A once-dominant company, brought to its knees by competition from Apple and Amazon, is faced with dropping sales, a sinking share price, and angry shareholders. In walks the silver-haired founder of the company, who volunteers part of his reduced, if still substantial fortune, in order to buy the company and save the brand.
RadioShack is an interesting sort of place. Much like your local CVS, Radio Shack sells a broad assortment of items at considerable markups, aiming at customers more interested in convenience than cost. “The Shack” has a pretty varied shelf, selling big ticket items like TVs and smartphones, as well as more mundane doodads like cables and chargers. Understandably, the business is rapidly shrinking, thanks to online behemoths like Amazon (which even has its own branded line of peripherals) and the reasonable variety of electronics now found in Costco, Walmart, and Target, wherein RadioShack operates the “Bullseye Mobile” counter.
I received an Amazon giftcard the other day. As I perused the site and compared prices with other e-tailers such as Target, Best Buy and Wal-Mart, I found that, as always, Amazon undercuts its competition, especially with tax and shipping factored in. Since I spend much of my pocket change at Amazon, this discovery came as no surprise.
But what was surprising was an interesting metric; Amazon, nearly earth’s largest
bookseller, books a net profit of only 1.34%. Granted, they rely on volume, not margin, for profits, but this incredibly low number was compelling, and seems indicative of Amazon’s corporate philosophy of using loss leaders – like the Kindle Fire – and microscopic margins to catch and keep customers within its simple and increasingly expanding product and entertainment ecosystem. The thinking is, as long as one buys a book at Amazon – giving them, say 28 cents on every $25 hardcover sold – one may as well purchase digital content from Amazon’s burgeoning music, video, and e-book selections. And while you’re at it, why not everything else?