Amazon is reportedly interested in buying some RadioShack stores, Bloomberg reported Tuesday morning.
Although Amazon has built pop-up shops and Kindle vending machines in the past, the company has never had a physical retail store presence before (rumoured plans for a flagship store in Manhattan never came to fruition).
So, why would the digital marketplace want to buy a bunch of physical stores?
Robert Peck, analyst at SunTrust, has some pretty convincing arguments for why it actually would make a lot of sense for Amazon.
Via Peck, here’s why Amazon should consider buying some of the bankrupt RadioShack locations:
1. No tax law issues
“Amazon originally avoided local presence due to tax laws, which have now shifted and don’t provide a barrier any longer.”
2. Amazon is already focused on local
“Clearly Amazon is moving more into local commerce with the rollout of its Amazon Fresh grocery delivery services — so it’s focused on the opportunity”
3. Showcase Amazon products and services (launch new services)
“Amazon could use the footprint of these smaller stores to show case their new products and services. Displays of Kindles and Fire phones, would let consumers come in and try the technology to see if they liked it. Amazon could also demonstrate the wide variety of services it offers over Prime, like video streaming and music. We think mainstream consumers are probably unaware of the extent of the offering. Further, the sales staff could help educate and explain products. ) It’s hard to remember, but the first Apple stores were much in that same vein (recall learning how to swipe, zoom, and pinch). In addition, for whatever long term ambition Amazon has around Payments, this could be a base for Amazon to build off of and a chance to convert consumers on a local level to start using Payments. Lastly, Amazon has also commented in the past about attaching services to sales of goods (consider the installation business for electronics or appliances). A local presence could also educate on the availability of these services to consumers.”
4. Improve pickup and distribution
“However, we think the biggest reason for Amazon to consider this strategy would be to improve local distribution and efficiency. RadioShack stores could provide, not only a place for consumers to come in to pick up purchases or items that are “in stock” but also a distribution area for Amazon╆s couriers to store and pickup merchandise. Interestingly, this could be the main point of Amazon╆s drone initiatives. Instead of having Drones delivering directly to consumers only, perhaps they could be used to move small merchandise between these smaller stores in a city, augmenting the availability of “local pickup and in stock merchandise” or even allow for more scheduled deliveries.”
5. Broader ecosystem lift.
“While the prior items focus on the lift to Amazon products and services, perhaps one of the greater lifts to Amazon may be to its 3rd party sellers, who would be incentivized to give more of their inventory to Amazon so it can be available “locally.” This would: increase the velocity of sales for sellers, augment the consumer experience (they wouldn’t have to wait for shipping) and provide more power to the overall Amazon platform. In addition, a lift to 3rd party sales could be beneficial to margins.”
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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