Is Buying Handsets From A Carrier a Rip-Off?

There’s no doubt that a phone’s cost factors heavily into our reviews. It’s impossible, after all, to determine if a given handset is a good value if we don’t compare it to similar phones in the same price range. Where that becomes tricky, however, is how the price of a phone varies tremendously depending on where you buy it.

For instance, the Motorola Droid, which was available through Verizon Wireless at launch for $199, won our Editors’ Choice award, beating out all other similarly priced phones on Verizon Wireless’ network. But when Best Buy started selling it for $99, other $99 phones sold through Verizon, such as the Motorola Devour, seemed mediocre in comparison. This made us think: are there any good reasons to continue buying phones directly through your carrier? We asked around to find out what you get—and what you might lose—by shopping elsewhere.

One-Stop Shop

When it comes to venturing beyond your carrier’s local store to buy a phone, the possibility of getting a lower price on the handset itself is just a nice perk. After all, wherever you buy, the prices for a carrier’s data plan—as well as its early termination fee—will remain the same.

What you really get when you go to a Best Buy or Radio Shack is choice. Best Buy Mobile, for instance, sells some 90 feature and smart phones across nine networks. The store has a book that makes it easy to compare different carriers’ data and voice plans side-by-side. As Michael Gartenberg, partner at Altimeter Group put it, “You go to Best Buy to kick all the tires simultaneously; you don’t have to make a bunch of different trips.”

Both analysts and retailers say this kind of hand-holding isn’t just ideal for clueless first-time smartphone buyers, but for discerning early adopters who are willing to switch carriers to get the latest and greatest handset. “It’s where technology enthusiasts go for a wide range of products,” said Ross Rubin, director of industry analysis for the NPD Group. As for everyone else, Andy Castonguay, director for Yankee Group’s Anywhere Network, says nowadays, even people who don’t consider themselves tech-savvy have done at least some cursory research before entering a store. “The days of going in with an open mind are probably past us,” he said.

The problem used to be, says Castonguay, that although big-box retailers may have sold phones for less, they weren’t as competent at explaining phones, or getting them configured as quickly. “Historically, there is a gap in performance, in that often it took third-party stores longer for the contract to be turned on,” he said. Moreover, it’s only within the past few years that number portability—the option to transfer your old cell phone number to an existing handset, even across carriers—became standard practice.

Then there was the now-moot problem of selection. While Best Buy sells about 90 phones, Amazon boasts more than 600. Wal-Mart hawks around 200 devices, and both of the latter outlets place a special emphasis on prepaid plans, an option that might appeal to parents of teens and young children, but is harder to find through a major carrier.

Today, consumers can expect to walk out of the store with a working phone, regardless of where they bought it. Through its free Walk Out Working service, Best Buy also transfers contacts to the phone and teaches customers rudimentary features. (Carriers also do this free of charge.) Best Buy Mobile also offers its own technical support line, so customers have a choice of calling the retailer or their carrier. Says Scott Moore, vice president of marketing for Best Buy Mobile, “We’re saying we want to work with you. We want to sell you phones every two years for the rest of your lives.”

Cut to the Chase

As far as the likes of Best Buy and Radio Shack have come, however, salespeople at carrier stores are likely to know their own network’s phones better than their big-box counterparts, if only because they have just one portfolio of handsets to master. “The folks that are going to a particular operator-owned store are customers who are very satisfied and want to continue with that operator or folks who have done their research and know they want to buy a phone on that operator,” said Castonguay. And, as NPD’s Rubin adds, carrier stores often become one-stop shops in a different sense, as existing customers can resolve billing issues while upgrading.

That’s only good news for those who choose a carrier before their device. Castonguay and Gartenberg say this group includes a lot of people, whether because they’re satisfied or just suffering from inertia (Gartenberg’s suggestion). That means consumers who shop in operator-run stores might fall into one of two extreme categories: loyal (or indifferent) existing customers, and decisive early adopters. Retail stores such as Best Buy are for the curious and overwhelmed.

And yet, if you’ve done your homework and know which phone you want to buy, you might want to bypass a store altogether and purchase your next phone online. Amazon, in particular, habitually undercuts its brick-and-mortar competition. As of press time, for instance, it was selling the HTC Droid Eris for a penny with a two-year agreement; Verizon was still selling it for $79 with an online discount. Radio Shack, meanwhile, invites customers to trade in old handsets, a kind of Cash for Clunkers program for phones.

“If you know what carrier you want, what device you want, and you don’t need the hand-holding in the store, you can save a good deal of money on popular devices by looking online and staying out of retail entirely,” said Gartenberg.

Amazon throws in a few other appealing perks. For one, Amazon automatically includes discounts so that users don’t have to bother with mail-in rebates, as they would if they purchased from a carrier or electronics store. Moreover, Amazon pays the return shipping if you decide (within 30 days) to return your phone.

Takeaways

While we’re going to continue posting the list price (i.e., what carriers advertise) in our cell phone reviews, that doesn’t mean you need to shop at operator stores. You’ll find a wider selection of carriers and devices (and, often, lower prices) when you shop at a brick-and-mortar store such as Best Buy, Radio Shack, or Wal-Mart, or even venture online to Amazon.com. Then again, if you know your network but are on the fence as to which device you should buy, your local carrier store likely knows its own phones best.

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