n Mobile phone top up vouchers go electronic in the spring. What are the implications for c-stores that have cashed in on the prepay mobile phone boom with pots of pay as you go money, asks Karen Dempsey T he mobile phone prepay pot looks set to get bigger. Chains such as Londis say paper top up vouchers brought in £20m of new money ­ average margins were 15% ­ for the group over the past year. And this year the largest mobile phone company, Vodafone, estimates sales of its vouchers and electronic top ups will reach £1.5bn ­ and that's just one of the networks. Non specialist retailers (including independent grocers, multiples and forecourts) account for 65-70% of that turnover, so developing the market is definitely worth their while. Going electronic means a new piece of kit on the counter. This could mean a standalone terminal, or in some cases retailers can choose to upgrade their EPoS systems or PDQ banking terminals to cater for electronic top up transactions. Customers recharge their credit card-sized e-top-up cards on the machines and the data is downloaded to the phone networks. The machines are recharged overnight. What the kit will cost the retailer is still to be decided, firstly because the four main networks have to collaborate to work out mutually satisfactory methods of data retrieval, and secondly because it will depend on the size and frequency of transactions per store. Via buying scheme ACE, for example, trading manager Clive Hildyard has a contract with a supplier to give the machine to retailers initially free of charge. The machine can also produce eight of the most popular long distance phone cards, and rental to retailers will be agreed as e-top-up becomes available. So c-stores don't have to panic- buy a terminal just yet. Vodafone is aiming for e-top-up roll out in March, but privately the industry expects the second half of the year to be a more realistic target. So there's time to decide which option is right. There are so many distributors doing the rounds, and so many deals on the market to take advantage of. Retailers that have already trialled the electronic system are raving about it. Morning Noon & Night's marketing director Stephen Thompson says: "There's no doubt this is the way forward. You shouldn't technically run out of stock, and customers are happy as they've got a bigger chance of getting the top up they want." Londis trading controller Martin Swadling says it's a "fantastic initiative"that eliminates the need for retailers to invest up front in high value stock. It also cuts down on the security risk. But it's not all rosy. Going electronic is a way of taking costs out of the distribution system ­ such as printing, distributing and warehousing the paper vouchers ­ and there's less effort involved in selling them. So while c-store owners see the benefits of e-top-ups, they also express their "deep concern" that margins will be slashed. They already feel betrayed that margins have been cut on paper vouchers. Whereas they used to earn around 15%, this has been cut to between 7.5% and 10%. In response, Vodafone says it has no intention of punishing the retailers that have helped create a massive market for top ups. Seldon Scott, commercial planning manager at Vodafone Connect, says: "It's getting very competitive but we aim to maintain margins suitable for retailers. It's not in our interest to cut off our noses to spite our faces. We work closely with our business partners to ensure it's a win:win." Basically, retailers have no choice. They can't stop selling vouchers as their customers expect it. They're a distress purchase, customers want to buy them from their corner shop, and as such they are a major footfall generator. However Chris Tombs, managing director of PT Distribution, the biggest independent distributor of prepaid mobile phone vouchers, warns that the larger the market for top ups becomes, the quicker the margins will fall, and the bigger the likelihood top- up vouchers will become a commodity sell. He says that just as retailers don't put up signs in their windows saying We sell stamps', the same could happen with the positioning of top up vouchers ­ with the fun and the money going out of it. So it is crucial, says Tombs, that retailers look at the bigger picture of telecoms as a convenience category. Instead of worrying about an ever decreasing slice of the telecoms cake, they should concentrate on creating a bigger cake. Telecoms is already the fifth largest category behind staples such as cigarettes, alcohol, chilled foods and dairy and electronic developments won't stop at mobile phones. In the future the terminals will handle a host of other transactions, such as subscriptions to digital TV and prepaid mobile internet cards, for example. Tombs says: "We should develop the telecoms category and grow the market instead of commoditising one element within it." {{MANAGEMENT FEATURE }}