RIGHTING THE BALANCE OF CELL PHONE REPAIR by Wireless Dealer Magazine

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Righting the Balance

in Cell Phone Repair Ed McKinley

Ed McKinley is a Senior Writer for The Prepaid Press, an online publication for the prepaid services industry. To learn more about the relationship between prepaid and repair services, and meet the players, attend The Prepaid Expo, produced by The Prepaid Press: August 22-23, 2017, Planet Hollywood, Las Vegas. Visit www.theprepaidexpo.com to register.

weird imbalance prevails in the cell phone business. On one side of the equation, the stores founded to sell prepaid minutes also repair phones. But on the other side, the shops launched to specialize in repairs usually don’t sell minutes. More specifically, about 80 percent of prepaid stores now double as repair shops, while perhaps 10 percent of the nation’s 15,000 or so repair centers are selling minutes, according to Avi Yosopov, CEO of PhonePartsDistributors.com, a wholesaler of repair parts and used cell phones. Despite their resistance to selling minutes, the repair specialists have been growing in number for the last five to seven years, observes Sean Michaels, president of MaxBack, a company that buys and sells used electronic devices, including phones. That growth shows little sign of abating, he says. Meanwhile, however, the repair marketplace is becoming more confused as big box office supply stores get into the business, says Lee Terkel, vice president of sales and marketing for cellhelmet, a phone accessories supplier. “Things are juxtaposing in all sorts of odd and strange ways,” he observes. The fragmentation of the market also includes incursions by small shops selling that specialize is selling barely related products – like battery stores, notes Matt Roldan, chief customer officer at Sourcely, a company that provides internet services and repair parts to the cell phone industry.

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t’s natural for prepaid centers to offer repairs simply because people walk in with phones that have problems, says Ramin Heydari, CEO of The Preferred Prepaid, a company that provides wireless products and services to retailers.

Prepaid stores are also attracted to the repair business because it represents another revenue stream in an industry with compressed margins on its core products, observers agree. Offering repairs keeps customers coming back and thus reduces attrition, they note.

Embracing repairs;

rejecting minutes

Conversely, repair specialists often choose not to sell minutes even though industry observers admonish them not to turn their backs on an opportunity. “If you’re just offering one thing in your business, you’re really cutting yourself short,” says MJ Nale, who operates an online phone repair school called Phonlab. Repair shop owners often shun minutes because they’re not familiar with the business, says Yosopov. “They’re just not educated in the exact details of how it works,” he adds. That fault lies with a lack of training and support from the carriers and distributors, according to Heydari. Those omissions leave repair shops with a “hodgepodge” when it comes to selling minutes, he says. It might also be contrary to the nature of many repair shop owners to take on a sales role, Roldan says. “A lot of times, they’re repair guys. They’re not business guys,” he notes. “They’re tinkerers. They build things.” Besides, about 90 percent of repair shops operate with only one person working on the premises so spending time selling doesn’t work well, says Heydari. “They’re making $100 on a thirty-minute repair and don’t want to waste time answering the customer’s questions on various prepaid services,” he says. “They don’t see the benefit.”

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In addition, some repair people regard the retail side of the business as a lower-end pursuit that’s lacking in sophistication and is usually confined to poorer parts of town, Yosopov says. “They think of a cluttered, non-corporatelooking store with a thousand different banners in front of it from a hundred different companies,” he maintains. “A lot of people take a step back from that.” Instead, lots of repair people aspire to opening shops in white-collar areas and catering to consumers who have postpaid accounts, Yosopov says. “Do I agree with their decisions?” he asks rhetorically. He answers himself by saying no. Combining repair with selling minutes and accessories makes more sense, Yosopov contends, adding that those who fail to bring together all the elements of the business will be left behind by competitors.

