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Amazon Could Be the Next Brick-and-Mortar Giant

By Jeremy Bowman – Feb 4, 2015 at 5:50PM

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The e-commerce king is reportedly in talks to take over a number of RadioShack stores. Here is why it could be a brilliant move.

In an ironic twist of fate, the company poised to take over now-bankrupt RadioShack (RSHCQ) stores might be the one most responsible for putting them out of business in the first place. -4.77%), the e-commerce giant synonymous with retail destruction and disruption, is rumored to be in talks with RadioShack about moving into select store locations. Amazon would join Sprint and Brookstone in the pursuit of some of this prized real estate.

RadioShack has over 4,000 locations nationwide, though the number Amazon might acquire has not been revealed. Sprint, meanwhile, has expressed interest in taking over 1,300 to 2,000 locations.

This is not your mama's Amazon
Five to ten years ago, this move would have been unthinkable for the online juggernaut, but Amazon has changed. For years, the company fought tooth and nail against sales taxes and maintained distribution centers in only a few states, in order to avoid collecting them.

However, as both Amazon and the tax protests grew, the company ceded ground -- it now collects sales tax in 23 states and has added dozens of distribution centers across the country in order to improve delivery speeds. Now that it collects sales tax from a majority of the U.S. population, expanding into physical retail locations is not as surprising a step as it once might have been.

Similarly, Amazon now makes a number of tech gadgets and has already experimented with pop-up kiosks, vending machines, and other mall displays in order to promote these products. The pop-up stores have featured Kindle e-readers, Fire tablets, Amazon Fire TV, and Fire Phones, and Amazon has stepped up its innovation with products including the Echo speaker and the Dash scanner.

Considering Apple's wildly successful move to open its own stores and Microsoft's decision to follow suit, it makes sense to see Amazon aiming to show off its own hardware in the real world. 

The next era of retail
As Amazon sales have skyrocketed, other retailers have intensified the competition and begun to catch up. A few years ago, Amazon was stealing customers from Best Buy and other retailers due to "showrooming," where shoppers would look at items in brick-and-mortar stores and then buy them at a lower price on Amazon.

Since then, traditional retailers have become more savvy, stepping up their e-commerce platforms and making prices competitive. As a result, many big box businesses have begun taking e-commerce market share from Amazon, and browsing online only to buy in-store is now more common than showrooming, according to some surveys.

Amazon also seems to have realized that, despite the Prime two-day free shipping promise, nothing beats the satisfaction of getting an item immediately, and in-store pickup and ship-from-store capabilities give the brick-and-mortar chains a significant advantage. The company has made same-day delivery a bigger priority than ever. It recently introduced the Prime Now service, currently available only in Manhattan, which offers free same-day delivery to Prime members, along with one-hour delivery for a fee. The service competes with Google Express, which partners with retailers to provide one-hour delivery in select cities.

This is clearly the next front in the retail wars, making the acquisition of select RadioShack stores a logical strategy for Amazon. Not only would it enable the company to display and sell its new gadgets, it would also serve as a pickup point for customers or a way to facilitate delivery.

The demise of RadioShack is separate from its real estate portfolio -- the company has a large number of small-footprint stores in prime locations that should fit Amazon's needs perfectly (33 stores in Manhattan alone). Amazon should only need to pick up a few of these locations to have its desired impact. Rival Apple, similarly, has been very particular with its site selection.

This is a bold move for Amazon, but this company is no stranger to disruption. It is too soon to say what, if anything, will comes of these talks, but a move like this could create yet another outlet for future sales growth. 

Jeremy Bowman owns shares of Apple. The Motley Fool recommends, Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of, Apple, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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