|Wed Feb 4 2015 14:30:40|
Amazon May Acquire the Cockroach of Retail
By: Ina Steiner
Amazon may be interested in acquiring RadioShack locations after the retailer files for bankruptcy, according to Bloomberg.
RadioShack has been referred to as the "cockroach of retail" for its ability to survive in a tough environment. Former ad executive and current marketing consultant Will Burns said of the chain in this Forbes column from 2012, "Somehow, despite the odds stacked entirely against them, and despite much bigger, seemingly more relevant competitors like Circuit City, they continue to plug along with their high-margin plugs."
But RadioShack is now facing bankruptcy. Bloomberg isn't actually saying Amazon is interested in the RadioShack business - rather, it's interested in acquiring the RadioShack locations:
"Amazon has considered using the RadioShack stores as showcases for the Seattle-based company's hardware, as well as potential pickup and drop-off centers for online customers, said one of the people, who asked not to be named because the deliberations are private."
As of the beginning of 2014, RadioShack operated 4,297 U.S. company-operated stores under the RadioShack brand located in strip centers and major shopping malls, as well as individual storefronts, according to filings with the SEC.
However, RadioShack doesn't own its store locations, it leases them. From its filings with the SEC under "Lease Commitments":
We lease, rather than own, all of our retail facilities. Some of these leases are subject to renewal options and provide for the payment of taxes, insurance and maintenance. Our retail locations comprise the largest portion of our leased facilities. These locations are primarily in strip centers, major shopping malls and shopping centers owned by other companies. Some leases are based on a minimum rental plus a percentage of the store's sales in excess of a stipulated base figure (contingent rent). Certain leases contain escalation clauses. We also lease a distribution center in Mexico, our corporate headquarters, and automobiles.
Does it makes sense for Amazon to operate 4,000 retail locations, and if so, how should they use them? As showcases for its hardware; hubs for same-day delivery (and don't forget, drones are coming); locations for pick-up lockers or a pick-up and drop-off counters?
Back in September, Bob Peck of SunTrust wrote:
"We think Amazon should consider buying some of the locations in bankruptcy for several reasons: 1) No tax law issues; 2) Amazon is already focused on local; 3) Showcase Amazon products and services (launch new services); 4) Improve pickup and distribution; 5) Broader ecosystem lift."
Do you think Amazon will eventually open retail locations of any kind, and what would you advise them to do?
PS: Amazon has already shown interest in B&M stores, this week it announced the grand opening of Amazon@Purdue, its first-ever staffed customer order pickup and drop-off location on the campus of Purdue University.
"Purdue students now have a new convenient option for receiving textbooks and other college essentials, all with the same great prices they find every day on Amazon, as well as a hassle-free way to return textbook rentals and other orders. Additionally, Amazon Student and Amazon Prime members at Purdue get Free One-Day Shipping on textbooks shipped to the West Lafayette campus area and are also eligible for Free One-Day Pickup on over one million items when shipped to the new Amazon@Purdue location."