Whatever the volume and whatever the shop chooses as its main function – prepaid minutes or repair – they find themselves replacing a lot of cell phone screens, says Roldan. In fact, screen repair accounts for about 80 percent of the repair business, he says. Remember that it’s mainly component-level repair, cautions Heydari. Hardly anyone in the cell phone stores or repair shops is changing out chips or modifying circuitry, he

says. Ninety percent are module changes – either a speaker or microphone – big components, he contends. Replacing major components that way usually requires 30 minutes to an hour, Heydari estimates. If the shop tells a customer a repair will take longer, it’s just because the shop has a backlog of work, he notes.

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Starting small in minutes

ven though repair shops can place themselves in a better competitive position by offering minutes, they don’t have to break the bank to do it, Yosopov suggests. They can start small by stocking just a few SIM cards, he notes. Once they have that capability to sell minutes, they can begin to strike up conversations about how they can beat competitors’ rates, Yosopov suggests. “Then, ‘Boom!’ they’ve got a sale,” he exclaims. But starting small can result in remaining small, Heydari warns. Repair shops that sell minutes tend to lag far behind in the prepaid category compared with stores that consider minutes their main

reason to exist, he notes. Marketing and location can hurt repair shops when it comes to selling minutes, he says. Marketing and location can hurt repair shops when it comes to repairs, too, cautions Yosopov. In fact, prepaid centers probably perform more repairs than the repair specialists do, he says. “They’ve been around longer and have an existing clientele base that they’ve accumulated over the years,” he notes. Still, some repair shops in prime retail locations handle a lot of repair business – about the same volume retailers achieve, Yosopov observes. Other repair shops pay a thousand dollars a month rent for a neighborhood space and thus have little foot traffic to drive business, he notes. “It really varies,” he says of repair shop volume. “It’s all over the place.”

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Starting a repair shop

eople who aspire to launching their own repair shops often have a computer background and start by repairing phones for friends and family, Yosopov says. Then they see the demand, scrape up some capital and open a shop, he says. Some computer-repair shops simply branch out into cell phone repairs, notes Roldan. Then there are the phone repair-stores that begin working on computers, too. “There is definitely some cross-pollination,” he observes.

Inventory should include screens, charging ports, earpieces, buttons and lots of other small parts, Roldan notes. And the parts vary from model to model. “You need to have a few of everything just to make sure,” he says. Besides inventory, repair shops should have marketing plans, Roldan emphasizes. “You have to know how you’re going to acquire customers,” he advises. His company provides ways of marketing online, he says.

However, it’s easier to enter the phone repair business than the computer repair industry because computers come in a wider variety of models and thus require a larger parts inventory, Roldan says.

Perhaps 20 percent or 30 percent of repair people choose to become franchisees, although no one really know the true numbers, notes Roldan. Of those who do take franchises, some remain low-level with just a few locations while others operate hundreds of franchised shops, he says.

The investment in parts varies for phone repair shops, Roldan continues. It’s tough to say how much inventory the business requires because it differs depending upon location and marketing, he contends. The parts bill for typical repair shops ranges from $2,500 to $5,000 monthly, he says.

A Google search yields numerous franchisors, many with names that conjure medical images. In no particular order, they include CPR, Cellairis, DrPhoneFix, LifeLine, Staymobile, iCare and uBreakiFix. Some entrepreneurs have grown their businesses into regional operations with multiple stores.

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The imperative of accessorizing A

lthough repairs shops often exhibit a reluctance to sell minutes, most show enthusiasm for selling accessories, says Terkel. “You walk into a well-heeled repair shop today, and you will see all of the ancillaries that are sold in wireless,” he says. Customers often wait in the shop for an hour or so for a phone repair, giving them plenty of time to peruse whatever accessories the repair shop chooses to display, Terkel notes. At the same time, prepaid retailers are attracted to the accessory business because their margins are squeezed on activations, renewals and devices, Terkel says. “The profitability of the accessory side of the business is becoming more and more paramount,” he declares. What’s more, prepaid retailers are going upmarket with the accessories they offer as their clientele becomes more middle class as families learn they can cut their wireless expenses by switching from postpaid to prepaid, Terkel maintains. “Chargers, tempered glass – those are going to be their opportunities,” Roldan says of accessories. “The No. 1 upsell in the industry is tempered glass,” he notes. For consumers, a $30 tempered glass shield protects a screen that could cost $90 to $300 to replace. For repair or retail shop owners, the margin comes to 90 percent, he says.

