Phone Card Industry Overview
The business of making and distributing phone cards is a facinating multi-billion dollar business. Phone Card distribution has a very low cost of entry. On the surface it is a very simple business. Use some phone cards, buy some phone cards... sell some phone cards... make a profit.
Yes it is a very simple business. Yet to suceed can be overwhelming. Because of its unique attributes, phone cards make and interesting study. Many of the customers have no other way of maintaing contact with loved ones at home. Customers include migrant farm workers from south of the border, and other recent immigrants or temporary workers visiting the USA from Africa, Eastern Europe, the Islands, and Asia.
Phone cards are most popular among customers who have not yet established credit cards, banking accounts, or home ownership. The typical phone card customer has been resident in the USA for less than 10 years. As customers become more established in their new country, they also can consider other alternatives to the phone card as a method of calling home. However, the phone card remains attractive as an easy to package, easy to distribute method for customers to call home.
Ease of Entry
There is very little barrier to entry into the phone card distribution business. Anyone who can put together a few hundred dollars can buy phone cards from a wholesale distributor and sell them to stores or individuals in their community.
This ease of entry attracts immigrants themselves to become phone card distributors. Often the foreign born American has difficulty finding a job in their area of expertise. The first thing the immigrant learns about their new city is the location of ethnic grocery stores where they can buy the kind of food they know and love. The immigrant quickly seeks out a place of worship according to their faith, and he or she seeks out other's who speak their language, understand their culture, and can provide a support network. It is understandable therefore, that this indivual seeks out an opportunty to sell phone cards within their ethnic community. Moreover, this individual tries out every new phone card that avertises good rates to their home country, so he quickly becomes an expert on the various phone card products, connection fees, and which card is good and which is no so good.
Market Opportunities
- There are a number of different approaches to the marketplace that the distributor must consider. Sometimes the distributor simply does what comes natural, and sometimes they analyse the demographics and do more traditional market research. Some of the options include:
- Direct to Consumer: Sell directly to end users through your personal network
- Online website: Sell online via a website
- Retail Store - buy cards for sale to existing walk-in customers
- Small Distributor -Sell to Retail stores
- Large Distributor or Master Distributor - Sells to Retail stores and Smaller Distributors
- Partner Distributors - Works with other distributors to build a competitive advantage
- Exclusive Distributor - establish relationship with card issuer, whereby you have exclusive distribution rights of a given product in your region(s).
- Private Label provider - design and create a phone card with an exclusive rate deck.
- Facility based phone card company - create rate decks, issue pins, manage terminations routes, manage origination routes.
- Virtual switch based company - same as facility based phone card company, except that you never touch the hardware. All of the management is done via third party company. You negotiate for your own routes, test and implement the routes, and manage rates decks.
Each of the above represents a niche opportunity. A distributor may choose to play in one or more of the above arenas. Often the growth path will take a distributor from one playing field to another limited only by the businessman's resources and skills.
Disaster Opportunites
There are many opportunities for the distributor to loose money in the prepaid calling card distribution business.
- Supplier goes out of business - the bigger they are the harder they fall
- Customer writes fraudulent check - even certified checks can be fake
- Many opportunities for facility based carriers to loose money
- Regulatory issues and potential penalties
Questions for your Consultant
- Should I consider my own phone card switch or a virtual switch?
- How do I create a Private Label product
- How do I negotiate the best rate deck for my target country?
- What kind of potential does the phone card business have?
- How do I differentiate myself from my competition?
- How can I get a store to take phone cards from me?
- Can you help me negotiate more minutes and better discount to my target countries?
- How do I sell PINs online?
- How should I handle returns? What kind of guarantee should I offer my cusotmers? Can I trust my supplier's guarantee?
- How can I increase traffic to my online phone card website?
- How should I price my phone cards?
- What kind of accounting system should I use in the phone card business?
- How do I take advantage of technology to grow my business and be more competitive?
- Should I have a business partner?
- How much money can I make as a phone card distributor?
- I have a friend with a switch... How can I negotiate a sucessful business venture with him?
- I have a network of more than 1000 people from my home country. How can I parle this into phone card profits?
- What are the biggest phone card markets?
- What other synergistic products can I offer to compliment my phone card business?
- How do I find "clean" phone cards?
- Who are the best phone card issuers in the industry?
- How can I buy good routes for my switch?
- How can I become more competitive?
- Should I sell consignment?
- How can I find the best phone cards for my region?
- Can tell me the ethnic makeup for my zip codes? How many foreign born live in my city, and what countries and regions are they from? What other cities do people from my target market live?
- Can you help me design and print my own phone cards?
- How do I get more retail store customers? How do I keep them as my customer?
- What should I expect from my supplier? Can I get usage reports? Can I expect to know my actual rate deck? How often will my rate deck change? Will my supplier tell me the truth?
- How do I get in the carrier termination business?
- How do I open a call shop?
- I have contacts in my home country. How can I set up origination and termination services in my home country?
- How do I create a PINless phone card?
- How do I create a rechargable phone card?
- How do I hire an employee to sell my phone cards? How much should I pay them?
- How much inventory do I need? How much cash reserve do I need?
- What kind of terms should I expect from my suppliers?
- Should I offer consignment to my cusotmers?
- Can I add PINless long distance services to cell phones?
- How do I sell prepaid cell phones? What prepaid wireless brands are available?
- Are there legal issues I need to be concerned with?
- Should I be in the prepaid phone card business? Why? Why not?
Consulting Services
To get the answers to these and other questions contact Bob Collett at 440-457-7209. Bob has more than 10 years experience in every aspect of the phone card industry, and more 20 years of telecommunications and consulting experience.
Why should you hire me?
I have owned and operated two phone card switches, I have owned a CLEC, I have owned a switchless reseller business, I have operated a virtual switch, I spent two years buying and selling wholesale international terminaton servcies, I built a local phone card distribution of more than $450,000 per month in less than 6 months, I have owned and operated a sucessful online retail phone card business, and owned and operated a sucessful online wholesale phone card business, I have survived the demise of numerous mega phone card suppliers, I have experienced fraud at various levels, I have developed multiple private label products using various suppliers as well as our own switches.
You deserve to have a "partner" who you can trust, who will represent your interest in the phone card industry. You need someone who knows the industry and will help you negotiate with your potential suppliers, and steer you clear of mistakes.
My normal consulting fee for established companies is $70 per hour. Take advantage our my phone card distributor "incubator" consulting fee of only $35 per hour, based upon an initial 10 hour consultancy spread over multiple sessions. Once you are established and sucessful, your hourly fee may ramp up based upon your ability to pay and your need for additional services.
The first phone call is free.
