Amazon.com, Inc. AMZN is once again rumored to be interested in acquiring select retail outlets from RadioShack Corporation RSHC. Here are four reasons why the rumor might actually come true.
Research shows that a bad return policy can deter potential shoppers. Customers seem to be generally satisfied by the way Amazon handles returns, but it's no replacement for a true in-store experience. This is one area where Best Buy Co Inc BBY has a clear advantage.
Cody Willard, chairman of Scutify (a financial social network), thinks Amazon could use physical stores to level the playing field.
"Amazon has got so much growth ahead in continuing to take retail market share," Willard told Benzinga. "Nothing would surprise me. I don't think the stores are going to be a destination for retail shopping. It's going to be a brick-and-mortar interface for you for Amazon."
Willard doesn't think the stores would act as a traditional retail outlet.
"This is just another way for Amazon to touch the customer," he said. "As an Amazon customer, anecdotally speaking, I get frustrated with handling all the boxes [for returns]. If I could just run in the shop and get it processed it'd be a lifesaver."
Willard said Amazon's whole business model is based on making it easier to shop with the company. These stores could accomplish that.
"I have enough faith in [Amazon CEO] Jeff Bezos," Willard concluded. "Having seen what he has done long-term in his company…if he's going to do this, he'll make it work."
Everyone Loves A Sale
This RadioShack rumor is sort of like Black Friday for Amazon. By taking the stores now, Amazon would receive a much better deal than if it waited to buy or build retail space in the future.
"If they were going to buy them, this is going to be the time they'll get a really good deal on them," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "They're gonna be selling assets at bankruptcy/fire sale prices."
Better still, Udall said that RadioShack stores are in a lot of decent locations. He speculated that if Amazon were to sell products at the stores, it would likely limit the selection to the site's top 100 or 200 items.
"They're very good at knowing what's trending," Udall concluded.
Consumers Have No Patience
Global Equities Research analyst Trip Chowdhry said that Amazon previously had no reason to build or acquire physical stores. Consumers could go online to save money and avoid sales tax.
Now that prices are rising, the primary reason consumers shop online is convenience. That may not be enough to persuade those who want an item immediately, however.
Chowdhry told Benzinga that Amazon could serve those customers and be "very close" to where consumers are by taking over a number of RadioShack locations.
3DPrintingStocks.com founder Gary Anderson doesn't think it makes any sense for Amazon to acquire dying RadioShack outlets.
"Maybe for logistics," Anderson told Benzinga. "But I don't think Amazon is going to all of a sudden go to a brick-and-mortar place unless they want to do it in select locations."
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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