Refurbished phones R

etailers and repair shops alike can profit from selling new-looking older phones with replacement housings and components, observers agree. But getting into that business can prove problematic because suppliers sometimes insist upon large-scale purchases, says Yosopov. Before becoming a parts and used phone distributor, Yosopov entered the industry by opening a repair shop. He wanted to augment his repair business by offering used phones for sale and soon discovered he had three options. First, Yosopov could buy used units from a wholesaler who charged nearly as much as the phones brought on eBay or Amazon and required a purchase of at least 200 devices. Second, he could buy the ten or 20 phones he needed but would have to pay the wholesaler more than the devices cost online. Third, he could simply buy them on eBay or Amazon.

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For distributors, used phones pose risks because they might not sell in time to avoid depreciation, Yosopov says. That danger intensifies when repair shops are buying phones one or two at a time, he notes. It’s also difficult to stock all the many varieties of used phones available in their differing brands, models, colors and data storage capabilities, he says. Meanwhile, many of the used devices in the U.S. are shipped abroad for sale in other countries, says Yosopov. “If you’re able to unlock them, they’re worth a lot more there,” he notes because so many consumers get new phones here. Buy-back schemes provide one way of acquiring old phones in the U.S. and at the same time can subsidize the cost of repairs, says Roldan. For example, a consumer might go into a repair shop and find that a repair to an iPhone 7 costs $250. The shop can offer that customer $100 for an old iPhone 6 and thus reduce the

cost of the iPhone 7 repair to $150, he notes. Shops can fix the trade-ins and sell them to consumersor sell them online or to wholesalers, Roldan says. Some of the old phones they receive are in good enough condition to resell without repairs, he notes. Providing used phones is becoming a core competency of some repair shops, and Sourcely provides an online platform to expedite buying phones from consumers, he says. Meanwhile, companies that specialize in used electronics equipment see an impending opportunity in secondhand cell phones, says Michaels. Until now, most of the equipment his company has handled has been has been in good enough shape that it didn’t need repair. But that’s changing as carriers become more aggressive in their efforts to compel consumers to turn in old phones, Michaels says.

Sometimes they’re offering $200 for trade-ins, for example, which could be more than the market value of the phones, he observes. It’s the carriers’ attempt to gain market share or retain subscribers, he notes. Whatever the goal, that pricing increases the number of phones traded in, Michaels says. But carriers don’t really want to deal with the large numbers of phones that need repairs that will come in as part of the new trade-in policy, Michaels continues. That provides his company with an opportunity to step in and buy the phones that need work. His firm can then make the repairs and sell the devices profitably. With all this emphasis on selling used phones in repair shops, it might seem likely that a move into selling new ones could take hold, too. But repair shops seldom offer new phones to their customers because they’re expensive to buy and to sell Rolden says.

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The importance of repair R

egardless of the approach that repair specialists choose – franchised or not, offering minutes or not – their numbers are continuing to grow and that trend appears likely to continue, Roldan says. “There aren’t any real barriers to entry,” he says. “Anyone can be in cell phone repair.” Even with easy access to the market, repair remains a great, mostly untapped source of income for repair specialists and cell phone stores alike, in Heydari’s view. “These channels definitely have more potential than is being used,” he maintains. And the skills of the repair specialists constitute an invaluable asset for the industry, Heydari says. “They’re pretty intelligent, savvy people – they’re more than just clerks,” he concludes.

A special thank you from the Publisher & CEO of Wireless Repair Magazine, to all of the repair stores around the world. – Kathy Katcher The Prepaid Press extends its appreciation to Kathy for her assistance with this editorial. www.WirelessRepairMagazine.com WRE Office: 1- 8 0 0 - 8 62-26 0 9