In spite of stellar earnings in 2010, RadioShack was already showing signs of problems pertaining to its electronics business line. One of the corporate calamities occurred in the second quarter of 2011, when the company terminated its business relationship with T-Mobile – and switched to the United States’ (U.S.) largest mobile carrier called Verizon Wireless. Needless to say, Verizon’s “lower end” mobile devices cut into and reduced RadioShack’s gross profit margin since.

Source: Vincata

Intense competition in the tech retail space

Significant efforts since 2010 from both the previous and current management have yet to reduce operating costs. Make no mistakes. These executives and directors are top-notched. Nevertheless, they are facing the nearly insurmountable fundamental business problems: The consumer electronic retail is a cutthroat-competitive market, necessitating continual innovation and cost reduction to maintain viability.

Cushioned by size advantage and horizontal expansion capability, giant electronic retailers – Wal-Mart Stores, Inc. (NYSE: WMT), eBay Inc. (NASDAQ: EBAY), Amazon, Inc. (NASDAQ: AMZN), Best Buy Co Inc (NYSE: BBY), and other online retailers – can procure cheaper supplies with manufacturers than RadioShack, thus, allowing these gargantuan conglomerates to entice customers with cheaper deals and more affordable gadgets. In essence, larger competitors can offset their low net profit margin with higher overall sales volume.

Read More at: Retail Investor 360