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It make sense for Amazon to transform Radio Shack


Wednesday, September 17, 2014

Investors are giving a nod of approval to news Monday that RadioShack's (RSH +16.48%) chief financial officer has stepped down amid flagging sales.

However, one analyst has an even more drastic solution to the consumer electronic chain¡¯s turnaround woes: a takeover by Amazon (AMZN -2.20%).

Rob Peck of SunTrust Robinson Humphrey, who has a buy rating on Amazon, said the ongoing convergence of e-commerce and brick-and-mortar retail makes RadioShack an attractive buy for Amazon.

It would complement other local commerce initiatives run by other e-commerce giants, including the same-day delivery services run by eBay (EBAY -2.36%) and Google (GOOG -0.44%) and Amazon¡¯s own grocery delivery business.

¡°Local commerce still remains the ¡®final frontier¡¯ for e-commerce platforms, as it is still a relatively untapped market with a lot of potential for the large platform,¡± Peck said.

RadioShack has been teetering on the brink of bankruptcy. The Wall Street Journal reported on Friday that it was weighing a $585 million financing package led by Standard General LP and UBS AG (UBS -0.85%) that would help keep it afloat. On Monday, RadioShack announced the departure of CFO John Feray.

If it does file for bankruptcy, Peck says Amazon may want to consider scooping up some of RadioShack¡¯s 4,000-plus stores, arguing it would enhance Seattle-based Amazon¡¯s already robust focus on local, showcase more Amazon products and services, such as the Fire smartphone and Kindle, and enhance pickup and distribution, making for a more seamless transition between clicks and bricks.

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.

Apple (AAPL -0.03%) has done this ingeniously for years. And while Amazon does offer its hardware at other stores such as AT&T (T +0.55%), Barnes & Noble (BKS -2.65%) and Best Buy (BBY +1.16%), it's easy to see how a centrally-aligned, strategically operated brick-and-mortar storefront could help Amazon with hardware sales.

Of course, Apple and Amazon are very different companies, with different operational structures and marketing strategies.

Shares of RadioShack jumped 16.5 percent to close at $1.06 Monday upon the CFO news. Amazon¡¯s were down 2.2 percent to $323.89. Amazon did not immediately respond for comment on this report. RadioShack declined to comment.

By: DocMemory
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