So you are interested in becoming a cell phone authorized dealer, or maybe you just have a healthy curiosity and would just like to know how those authorized dealers do business? Either way, let’s see if I can shed some light on this strange industry…
First off, if you haven’t already, you should probably read the How Contracts Work post to learn a bit about.. well… how contracts work, as well as why we have them and why they aren’t so bad (yes I said it). This is important when talking about authorized cell phone dealers and I’ll explain why later.
Now that you have brushed up on that, we can get into the way an authorized dealer works (here in the States at least).
Basically the authorized dealer buys phones from the carrier (or other sources) for a “wholesale price” that is just below their retail price (generally $25-$75,) less than the phone is sold for retail for. Â For example a T-Mobile G1 is $399.99 retail on T-Mobile’s site and T-Mobile authorized dealer happens to buy that phone for $375.
N0w that they have the phone in stock they can sell it to a customer with a contract for $129.99 (if they wanted to copy T-Mobile’s on site pricing). When they did this, they would lose $245 initially ($375-$130), but then 2 months later T-Mobile pays them the $245 plus some extra for profit (amount based on what plan the customer chose and what features they added usually). And that’s the basic concept.
Now another thing to keep in mind, is that there is a chargeback period with most authorized dealer (T-Mobile’s happens to be 4 months, and Verizon’s is 6 months I believe). So if that customer signed up, got the G1, the company lost the $245, and then the customer cancelled within the chargeback period, T-Mobile would take back the money they gave the dealer and the dealer would be negative $245 for the sale (which is harsh, right?). Now to protect themselves from this, all authorized dealers have what is known as a Secondary Agreement (which if you have ever signed up at an authorized dealer location, you have definitely signed it in one way or another). The Secondary agreement states to the customer that if they cancel within the chargeback period that they authorize the authorized dealer to charge their card for the amount of the discount they gave on the phone (and lost since you cancelled) and then some for their troubles.
Even though the Secondary Agreement may sound evil, it is necessary and too be honest, if you signed up with the intentions of cancelling within the first 4 months (this excludes the 14 or 30 trial the company gives you so long as you brought the phone back within that period) then you shouldn’t be signing the contract in the first place. Get the phone without a contract and save yourself and the dealer the headache 🙂
Hope that helps clear some things up…
By the way, if anyone is interested in becoming an authorized dealer for T-Mobile, Mobile Unlimited, Inc. has a great subagent program that allows you to sell unlocked phones with T-Mobile service contract (or without contracts as well of course).
Click Here their SubAgent section of their site.