RadioShack getting squeezed
Electronic retailers are trying hard to maintain their edge as online players like Amazon bring significant changes to the industry.
Increasing online penetration and the advancement in mobile technology have changed the dynamics of the consumer retail industry. Retail companies are leaving no stone unturned to remain competitive as customers become smarter, more aware and more tech savvy.
Declining Gross Margins
- RadioShack is experiencing a shift toward lower margin smartphones and mobile devices in its product portfolio, and this is taking a toll on its gross margins. In Q4 2011, the gross margins declined to 34.8% from 41% a year ago. The company expects this trend to continue in the coming years.
- Increasing online penetration has intensified competition in the retail industry. Online players such as Amazon have brought significant changes to the industry with their extremely competitive pricing, and retailers are trying hard to maintain their edge.
- RadioShack has also reset expectations for 2012 amid a challenging economic environment and fierce competition. It expects lower bottom-line numbers for 2012 compared to 2011 and anticipates a challenging first quarter for this year.
Changing Consumer Preferences and Lifestyle
- Lifestyle changes are also impacting the way customers shop today. With time being a crucial factor, customers prefer ease, variety and convenience while making purchase decisions.
- It's easy for customers to compare prices for similar products and search for the most lucrative deals. Consumer awareness has compelled retailers to increase promotional spending to persuade them into making purchase decisions.
In twenty years very few Physical Retail Stores will remain. Most left will be Big Box and online retailers. Once this happens people will see fewer choices and higher prices. Small retailers are being systematically destroyed by Walmart, Target and a few others. I do not invest in retail stocks.
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