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Investors Give RadioShack a Second Chance

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Maybe now they can afford to close those stores...

thebriang

Oct 3, 2014, 4:53 PM
Its crazy to me that they said they didn't have enough money to close money-losing stores, but maybe this will help. Then they can transfer the closed stores' inventory to other stores that might actually sell them.

Then they can stop making so many bad SWAT sales that they know are going to be returned in a day or two when the phone they really want comes in stock.

Its bad sales and cellular returns that are killing radio shack, if they had their cellular game tight nothing else would matter, one fully qual'd new activation makes more profit than everything else they sell in the store that entire day. And the opposite is also true for returns, one return kills the stores profit for the day.
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yourvoiceofreason

Oct 4, 2014, 10:05 AM
I find what you said interesting. I am not familiar with the operations of Radio shack. Could you explain in a little more detail the way they handle phone activations and why there are so many returns?
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Shakezula84

Oct 4, 2014, 10:48 AM
I use to work at RadioShack and for the store I worked at it was chargebacks that hit us hard.

If someone activates a new line of service and gets the phone, but never pays the bill, then the carrier will not pay radioshack. Which means that $600 phone we gave for $0 but will receive $1000 from the carrier just turned into a $600 lose. To make it worse, the window is up to 6 months with some carriers.
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T Bone

Oct 6, 2014, 10:03 AM
The problem you note with returns is endemic throughout the entire wireless industry and is the reason why carriers are trying to abolish contracts. Contracts don't make money in the short run, they only make money in the long run, over two years, but for every customer who fulfills a 2 year contract there are 3 others who cancel within 3 months, meaning that contracts lose money for the carrier in the majority of cases, and the only way to even break even is to either sign a ridiculous number of customers every year or reduce your churn down to almost zero.
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Zpike

Oct 6, 2014, 10:50 AM
>>Contracts don't make money in the short run, they only make money in the long run

I'm pretty sure their networks are paid for... many times over. Every monthly service fee paid to a carrier is pure profit. So, they make money right away.

In this statement you can only be referring to the loss taken BY THE CARRIER on a subsidized device. But we all know that a substantially large number of new activations happen through 3rd party vendors, in which case the carrier not only assumes zero risk but also makes an additional PURE profit from the ETF.

I'm not convinced that mega rich corporations that made their fortunes on cellular contracts are now about to lose their shirts on them.

>>but for every customer who fulfills a 2 year co...
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Brad K

Oct 7, 2014, 10:20 AM
>>I'm pretty sure their networks are paid for... many times over. Every monthly service fee paid to a carrier is pure profit. So, they make money right away.

There is no way the networks are paid for, they are constantly working to improve and expand their networks (even if it doesn't seem like it with some carriers) weather it be through tower repairs, expanding LTE, etc.

How do you figure monthly service fees paid to a carrier are pure profit? You know how a business is run? There are operating costs, you have to pay for utilities, leases on stores/office buildings, inventory management, and the biggest expense of them all by far, employees. Even if you're referring to only the network itself there is still maintenance costs, elec...
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Zpike

Oct 7, 2014, 10:39 AM
>>How do you figure monthly service fees paid to a carrier are pure profit? You know how a business is run?

It's simple economics really. I decide I want to open a lemonade stand. So, I go to the local government and convince them how awesome it would be for the community to have my lemonade stand. I secure a bunch of tax incentives and government subsidies and then I build my lemonade stand for cheap. My business takes off and I amass the wealth to acquire a virtually limitless supply of lemons. I build and automate a factory to squeeze lemons into cups for my stand.

Initially my factory cost me a great deal of money. But the markup on my lemonade is so ridiculously high that I've paid for the entire operation within a couple years. ...
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Brad K

Oct 7, 2014, 12:13 PM
Good luck with that fantasy land scenario. In the real world a company pays out anywhere from 30% to 50% of their gross sales in just payroll. There is no way you can put enough cash reserves away to indefinitely cover that and all other operating expenses. I have actually ran a business before and believe me, there is much more to it than you think.

With there being competition, if cell carriers were that profitable, for one, cell service would be dirt cheap from carriers continuing to better the competitors price, and for 2, there wouldn't even be discussions about carriers buying other carriers out because who would want to sell a company that's pure profit and has no expenses?
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Zpike

Oct 7, 2014, 2:13 PM
>> In the real world a company pays out anywhere from 30% to 50% of their gross sales in just payroll.

I doubt that's true of wireless carriers.

>> There is no way you can put enough cash reserves away to indefinitely cover that and all other operating expenses.

That's certainly true of small business.

>>I have actually ran a business before and believe me, there is much more to it than you think.

I have too. So, I know what's involved. My example was an analogy and simple by design. I realize it's not an exact example of the real world. I also realize that wireless carriers have operational expenses that go beyond their cash reserves. And pure profit is probably only theoretical in nature.

My point was that wireless carri...
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Brad K

Oct 7, 2014, 2:40 PM
Cash reserves are not used for operating costs unless the business is not doing well. They are for those "just in case" situations where they have a bad year and ended up at a loss, or for paying down debts, or those situations where Apple goes sue happy and they need to pay out a settlement.
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Zpike

Oct 7, 2014, 5:02 PM
Regardless, it's hard to argue that a company sitting on over $50 Billion in cash reserves hasn't already paid for its network.
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T Bone

Oct 7, 2014, 12:48 PM
I'm sorry but there is simply no such thing as a network 'being completely paid for' to the point where they never have to spend another dollar on it ever.


