It looks like competition and shifting consumer trends are getting the better of consumer electronics retailer RadioShack (NYSE:RSH). It faces competition from brick and mortar retailers such as Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and Best Buy (NYSE:BBY) as well as online players like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY). Increasing online penetration and the advancement in mobile technology has changed the dynamics of the consumer retail industry. Retail companies are leaving no stone unturned to remain competitive as the customers today are more smart, aware and tech savvy.
Factors Impacting RadioShack
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 firm 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.