By: Gordon Brockhouse
Everyone knows that looks can be deceiving, and the headquarters of Microcel Corporation is a case in point. Located in an industrial plaza in Newmarket, ON, north of Toronto, the building houses two floors of office space, plus a large warehouse at the back. There's nothing about the non-descript exterior to indicate that a leading-edge technology distributor operates within.
From its formation 21 years ago, Microcel has been involved in what is probably the fastest-moving technology sector: wireless. During that time, it's outgrown four buildings, and moved into progressively larger facilities, all located in Newmarket.
Today, Microcel employs 45 people, and distributes a wide range of wireless accessories. These include OEM products from BlackBerry, Motorola, Samsung and Sony-Ericsson; and aftermarket brands such as Belkin, BlueAnt, iGo, Plantronics, Speck and SuperTooth. Recently, the company started branching out of its wireless niche into other related technology areas, like PC networking and HDTV.
Microcel's activities go beyond distribution. For example, it is responsible for global packaging of BlackBerry products.
As is typical, Microcel's Owner/President manifests his company culture. Rick Henry is easy to follow in conversation, because ideas flow naturally, rather than jumping all over the place. Afterward, you realize that you've covered a lot of ground in a short time. He's clearly excited about his company and the industry it serves; but he manifests his enthusiasm in an orderly fashion, moving methodically from A to B, combining the dynamism of a marketer with the precision of an engineer. This isn't surprising, given his company's history.
Helsinki, We've Got a Problem
Interestingly for an industry composed mostly of young companies, Microcel has been operating almost since the beginning of cellular telephony in Canada. It was 1989, five years after Henry graduated from the technology program at Toronto's Seneca College. Henry's employer had a serious problem: thousands of non-functioning cell phones.
Two years previously, Henry had joined Nokia as its second Canadian employee. This followed a short stint at Across Canada Mobile, the first independent service centre for Cantel, one of Canada's original cell carriers. A Finnish company best known at the time for tires and footwear, Nokia was selling mobile phones under the Mobira brand. The Finnish-made phones occupied a premium position in the emerging Canadian market.
"We could not compete with lower-end phones," Henry recalls. "Motorola and some of the other players were getting a lot of that business. Nokia wanted to compete in that area."
Nokia joined forces with Tandy Radio Shack, which was sourcing phones from a Korean manufacturer and selling them under the Realistic brand in Canada and the U.S. "They were very similar to our transportable phones, but were only half the price," Henry says. "We needed access to those smaller phones.
"We ended up getting the Korean factory to manufacture phones under the Nokia brand," he continues. "It was the first time the Nokia brand had ever been used on a phone. We checked the factory to make sure the quality was good, and started ordering tens of thousands. Then the phones came over, and we started having all kinds of problems."
The solution involved retuning circuits inside the phones by changing surface-mount components; but there were no facilities in Canada that could do this. "It was a real problem for myself and our company president," Henry says. "In the end, we decided that I would form an outside company and hire technicians who could do this service work. That's how Microcel was formed in 1989."
During Microcel's early days, Henry continued to work for Nokia. In addition to heading up the service division, he was involved in sales and support, product development, and marketing. "I really enjoyed what I was doing on the product development side," Henry says. "Even though Canada is a small country, we were influential with new phones, accessories and software. The challenge was that it was consuming a lot of my time. In the end, we decided that the best thing was for me to leave Nokia, join Microcel full-time, and work with Nokia on a consulting basis. For the next year and-a-half, we had a consulting contract developing Nokia phones and accessories with the team in Finland."
Meanwhile, Microcel's role had expanded beyond service into automotive programs. Even before Henry joined his company on a full-time basis, Microcel had hired a contract salesperson to act as liaison with 1,200 GM dealers.
Loud & Clear
Microcel's evolution into value-added distribution occurred a couple of years later. Henry had consulting contracts with Canadian Tire Corp. to help it get into wireless, and with Bell Mobility to help its dealers market accessories. "I realized that to do good, value-added consulting work for a carrier or retailer or even Nokia, I needed to be closer to what's going on in the field," Henry relates. "So I expanded into the distribution side of the business. The first thing we did was bring the Antenna Company into Canada."
This was a solution to a common problem: poor reception on phones being used inside cars. "From my technical background, I knew that with mobile and transportable phones, the antenna is very important," Henry says. "You can have a great network and a great phone, but if it's not seeing the signal, you have problems. We convinced the carriers and vendors on the importance of the antenna."
