Will the eSIM Cause Phone Company Retail Stores to Close?

esim

Ericsson moves to eSIM tech

Ericsson  has become the latest to adopt eSIM technology. The tech giant’s new devices will no longer feature the need for physical SIM cards, thanks to what the eSIM brings.

eSIMs are essentially built-in SIM cards. They are embedded into the device itself, eliminating the need for physical SIMs, and thus the need for switching back and forth when choosing one network over another.

What is an eSIM

What is an eSIM. Image Source

That latter part has become somewhat of a concern for telcos, who typically find a lot of profit in locking customers in with a particular SIM card. With the eSIM allowing for remote provisioning of user profiles without a physical SIM, managed by any service provider or network, you can imagine why telcos might find the technology threatening.

While the ability to switch telcos without having to order a SIM, wait for it to come in the mail, and then physically switch SIMs is an obvious benefit to consumers, there are some benefits to telcos as well. Ericsson states that the technology will be beneficial to service providers if they use and market it the right way. We agree.

In fact, eSIM technology has been in Australia since 2017, with the major telcos offereng eSIM plans.

An example is Telstra’s eSIM support for Microsoft Windows 10 decives, and the iPhone 11.

Telcos will also realize from some cost saving benefits as the eSIM slowly eliminates the need for brick-and-mortar retail shops. But this particular point might bring about a mixed bag of benefits and drawbacks, for both service providers and some customers.

Why telcos might be worried about the eSIM, but shouldn’t

As stated, telcos’ main concerns over eSIM technology is the loss of an ability to lock customers in with a particular SIM. If customers can switch from one telco to another without needing to switch SIMs or order a new SIM card, then they can do so at will, jumping from one attractive phone plan offer to another on a monthly basis.

But it isn’t all doom and gloom for telcos.

The telco business is mired with overhead costs. Major telcos have a number of brick-and-mortar retail stores, most of which are mainly there to sell you plans which can only be activated with a physical SIM card.

Retail stores are extremely expensive for phone companies to run. Their margins are being squeezed all the time, all while they spend a lot money building their 5G networks (which costs billions of dollars for infrastructure alone, not to mention the cost of the spectrum).

Take away the need for a SIM card, and such shops really don’t have any business existing. This, of course, saves the telco a ton in overhead costs, and allows for those savings to be invested elsewhere.

At the same time, there are a number of factors pushing telcos to broaden an online presence, such as:

  • Customer familiarity and love of self service apps;
  • Online chat as an alternative to long phone wait times;
  • Increasing proportion of SIMs sold online;
  • eSIM technology gaining popularity, which will allow switching plans from the device, without switching SIMs.

This move of typical telco activity to the Internet could become a full one – a full online presence with no need for a physical retail store presence. It may soon be very attractive for phone companies like Optus and Vodafone to close many of their less successful retail stores, saving a ton in the process. They could move former retail-store activity to the Internet through, for example, virtual reality.

In fact, many small phone companies (MVNOs) operate without retail stores today. Many can simply operate with one call center (which are increasingly outsourced, by the way) and an office space as their headquarters, while handling all sales through online channels.

But while the eSIM might eliminate the need for a number of retail stores and save telcos overhead costs in the process, such a move comes with its own drawbacks for consumers.

For consumers, the eSIM is mostly good news, but eliminating retail stores might not be

Some people, especially older Australians, are not as tech savvy as others, and would rather have actual humans handle their phone plan setup than do it themselves online. Such customers value the personalized experience in retail stores, where the staff do a lot of hand holding.

Also, if retail stores were to close, the phenomenon will likely start in rural Australia. In a sense, this will be a lot like cutting off rural areas from quality telco advice. That’s because, although a lot of telco services are available online, some things simply function better with an actual human. It would be in a telco’s interest to keep a store or two open, but those one or two stores will likely be in an urban are where the bulk of customers are.

Conclusion

While most telco activity are already available online, eSIM technology will make this even more real and save costs in the process. Today, buying a phone plan online involves a lot of moving parts on the telco’s end.

First they have to have a SIM card available, which means they either ordered one or manufactured it. This also means the SIM cards have to be stored somewhere, and then shipped to the customer (usually free of charge) before the activation process begins. Also, keep in mind that receiving a SIM card from a telco doesn’t mean you’re obligated to activate the phone plan. This means a customer could actually just let a SIM card lay waste and never use it, despite the costs on the telco’s part in getting the SIM card and shipping it to the customer.

These points are valid ones, and they result in costs, even for those telcos that operate only online and don’t maintain retail stores. But with the eSIM, these costs become nonexistent. The telco manages the customer’s profile remotely, activating the phone plan without any logistics expenses.

The eSIM brings benefits, even for service providers. Maximizing those benefits will take a lot of planning and marketing on the part of the telco, which will lead to an even more competitive phone plan market. That, of course, will benefit the consumer, an is the best part of all.

 

Neil Aitken

Having worked in 3 countries for 4 telcos on both voice and data products, Neil is in a position to give you the inside track. Get beyond the marketing messages to the best plan for you.