The Secret of the Authorized Reseller

I’m sure you all have noticed at one point or another that different places sell cell phones for different prices.  Radio Shack sells this phone for $30 while the corporate store sells the same phone for $200.  Have you ever wondered why?  Well I think I can be nice enough to explain that to you.

What happens is the subsidized costs.  The carriers subsidize the cost and in return you turn over your John Hancock for that two year agreement.  The carrier then has you trapped for that monthly revenue they like so much.  But that doesn’t so much explain why Best Buy and Walmart have the same phone for a different price.  But they all use this subsidized cost thingy as a perk to get you to sign the contract.

The authorized resellers don’t make any money off the phone.  Actually they are losing money on the phone, and a lot of it.  That’s why the stand at the mall sells their phone for $150 while Radio Shack down the street sells the same phone for $30.  The Authorized reseller makes there money on residual income based on you staying with that carrier.  This means for every month and year that you pay your bill and stay with the carrier, who ever you got you to sign that contract gets a small portion of the monthly pie.  The more features that the authorized reseller gets you to purchase, the bigger their slice of pie.  And pie makes these agents happy.

So why does Radio Shack sell this phones for cheaper then the guy at the mall?  It’s simple economics really.  Radio Shack is large nationwide retailer.  They sign up more customers every month then they guy at the mall does.  They can afford to eat more of the cost because, all though their little bit of pie is smaller, they get way more smaller slices which turns into a whole lotta cake.

But the phone I buy from everyone else is crap.  Only the corporate store get the good phones.  This is just down right silly and wrong.  Whether it be a corporate based store or an agent, they all by the phones from the manufacturers.  AT&T and Verizon don’t give these little guys the phones, LG and Samsung do.  I have a theory that this myth was started by corporate sales people because they would get fewer sales then the guy down the street which hurt their commission.  Sales is a cut throat industry my friends, and sometimes there are innocent victims.

And now you know, and knowing is half the battle.