Electronics retailers these days have plenty going for themselves, especially with the emergence of fancy new mobile handsets in the market. However, with the discount pricing being a trend these days, a large chunk of the retailers’ profits are cut down. One such retailer is RadioShack which has almost half of its revenue coming from handsets, yet it doesn’t seem to be having a good time. Its partnership with major retailer Target has come to an end as the two companies have decided to part ways after April. What this basically means is that the RadioShack mobile/smartphone kiosks in Target stores all over the U.S will be shut down. It’s clear that both companies weren’t benefiting majorly from the partnership and the decision has been reached with mutual content apparently. The partnership between the two began in 2010 to sell smartphones inside Target stores. It is believed that the two retailers tried to strike a new deal with each other which would eventually be profitable for the both, but talks didn’t bear any fruits.
Perhaps Target will look to strike a deal with other major retailers out there to continue the mobile phone business going forward. As for RadioShack, there’s nowhere to go but up. It’s currently going through a crisis of sorts with its debt rating being cut down by Fitch which is a credit ratings agency. The decrease in profitability is believed to be causing the lowering of the debt rating of RadioShack. So maybe RadioShack could come out strong by selling devices in its stores. It certainly has a huge presence in the American market, although sales haven’t been that great of late. Even when we think of smartphones, there are online retailers like Amazon as well as other retailers who offer smartphones for a great discount. Sure RadioShack has online presence too, but not to the extent of Amazon’s. But it can make up for that with its retail outlets. We often see these retailers selling the device for massive discounts while the carriers or the manufacturers themselves sell it for a higher price tag.
Analyst Scott Tilghman said the partnership with Target didn’t work for RadioShack because it wasn’t allowed to sell accessories in the kiosks. Accessories are usually believed to have higher profit margins compared to most devices. Here’s what the Executive VP of RadioShack Mr. Telvin Jeffries had to say – “In order for RadioShack to have continued this relationship, we needed to establish a new agreement that would be financially appealing to both companies.Ultimately, we amicably agreed to dissolve the relationship.”
So after April 8, it’s an end to the rather unfruitful journey the two companies have had, so we hope something good comes out of it for both Target and RadioShack. What are your thoughts on this breakup?