They are constantly improving and upgrading the network, constantly doing maintenance, and constantly doing research to create the next generation of network technology.


There is no such thing as the network being 'done'...

If we ever reach a point where 'the network is fully built and paid for' and nothing more needs to be done then one of three things is true:

Either

1. The wireless industry is dead

or

2. The wireless industry is dead

or quite possibly

3. The wireless industry is dead

The network is NEVER going to be finished, ever, the day they stop ...
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Brad K

Oct 7, 2014, 1:54 PM
>>They are constantly improving and upgrading the network, constantly doing maintenance, and constantly doing research to create the next generation of network technology.

Exactly, one of the major things to know about running a business is that the minute you decide you're at where you need to be and stop improving is the same minute you get passed up by your competitors.
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Zpike

Oct 8, 2014, 11:17 AM
>>I'm sorry but there is simply no such thing as a network 'being completely paid for' to the point where they never have to spend another dollar on it ever.

That's not what I'm trying to say and you know it. I can only assume you have read the rest of the thread with Brad K. So, it's a little dishonest for you to misrepresent what I'm trying to say.

If I asked you if your car was paid for would you say, "no," because you knew you were going to be putting gas in it every week and that it would eventually have some maintenance costs? Or would you say, "yes," because you had made the last payment to the bank and the car was officially yours?

Likewise, the carriers had an initial investment to build out their networks. And I maintain t...
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Zpike

Oct 6, 2014, 10:32 AM
Because the carriers never owned most of the devices on their network in the first place. Third party vendors pony up all the risk on the subsidized devices, while the carriers hold them over the barrel. And since the carriers are assuming little to no risk with the devices, they have ZERO right to charge ETF's and ZERO right to lock consumer devices running on their networks. The only reason they get away with it is because the socialists and communists running our government like corporate price fixing schemes and have no respect for the individual rights of American citizens.
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T Bone

Oct 6, 2014, 10:50 AM
The carriers are not assuming zero risk. Most new activations and upgrades still go through the carrier, either at the stores or over the phone or website ordering. Moreover, even when contracts come in through third party retailers, when customers cancel within the first few months, when they cancel, customer almost never pay the ETF (I would estimate that at least 90% of ETF's are waived, and probably more than that) the carrier loses money on most contracts, and that is before factoring in warranty claims, sometimes 3-4 warranty exchanges are done for the same customer in the first year of a contract, tying equipment to the carrier translates to a net loss for the carrier a large percentage of the time.

Contracts were introduced ini...
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Zpike

Oct 7, 2014, 10:18 AM
>>The carriers are not assuming zero risk.

In the case of third party vendors, they are. And that is what I stated in my previous post.

>>Most new activations and upgrades still go through the carrier, either at the stores or over the phone or website ordering

I'm not willing to accept that statement without some factual numbers to back them up. I find it hard to believe that Best Buy, Walmart, Target, Amazon, New Egg, Tiger Direct, and a plethora of other third party retailers find it profitable to sell third party cellular service if the majority of activations go through the carriers. Especially considering that every single source I just named consistently has better deals than the carrier branded stores.

>>Moreover, even whe...
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Brad K

Oct 7, 2014, 10:31 AM
I'm not sure if/how the third party carries you speak of differ from Agent locations such as the one I work for, but when we sell a subsidized phone the carrier reimburses us for the lost cost of the phone + the commission on the sale. If the customer cancels within the first 90 days (or it might be 120 days, not 100% sure) we will get charged back for just the commission on the sale. I currently work for an Agent of US Cellular and I used to run several Cricket stores and it worked the same way there (was before the AT&T buyout).

So of the 2 carriers I've been involved with, neither of them made the Agents eat the costs of subsidized devices.
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Zpike

Oct 7, 2014, 11:44 AM
When I was in cell phone sales we bought the device at pretty much whatever the retail price was. If a customer had great credit, the carrier would sometimes reimburse us for a discount of $20 or $30 or whatever discount they qualified for. But they never reimbursed us for the actual device. The way it worked for us was that we either broke even or took a small loss on the device in order to make the commission. So, if we got charged back for the commission, we were totally screwed. This is why we eventually started pushing pre-paid harder than contract services.

The only place where we got any kind of a deal was one of the carriers (T-Mobile I think), let us keep like half of the deposit.
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Brad K

Oct 7, 2014, 12:19 PM
Damn, I don't know why anyone would want to be a third party dealer if you have to eat the cost of charge-back devices. My guess is when it's structured like that the monthly residuals the dealer gets per customer has to be much higher.
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Zpike

Oct 7, 2014, 1:17 PM
The commission was good when we were able to get it, but it was a lot of headache. And even worse is the fact that we would do all the work to enter the customer data into the carrier's system and explain the devices and the services to the customer. Then the carrier's system would ask for a $500 deposit and the customer would leave. A month or so later the customer would get a letter in the mail offering them service for $75 or $100 deposit. So, the carrier would get the customer and we would get entirely screwed out of the commission.
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thebriang

Oct 6, 2014, 1:54 PM
Radio Shack has done what so many other retailers have done and got rid of most of the old skilled salespeople that made slightly more money but kept the old management, which is often half the problem.
Its is difficult to get many of these 50+ year old mangers to embrace the turn around from just box retailer to cellular activations, which should be their focus. Then they started hiring a ton of first time employees with no experience, to be trained by a manager with no real sales experience, and they dont have a clue about selling phones, qualifying customers, overcoming objections, compare and contrast, and closing the sale. Its typically like, Oh you want that?, okay let me call somebody to see who we do that. Then the activation ta...
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