Amazon (NASDAQ:AMZN) is a massive online retailer with interests in several businesses. It has its well-known online marketplace, its lesser-known web services and a range of electronics that support its media business - but the one thing the company lacks is a physical store presence.
While a company like Amazon can certainly afford to set up a network of physical locations, the cost of doing so would be more than buying an existing network - and why drive when you can be driven?
RadioShack (NYSE:RSH) is the perfect entry. The company is facing bankruptcy, and it is priced low enough to be an attractive acquisition. RadioShack is trading at only $1 per share after reporting its tenth quarterly loss in a row. "RadioShack has had a negative average surprise in earnings history of 66.67% in the past year, and 90% of analysts have downgraded their earnings estimate revisions for the current quarter until next year," according to Zacks. "Analysts are suspecting that RadioShack may file for bankruptcy protection in the coming weeks."
Now that RadioShack is on the brink of bankruptcy, Amazon could buy its 4,400-plus stores for a steal and gain the foothold it needs. Buying RadioShack is an easy entry to creating physical storefronts. In addition, doing so would introduce a range of other options for Amazon, such as same-day delivery or pickup, virtual showrooms and curated collections.
ALTERNATE DELIVERY LOCATIONS
Amazon started offering its self-service lockers some time ago, installing them throughout the US and the UK, in various buildings and stores like 7-Eleven. While the lockers offer a convenient way to collect packages - especially if you need to ensure delivery (e.g. you are scared of theft, you live in an apartment complex and won't be home in time to collect the parcel from your apartment manager) or require an alternate delivery location (e.g. want to buy a gift for your spouse, but don't want it delivered to your home or office).
However, these lockers are located primarily in major cities, specifically Los Angeles, New York City, Philadelphia, Portland, San Diego, San Francisco and Seattle, as well as a handful of locations in Delaware, New Jersey and Virginia. If Amazon purchased RadioShack, the company would be able to offer a similar service in a wider range of locations, including many rural areas. In addition, Amazon Lockers only allow the delivery of items that weigh less than 10 pounds. By offering delivery to physical storefronts, Amazon would be able to allow customers to purchase larger items.
Further, Amazon had originally offered its lockers in big brick-and-mortar stores like Staples and even RadioShack. Those retailers pulled the plug on offering locker service last year. "For a bricks-and-mortar business, the idea is that people coming to collect their Amazon purchases will buy other stuff on their way out the door," explains Bloomberg Businessweek. "But Amazon's ability to place future lockers may also come down to the mundane matter of competition: Coffee shops, parking garages, supermarkets, pharmacies, and copy-printing stores don't have Amazon as a rival, whereas a retailer such as Staples will quickly realize that Amazon sells virtually everything it does-and possibly cheaper."
If Amazon offered locker service at physical storefronts it owns, Amazon could remove this issue and possibly sell even more products. Customers may buy other items while collecting their packages. This could include small impulse purchases (e.g. a fun case for your Kindle), product add-ons (e.g. did you remember to buy the HDMI cable for your device?) or even products the customer never knew existed.
Customers would also be able to use the Amazon storefronts as virtual showrooms. Much like the way people have used stores like Best Buy as places to demo products and then compare prices online, Amazon would be able to let customers try out various technologies in these physical storefronts. Marketwatch explains, "Imagine an Apple-like customer experience of Amazon's best products and services, giving customers the ability to see and feel potential purchases such as the, say, Amazon Kindle Fire, before dropping $100 on it" - but the benefit may not lie solely in technology and appliances.
Amazon could also allow customers to see other products before buying. If a customer is considering buying an item with which he or she is not already familiar, quality can be questionable - being able to see and feel the product in person allows the customer to decide if it is worth the price.
Physical storefronts would have to be selective about the items offered - space would be an issue - so Amazon would have to ensure that the products displayed at its stores were relevant to local consumers, or even use purchasing data to include items that are particularly popular locally. But this would serve a secondary benefit - same-day pickup.
If the item the customer wants is in stock, he or she could order it online and pick it up that day at Amazon prices - be it a last-minute present or a replacement for a broken router.
RadioShack may facing bankruptcy, but its 4,400-plus locations would give Amazon a physical presence. It would allow Amazon to expand its delivery options, showcase popular products and introduce same-day pickup.
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The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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