Over the next two years, Antenna Company products attained 98% marketshare in Canada. "Virtually every phone and car kit came with our antenna," Henry says. The pigtail antennas didn't just serve a technical function; they also had a marketing benefit. "You'd see Cantel and Bell Mobility logos on the antennas," Henry explains. "That was something we put together. Cantel jumped on initially. Bell wasn't quite sure of the value until their executives walked through some parking lots and saw the Cantel brand on antennas."
Microcel didn't just ship antennas to retailers; it also trained people to sell them. Henry estimates that 7,000 salespeople across Canada went through the Antenna Academy.
Meanwhile, Microcel ventured into other categories. Formed in the early 1990s, a division called Microcel Mobility Distribution Centre supplied Bell Mobility stores with a wide range of communications products, including cordless phones, fax machines, palm-top computers, two-way radios and paging accessories. "We launched Bell Mobility into all these areas. Eventually, it became Bell World, as we know it today."
Then in 1995, Microcel won a contract from Cantel to develop a line of branded wireless accessories, beating out 250 other vendors across North America. The process took a year, but Microcel retained this business for 11 years, during which Cantel became Cantel AT&T and ultimately Rogers Wireless. The company also developed branded accessories for Bell.
At the same time, phone manufacturers were approaching Microcel to develop OEM accessories. "Samsung was the first partner we brought in, and we still work with them today," Henry says. "Bell was buying direct from Samsung, but there were challenges in getting accessories like cases, chargers and hands-free devices. We expanded the program and supported it with marketing efforts across the country. It produced the largest attach rate that Bell had."
The arrangement expanded to include phone distribution when Rogers began carrying Samsung handsets. "Back then, Samsung had no bricks-and-mortar facilities for their phone division in Canada," Henry relates. "They needed a way to warehouse phones and sell them to Rogers. We expanded to distributing all their phones for three and-a-half years."
To support this activity, Microcel developed a secure Web portal for its customers, with links into Samsung's SAP enterprise system. The system, which could be accessed wirelessly, allowed authorized users from Samsung, Bell and Rogers to dial in from anywhere in the world. "We won a Bell technology award for this," Henry boasts. "It started off as a small-volume application, but grew to half a million phones a year, to thousands of locations. We were kitting the phones. If there were any software changes, we could handle that as well. At one time, we got 10,000 phones out in a couple of hours. Both companies were amazed we could do this."
The Complete Package
Along the way, Microcel added a packaging department, which handles not just Samsung products, but BlackBerry as well.
"When we started with BlackBerry five years ago, they just had white boxes," Henry says. "We were the exclusive distributor for Canada, and we designed our own clamshell packaging, as other distributors did in the U.S." In 2008, RIM decided it wanted a uniform package design for all its global markets. RIM liked the packaging Microcel had designed for the Canadian market, so it asked the company to design its global packaging.
Microcel came up with a design that uses 100% recycled materials, both for cardboard and plastics. But the pièce-de-résistance was the holo-coating covering the box. "It has the little flying bees that BlackBerry uses in its emblem," Henry explains. "If you put it under a 30x microscope, you can actually read ‘BlackBerry.' This process had never been utilized before. We've won three global awards from packaging associations."
The vacuum-forming company and cardboard-box manufacturer that make the packaging are both based in Ontario, but have international reach. The box company does work for large customers such as Proctor & Gamble. Microcel found them through a referral process. "The holo-coat technology was something our box partner had," Henry says, "but had never used it in North America. We were able to use it, and BlackBerry was very happy."
Microcel packages some BlackBerry products at its Newmarket facility, which can operate two shifts when necessary. "The product comes in here in bulk, and we package it up, and label any way they want," Henry elaborates.
And it will customize the package configurations to meet the needs of large retailers like Wal-Mart. "That's why we do as much as we can here, instead of outsourcing," Henry states.
As wireless has entered the mainstream, the business has migrated outward from wireless stores to CE retailers. This applies particularly to accessories. Carrier stores are more focused on activations, especially with new competitors entering the market; and the floor space for accessories is limited. "Five years ago, 70% of our business was on the carrier side and 30% on the retail side," Henry says. "That has now flipped, because retailers have the space to handle accessories."
A big difference between CE and carrier channels is timelines. "In the wireless business, things always seem to happen last-minute," Henry says. "Decisions on products like PCs and TVs may be made six months in advance. Retailers want to talk about Christmas promotions in the summer. On the wireless side, they may not be sure what phones and programs they're going to have until a month or two before."
Henry says Microcel accommodates retailers' planning needs in different ways. Given the timelines on which new phones are introduced, it's not always possible to plan accessories long in advance. But that doesn't mean long-range planning is impossible in wireless.
