Differentiated business model in a crowded retail market
Situation During the mid-1990’s the cellular phone market was extremely profitable and the number of new retail competitors was aggressively increasing. The business challenge rapidly became how an independent retailer could remain profitable while trying to compete in an industry where handsets were sold significantly below cost.
Leadership While most retailers protected profitability by expanding product lines and sourcing less expensive equipment (e.g. used cellular phones), it became clear to me that another business model was possible. At this time independent retailers were paid both an upfront commission and an on-going revenue stream (percentage of revenue generated by each billable customer signed-up by the retailer). The unique opportunity was to develop a business model that allowed a retailer to achieve operational profitability with just their recurring revenue stream.
The unique business model that my business partner and I created was one that paid a sales person the majority of the upfront commission while retaining 100% of the revenue stream for the business. The result was Allstate Cellular’s high earning potential attracted a large number of professional sales representatives and hyper-accelerated the compounding customer revenue stream.
Result Despite the short-term losses that we sustained, our business model proved profitable with 12 months and resulted in the achievement of a multi-million-dollar on-going revenue stream with a few short years.