotional cards here that we have overseas. I think thereís plenty of room left for innovation; weíve even heard of the development of disposable mobile phones."

Janine James of Pracom Limited says: "Some of our service stations are achieving bankable dollars of over $25,000 per year from this category alone. The stores that become a known destination for these products in their community are enjoying great profits".

The rapid adoption of this technology is reflected in the fact that phone cards are now on sale almost everywhere. And everybodyís buying them from the very young to the very old.

"This is a product that people expect you to have in stock," said Andrew Ayoub. "If youíre not stocking a good range of cards, youíre losing business."