RadioShack, three other phone sellers join forces: Financial News – Yahoo! Finance

RadioShack announced on March 6 that they have team up with Dangaard, Brightstar & Axiom for the purpose of purchasing cell phones to be targeted at their combined 70,000 points of sale in 52 countries.

This is an amazing example of leveraging buying power. Consider the ‘voice’ that RadioShack would have on its own as a buyer representing approximately 7,000 points of sale and has now combined to increase that voice by a factor of 10.

This is positive news for RadioShack following a month that has seen the announcement of closure of some of those points of sale along with departure of RadioShack’s CEO.

The linked article describes that the new group will benefit itself and its customers by leveraging information learned during the retail experience from one country or region to the next throughout the group.

Potentially more important for the bottom line, is the benefit that all will yield if they are truly able to consolidate the disposal of ‘end of life’ product. Consolidation will decrease ‘fire sales’ within stores or in secondary markets, which detract from new models hitting the shelves.

Good for the company not so good for consumers.

This means that consumers will not see in-store discounts to clear the shelves of these same ‘end of life’ products. Instead they’ll be boxed up, shipped, and possibly sold to a consolidated source, that will either destroy or refurb the product. It is not uncommon for the manufacturer to bear bear the brunt of the cost of destruction. Similarly, refurbed products can often be offered for over the counter replacement of defective phones, sold to carriers for the same purpose or sold in other channels.

The primary goal of consolidation is to remove it from the channel and remove it from the target of the consumer’s purchasing dollars. If its gone then the group would earn higher margins on current year products that have not been discounted through the year yet.

Margin 30% on Last years phone discounted for fire sale
$25 x .3 = $7.5 Margin

30% on newly introduced product
$150 x .3 = $45 Margin

If there are only a few tens of thousands of old product left and millions of new on the shelves and on order, its not hard to see the benefit.

However, If consumers have the choice of a phone for next to nothing v. a phone for $200 they might vote with their wallets and skip the latest, greatest technology until its discounted next year. Eliminate the discount and everyone is happy except the frugal consumer.
leveraged buying power
Radio Shack
end of life products