It is expensive to do business on the corner today. If you own a shop at the corner in New York, you need to sell a lot of products to pay your staff. House prices are high too. It`s cheaper to have an online store.
Take a look at Radioshack (RSH), which is down -38,5% (1YR). They are doomed. A great shop with great products in a great market for many years. Now, things have changed. Radioshack is declining and this is a sign of the era in the retailer business.
Why should people buy a cable from Radioshack when they can buy it from Amazon with a better price? You can buy a cable for $20 Radioshack brand, but Amazon (AMZN) can sell the same set for only $10.
In addition; Amazon can ship for an extra $3,99 within 24 hours. Of course you can wait a day for the cables. Much better than spending time in the car driving back and forth, plus spending a lot of money on gas.
If I need any experts to tell me about the cables, I can chat with Amazon. In addition to over prices gear, Radioshack have poorly trained and underpaid staff, so my decision is easy. Radioshack need a new business model and that is fast. Radioshack is down -17,7% only this year (2014).
Retail sales are down so far this year. This is probably the new trend now. I wrote about it last year and this behaviour will affect coffee shops like Starbucks (NASDAQ: SBUX) too. The stock is down -6,2% in 2014.
Amazon is doing everything right. They are big, have low prices which increase their market share, which can be leveraged going forward. They are effective and have a great distribution. The shareholders in Amazon know that better than others.
Amazon`s share price moved more than 50% last year. A big jump from $257,31 per share to more than $398 per share. It`s a dynamic company with cloud computing with AWS and digital streaming through Prime Instant Video.
Amazon competes in the E-commerce Catalog & Mail Order House industry, which holds about 40 percent of the industry market share. Amazon is better than eBay on their search capability to optimize user purchasing experience.
Amazon Prime is a key growth for Amazon. They try to enter the music industry and will try to grad some markets share of music sellers. Many have rated Amazon`s Prime better than Netflix (NFLX). It will be difficult for Amazon to everything I think.
They try as best as they can to take a big bite of market shares in the entertainment industry, where they try to beat the industry leader Netflix. Amazon is down -7,1% so far this year, but I think this company will continue to grow.
So, watch out for Radioshack. They can go bankrupt, while Amazon will keep going forward I think. Those two different companies represent two different business models and reflect the new era in the new online business world.
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Ket Garden
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