Apple lands iPod deal with RadioShack
Exclusive -- Apple Computer and RadioShack have entered into a strategic partnership that will deliver Apple's full line of iPods to the shelves of thousands of RadioShack electronics stores in time for this year's holiday shopping season, AppleInsider has learned.
According to industry sources, RadioShack, the nation's No. 1 electronics specialty retailer, has agreed to carry Apple's full mix of iPod digital music players at several thousands locations beginning the fourth calendar quarter of the year.
The Fort Worth, Texas-based retailer operates nearly 7000 stores, which combine to fall within five minutes of where 94 percent of all Americans either live or work. Of the 7000 stores, approximately 5000 are company-owned stores with the remainder being dealer/franchise-operated locations.
Sources say RadioShack will stock all versions of the Apple iPod at company-owned stores that fit the iPod demographic. Stores outside major metropolitan areas, and those catering to a slightly older demographic, will stock a smaller selection of the players.
A vast majority of RadioShack?s franchise locations are also expected to begin selling Apple iPods in the coming months. However, sources said these locations would decide whether or not to carry the players, and what mix, on a per-store basis.
As one of the terms of the deal, RadioShack has agreed to purchase at least 450,000 iPods during the initial three-month period. Assuming iPods appear in only 70 percent of the company's stores, RadioShack would need to sell just shy of one iPod per store, per day to meet its contractual commitment. This leads sources to believe that RadioShack will likely sell a significantly larger number of the players by the end of the holiday shopping season.
Through both its online and brick-and-mortar retail stores, RadioShack currently carries a very small assortment of iPods from HP. The retailer sells a silver 6GB mini, 1GB shuffle, and 60GB iPod. However, in the case of 60GB HP iPod, RadioShack continues to list the player at its old retail price of $449 (about $50 above most advertised prices).
According to sources, RadioShack has been unable to reduce the cost of the player to fall inline with Apple's recent iPod price cuts because HP, due to its own iPod licensing agreement with Apple, cannot offer proper price protection on the players. As a result, sources say RadioShack jumped at the opportunity to work directly with Apple, knowing it would be offered an amicable price protection policy on the players moving forward.
Along with its current assortment of HP iPods, insiders say RadioShack has witnessed strong sales of iPod accessories and related gear. The retailer's partnership with Apple will further expand its accessory offerings to include the wide range of iPod accessories found in most Apple retail stores.
Apple recently ended its June fiscal quarter with a total of 25,000 worldwide distribution points for the iPod, an increase from the 21,000 points from the previous quarter. This was primarily due to the addition of 3,500 US-based Wal-Mart locations to its distribution network. The deal with RadioShack is expected to boost this figure to over 30,000 points by November.
If iPod sales at RadioShack boom -- and they are expected to -- sources say both companies will be open to a pilot program that will test sales of Apple's Macintosh computer line in the electronics stores. RadioShack currently markets computers from both HP and Compaq, but its arrangement with HP is said to expire at the end of the year.
For the quarter ended June 30th, RadioShack posted a profit of $52.3m or 33 cents per diluted share on sales of just over $1b.
According to industry sources, RadioShack, the nation's No. 1 electronics specialty retailer, has agreed to carry Apple's full mix of iPod digital music players at several thousands locations beginning the fourth calendar quarter of the year.
The Fort Worth, Texas-based retailer operates nearly 7000 stores, which combine to fall within five minutes of where 94 percent of all Americans either live or work. Of the 7000 stores, approximately 5000 are company-owned stores with the remainder being dealer/franchise-operated locations.
Sources say RadioShack will stock all versions of the Apple iPod at company-owned stores that fit the iPod demographic. Stores outside major metropolitan areas, and those catering to a slightly older demographic, will stock a smaller selection of the players.
A vast majority of RadioShack?s franchise locations are also expected to begin selling Apple iPods in the coming months. However, sources said these locations would decide whether or not to carry the players, and what mix, on a per-store basis.
As one of the terms of the deal, RadioShack has agreed to purchase at least 450,000 iPods during the initial three-month period. Assuming iPods appear in only 70 percent of the company's stores, RadioShack would need to sell just shy of one iPod per store, per day to meet its contractual commitment. This leads sources to believe that RadioShack will likely sell a significantly larger number of the players by the end of the holiday shopping season.
Through both its online and brick-and-mortar retail stores, RadioShack currently carries a very small assortment of iPods from HP. The retailer sells a silver 6GB mini, 1GB shuffle, and 60GB iPod. However, in the case of 60GB HP iPod, RadioShack continues to list the player at its old retail price of $449 (about $50 above most advertised prices).
