Mobile Phone Distributors - What You Need To Know!

Mobile phone distributors are a critical part of a prepaid wireless provider's success!  Are you interested in becoming a cell phone distributor?  Here you'll learn about what it takes to be a wireless master agent, how it works, the technology involved, and more!  The fact is that the world of mobile phone distributors is fascinating, and can be the life blood of many wireless carriers.

What are cell phone distributors?
First, let's define what exactly a distributor is and does.  Different people will have different definitions and describe various scopes of responsibility, however, generally speaking the following points are very consistent.  Having worked directly with prepaid wireless distributors for many years, I feel comfortable that the following information will help you get jump-started on becoming knowledgeable!

• Distributors are often referred to as master agents.  This is because they are at the top of the so-called distribution food chain.  What that means is that while a distributor or master agent may sometimes sell phones and airtime directly to customers, they typically mostly sell wholesale to dealers.

• In turn, dealers have their own stores, but also sell wholesale to smaller stores.  Sometimes there is even a sub-dealer level between the dealer and the store level.

• A cell phone distributor will buy phones and airtime discounted directly from prepaid wireless carriers.  They will then mark up the price and sell it down to the next level.

• Mobile phone distributors can have relationships with dozens, hundreds, or even thousands of stores beneath them.  The layers under them are often referred to as their sub-distribution.  Depending on the size, reputation, and policies of a prepaid wireless carrier, some wireless distributors won't be able to work directly with a prepaid carrier.  In other words, as a wireless distributor, you could have a direct relationship with a prepaid carrier, or you may have to work as a sub-distributor under another larger master agent who is working directly with the carrier.

What's the best level?
This can become a very personal decision.  Are you the type of person who wants to run a large distribution network, and deal with the operations, collections, and warehousing that comes along with that?  Or are you the type of person who enjoys working day to day directly with the customer?  The answer will likely be a combination of what you enjoy, as well as what are your strengths and capabilities.

There's no doubt about it that the higher you are on the mobile phone distributor food chain, the more money you'll make, and the faster you'll make that money.  The simple reason is because once you have a network of sub-distributors and stores, you'll be able to sell hundreds, or even thousands of phones in one deal, versus the bottom of the chain, where you'll be selling one phone at a time to the customer, which practically speaking, will simply take more time.  But for that apparent ease, you'll have more overall risk.

Consider if you were to buy 10,000 phones from a prepaid carrier.  If you don't have the operations in place to receive and ship out those phones in an efficient manner, it could take you some time before you get the products in the hands of those who will actually be selling them.  And that doesn't include the cost of paying for the phone (or topup) inventory, and the cost to store it.  Many prepaid carriers require that distributors prepay for inventory.  Some will give you payment terms (ex. net 10 days or 30 days), however, that is becoming less common these days.  Even with payment terms, you'll still need to get the product out, and get paid in time to pay the carrier for the inventory if you want to minimize your cash flow outlay to support your inventory.

As a side note, I've seen more than a few mobile phone distributors selling millions upon millions of dollars of phones and airline who have been extremely cash-strapped, and on the brink of bankruptcy!  One operational issue, or trouble collecting money from your sub-distribution, and you're toast!  But don't let that scare you off.  Those issues really come down to poor management, and perhaps greed, trying to grow their business too quickly.  If you're wise, you should be able to profitably (and safely!) build your business without being on the edge of financial disaster.

What do you need to become a wireless distributor?

• Relationships - You'll need to have relationships with sub-dealers and/or stores.  In my opinion this is the most difficult part.  Building relationships with other dealers or stores is not easy.  It takes a certain kind of person to seek out such opportunities and to sell your services.  Due to the amazing potential to make a lot of money in the prepaid wireless distribution business, competition is fierce!  You can target a specific neighborhood, type of mom and pop store, small convenience store, etc.  Think about where people might want to buy a phone or topup their prepaid wireless account.  Also consider what unique value you can add.  Do you have special knowledge, insight, or existing relationships with a specific type of community?  This should be considered a critical success factor, and will largely determine whether you should be a master cell phone distributor at the top of the chain, a smaller one, or somewhere in the middle.  There's really no "wrong" place to be.  Wherever you fit in, and can apply your passion, you'll have a chance to succeed!

• Access to Technology - Depending on where you are on the food chain, you'll need to have technology to process airtime sales.  Usually the master cell phone distributor will provide access to technology to partners below them, so lets assume you're at the top for the moment.  You'll need to partner with a Technology Service Provider (TSP).  TSPs also have relationships with prepaid wireless carriers.  The larger ones will have direct relationships, while the smaller ones will have indirect relationships.  The closer they are to being direct, the more money you'll likely be able to make (due to higher available margins).  There are a number of technologies currently available, and depending on the dealers/stores that are selling your prepaid products, you may need one or all of these:

• POS Terminals - These are Point Of Sale Terminals that typically look like credit card terminals.  They can be used to sell electronic PINs (ePINs) or to perform PIN-less Real Time Replenishment (RTR) transactions.

• Web Terminals - These are secure websites that provide the same products as do POS terminals, but can be accessed via the Internet, without the need for special hardware or equipment.  Internet access, however, IS required.

• Hot Cards - This product has been phased out of the market.  These require minimal or no technology, and can often be purchased directly from the carrier or master distributors.  The operational and fraud risks around this product lead carriers to get rid of it; I keep it here as a historical reference, and you may encounter people who talk about it even to this day.

To read about these technologies in detail, visit the Point Of Sale Technology page.  As a cell phone distributor you'll need to get a very good understanding of these replenishment technologies so you can sell your services to dealers and/or stores.  You may only need one of them or all of them.  Remember that you need to keep in mind the needs of YOUR customers (dealers and/or stores), as well as what the end users (wireless customers) need and prefer.  Believe it or not, these are not always the same things!

Special Note:  Depending on how large you are, as well as your relationship with your TSP(s) and sub-distribution, you may be able to get these technologies from free, you may have to buy them outright (ex. terminals), or you may be able to lease them.  Depending on where your business lies in the food chain, you may be able to pass any costs down to your sub-distribution.

• Money - You'll need to either have cash on hand, or access to money from banks or investors.  You'll need this money to pay for technology, warehousing, staff, and of course, prepaid phones and prepaid airtime.  Although people tend to worry the most about getting money, I put it last because it really is the easiest part of the equation!  If you have good relationships and access to technology, you're well on your way to building a successful cell phone distributor business, and finding the money will be the easiest part!

Continued - Wireless Master Agent

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