gadget hardship

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Best Buy, GameStop and RadioShack are hoping for turnarounds with "strategies that highlight their abilities to obtain hot new smartphones and tablets," reports Ann Zimmerman in The Wall Street Journal (8/31/12). All three are "fighting to survive" amid "online competitors ... that offer low prices" and the rise of "downloadable products." As retail analyst Michael Lasser notes, "The economics of the industry have evolved -- and not to the benefit of most retailers." Except, of course, Apple, which is almost single-handedly driving "innovation in consumer electronics" through its own stores, online, and other retailers. Amazon is doing pretty well, too, its consumer-electronics market share having increased from two percent to 11 percent since Circuit City closed in 2009.

In response, Best Buy president Mike Vitelli says the retailer is "balancing secular decline in the industry with capturing growth in areas that are exploding." Unfortunately, a 40 percent decline in TV prices since 2007 means that Best Buy has "to sell almost twice as many TVs as five years ago to achieve an equivalent amount of revenue." RadioShack ceo Jim Gooch says, "We need to re-build consumer's knowledge of our brand." GameStop ceo Paul Raines says "the threat of losing the consumer has created a burning platform for change." GameStop's plan is to add "used iPhones and tablets to its portfolio of new and used videogames. It is also beefing up its digital download services to compete against game websites ... GameStop's profit fell 33 percent last quarter."

RadioShack, meanwhile, is "refashioning itself as a convenience store for smartphone buyers." At RadioShack, mobile devices now account for 51 percent of its sales, up from 44 percent a year ago, however "its gross profit margin has shrunk, falling eight percentage points." RadioShack is "also struggling to make money from the 1,400 kiosks it runs inside Target stores. And Best Buy is shrinking its fleet of big-box stores, pushing high-end appliances and retraining workers to focus on tech support. It is also opening hundreds of small stores devoted to mobile phones and tablets ... Best Buy recently reported profit fell 91 percent last quarter on the eighth sales decline in nine quarters at stores open at least 14 months. Its founder is trying to take it private." ~ Tim Manners, editor.

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