According to sources, RadioShack has been unable to reduce the cost of the player to fall inline with Apple's recent iPod price cuts because HP, due to its own iPod licensing agreement with Apple, cannot offer proper price protection on the players. As a result, sources say RadioShack jumped at the opportunity to work directly with Apple, knowing it would be offered an amicable price protection policy on the players moving forward.
Along with its current assortment of HP iPods, insiders say RadioShack has witnessed strong sales of iPod accessories and related gear. The retailer's partnership with Apple will further expand its accessory offerings to include the wide range of iPod accessories found in most Apple retail stores.
Apple recently ended its June fiscal quarter with a total of 25,000 worldwide distribution points for the iPod, an increase from the 21,000 points from the previous quarter. This was primarily due to the addition of 3,500 US-based Wal-Mart locations to its distribution network. The deal with RadioShack is expected to boost this figure to over 30,000 points by November.
If iPod sales at RadioShack boom -- and they are expected to -- sources say both companies will be open to a pilot program that will test sales of Apple's Macintosh computer line in the electronics stores. RadioShack currently markets computers from both HP and Compaq, but its arrangement with HP is said to expire at the end of the year.
For the quarter ended June 30th, RadioShack posted a profit of $52.3m or 33 cents per diluted share on sales of just over $1b.
Comments
(I also saw a customer tell another customer just before Christmas that she bought her son an iPod for a present--and saved some money by getting a different brand iPod. In other words, a Creative flash player no doubt. Poor kid. I hope customer #2 wasn't persuaded to do the same!)
Having more places to get iPods--MANY more--is a big thing: I see a lot more Radio Shacks around than I see other chains that carry iPods. And they're a smaller sized store, located in shopping centers that could never fit a big Target etc.
It would be an even bigger thing for Macs!
I side with HP on the price protection thing. That's harsh! And now HP may get less shelf space at Radio Shack too. I don't know why HP keeps coming back for more abuse
Originally posted by nagromme
Having more places to get iPods--MANY more--is a big thing: I see a lot more Radio Shacks around than I see other chains that carry iPods. And they're a smaller sized store, located in shopping centers that could never fit a big Target etc.
MANY more is right
Just think
3 x 30 x 5 x 5000 = 2.25 Million
----------------------------------------
3 months
30 Days each month
5 per day, per store
5,000 + Stores
Radio Shack. The Wal-Mart of technology stores. It's about time they started carrying something with quality in their closet-sized locations. I mean, really -- I've seen better-made product in All-For-A-Dollar.
Of course they're happy with carrying the iPod. It distracts customers from the crappy transistors and CB radios on de shelves.
Hey, I keed. I keed the McDonald's of electronics stores.
An 299 dollar iPod isn´t something you throw into the basket along with the ethernet cable on an impulse. You know you are gonna buy one when you leave your front door.
Those who haven´t planned on buying a iPod are much much more likely to buy something cheaper than a HD iPod or something with more "features" than a shuffle when in the shop.
Originally posted by Anders
I really don´t think that more people are gonna buy an iPod just because there are more outlets. As long it is fairly easy to buy one they are set.
An 299 dollar iPod isn´t something you throw into the basket along with the ethernet cable on an impulse. You know you are gonna buy one when you leave your front door.
Those who haven´t planned on buying a iPod are much much more likely to buy something cheaper than a HD iPod or something with more "features" than a shuffle when in the shop.
They will be selling a lot with the holiday sales as people go to buy radio controlled race cars for Billy. That's where RadioShack shines and they do sell alot of cell phones because they have a good variety of devices and more than one service.
Will iPods be sitting next to Zens on the same shelf?
What I find most positive about his is that I'm sure this deal is not just for RadioShack to get into selliing iPods as they start to plateau in sales, but they are positioning themselves for the as yet, unannounced next generation iPods and possibly video players. Apple wants a large distribution system in place to take things to the next level!
I hope.
Originally posted by Anders
I really don´t think that more people are gonna buy an iPod just because there are more outlets. As long it is fairly easy to buy one they are set.
An 299 dollar iPod isn´t something you throw into the basket along with the ethernet cable on an impulse. You know you are gonna buy one when you leave your front door.
Those who haven´t planned on buying a iPod are much much more likely to buy something cheaper than a HD iPod or something with more "features" than a shuffle when in the shop.
Additional distribution almost always leads to incremental volume, in almost any business. It's one of the four "P's" of marketing (Product, Price, Promotion, and Place). The more accessible a product, the more opportunities there are for someone to buy it.
Granted, iPods are a higher ticket item than, say, a box of cereal; but there are thousands of Radio Shacks in malls and towns around the country that don't have an Apple Store, making it easier to find and buy than it was before.