"Today almost every phone has Bluetooth, so we can plan promotions around Bluetooth products," Henry notes. "Or if the retailer wants to do some kind of case promotion or bundle, the question is just what phone it's going to be for. We can lock the concept of what we want to offer in advance."
To facilitate its move into CE channels, Microcel has hired people with CE experience, notably Tracey Ekerton, Director of Sales and Marketing. Before joining Microcel three years ago, Ekerton ran the consumer electronics program for Loblaw Companies Ltd.; and before that, she worked for Kodak Canada Inc. "Tracey has consumer electronics experience from both the manufacturing and sales/distribution side," Henry notes. "All our sales, marketing and product teams report to her."
The Loblaw connection is interesting, because Microcel is now supplying product to Loblaws as well as Shoppers Drug Mart, two mass merchants that have recently added wireless to their product portfolios.
Microcel deals with other large merchants as well, including Wal-Mart, Staples and Best Buy. The Best Buy connection has been in place for about five years. "When the BlackBerry took off at retail, we needed a line of accessories," recalls Gus Chow, Merchandising Manager at Best Buy Canada. "We migrated from there into Bluetooth headsets and in-car solutions. As our cellular accessory business grew, Microcel grew hand-in-hand with it."
Chow cites several benefits of dealing with Microcel. "Their expertise in packaging makes the product a lot friendlier at retail," he says. "They have strength in logistics. They can break down packages and give us the quantities we need."
He also appreciates that the relationship works because it's a partnership. "They're not just concerned with sell-in," Chow says. "They're concerned with sell-through. If a product isn't right for us, they'll say so. They're almost a second conscience."
Henry says Microcel works this way with all its customers. "With most of our customers, we can see their inventory," he elaborates. "Part of the responsibility of our sales team is to manage their customers' inventory. It's our job to make sure it's moving. Even if a purchase order is created, if it doesn't make sense because certain SKUs aren't moving through, it's our job to notify them."
Microcel's warehouse, which uses wireless scanning throughout, gets shipments out the day they're received, on a single shift. For some customers, Microcel ships to distribution centres. For others, it does drop shipments. For example in Canada, Microcel does drop shipments to 300 Staples locations.
Timing is Everything
In the fast-moving wireless field, adaptability and mobility are essential. "With the short life cycle of most devices, if you don't have accessories at launch or very close, you're better not to carry it," Henry says. "You have to get out early, especially if it's to a large retailer with 300 or 500 locations. And you want to be able to shut it down quickly and get the new products in."
So how does Microcel do all this? "Very detailed forecasting," Henry says. "Our sales team works with every customer by vendor and SKU to produce forecasts that run out three-to-six months. That feeds into a master forecasting plan that our purchasing manager and her team work on. We've very detailed, because customers' needs change constantly."
Purchasing decisions also involve gut instinct, Henry acknowledges. "With our experience, we give customers input on what we think will move with their demographic. But it's not a perfect science. Looking at history and trends is not enough. You need a good understanding of what's going on."
You also have to be willing to take risks and try new things out, which is what Microcel is doing. It's branching beyond wireless, into new product categories. Some are natural outgrowths. For example, it's now carrying iGo's PC chargers in addition to wireless products.
Another natural outgrowth is tablet accessories. Microcel is launching an iPad keyboard, and keeping a close watch on other tablet platforms.
Other lines such as iLuv represent a greater departure. "They have docking audio stations and other unique products that we haven't worked with before," Henry says. "And we're also looking at headsets for music." Another new line is Microvision compact LED pico projectors, which focus automatically using a laser.
But the most adventurous product is the Wireless Media Stick from a Calgary company called HSTi. It's a USB adapter that maps the location of all the music, image and video files on a home network. You start by putting the device into a USB port on every PC on your network, or on any other network devices with an USB port. When you're done, plug the Media Stick it into a USB port on the TV. The TV will play media files as if they were on the Media Stick. In fact, the Stick is pulling them off the computers on which they reside.
Henry believes lines like Microvision and HSTi represent a natural evolution for Microcel and its customers. "I've been going to the Consumer Electronics Show for 25 years," he says. "For the first time this year, I felt the focus wasn't all about television. It's starting to migrate to media solutions, and smartphones and tablets. How do you share media and information?
"We're continually trying to expand our value proposition," Henry continues. "The key challenge for our customers today is getting innovative products that can generate high turns and great margins. Our job is to bring in these products, and make sure they're moving at the stores."