Its a premium item. Those who have the dough to impulse buy an iPod aren´t the typical customers of RS. And the rest would know where to go buy it otherwise.
WARNING: CAR ANALOGY.
Volvo doesn´t have to have a dealership on every street corner either. Those who want one know where to go.
But I agree on the basic structure, only disagree on the %.
Originally posted by Reid
Additional distribution almost always leads to incremental volume, in almost any business. It's one of the four "P's" of marketing (Product, Price, Promotion, and Place). The more accessible a product, the more opportunities there are for someone to buy it.
Granted, iPods are a higher ticket item than, say, a box of cereal; but there are thousands of Radio Shacks in malls and towns around the country that don't have an Apple Store, making it easier to find and buy than it was before.
And in many towns here and elsewhere in rural America the RadioShack IS the equivalent of a Bose Store in San Fran. That isn't to disrespect these towns, but that's just how it is. My folks think Stuart Anderson's steak houses are the cultural equivalents to Tavern on the Green, NYC.
Originally posted by Anders
I really don?t think that more people are gonna buy an iPod just because there are more outlets. As long it is fairly easy to buy one they are set.
An 299 dollar iPod isn?t something you throw into the basket along with the ethernet cable on an impulse. You know you are gonna buy one when you leave your front door.
Those who haven?t planned on buying a iPod are much much more likely to buy something cheaper than a HD iPod or something with more "features" than a shuffle when in the shop.
This will impact sales two ways. First it means more iPods to be shipped to fill distribution channels. You can look at this as the extreme worse case scenario, Radio Shack will put 450,000 iPods on their shelves and each one sold is one that would've been sold otherwise at BestBuy (or where ever). It still results in more units in existence in inventory, shipping and on shelves. It also means more units to discount and sale-out with product cycles.
But of course it will be better than that hypothetical worse case scenario. Instead Radio Shack and other retailers will compete with each other to sell iPods. This will come in the form of advertising, promotions, sales, bundles, etc... Customers may take advantage of credit programs or simply buying from where and who they trust.
This is good for Apple.
But they probably DO have Radio Shack, and for a lot of people, it's still their definitive electronics store. Heck, I often turn to them when I need cables, adapters, etc. that nobody else sells.
"Hey Wilbur! Them iPod dealies are coming to Rat Shack! Break out the piggy bank, I want to take my music out on the tractor!"
Originally posted by Anders
I really don´t think that more people are gonna buy an iPod just because there are more outlets. As long it is fairly easy to buy one they are set.
Exactly. Many people don't have any place within 5 miles to buy an iPod. MANY people. And that will now change for many of them.
I'm going down the list of my family members in different cities and thinking where they could go to buy an iPod nearby. Noplace! But they all have Radio Shacks...
And iPods can fall into an "impulse" situation of a certain type: people who already have "pretty much decided" to get an iPod soon. Some will go through with it, some won't... but seeing on in person ready to have NOW (instead of having to order online) can snare a few of those fence-sitters.
Originally posted by Anders
Place only have a limited significance when speaking upscale products. Radio Shack will sell some iPods that would not otherwise be sold. But far the most sold through there would have been sold through other channels.
With all due respect, RS obviously feels very strongly that they'll be able to move a large amount of iPods. Why else would they order so many?
Originally posted by wilco
With all due respect, RS obviously feels very strongly that they'll be able to move a large amount of iPods. Why else would they order so many?
It doesn´t contradict what you quote me on
I´ll beat everybody on convenience. Everybody with an internet connection is less than 30 feet from a iPod store.
Originally posted by Skittles_the_cat
This is great because of the potential for Mac sales in Radio Shack. Finally, you will be able to walk in and see Macs in a store in almost any town in America.
people who buy computers at radio shack (moddern day, post TRS80, all compaq) are stupid!
Originally posted by Anders
I´ll beat everybody on convenience. Everybody with an internet connection is less than 30 feet from a iPod store.
Yes, but there are still a LOT of people who will not use their credit cards on the internet. That, plus the fact that people still love to shop at brick and morter stores shows why Radio Shack still exists -- which even surprises me.
Originally posted by a_greer
people who buy computers at radio shack (moddern day, post TRS80, all compaq) are stupid!
Actually, there is no way all of those people are stupid. It might not have been the smartest thing they did in their lives, but that's another story. Besides, intelligence isn't everthing.
There are not Apple stores or even COMP-USA (a horrible second choice to a real Apple store) everywhere. Take Louisville, KY for example. FOUR MILLION people. Nearest Apple store: about 80 Miles to Cincinatti. 110 miles to Indy. There is a Comp USA, and lots of places that carry iPod, but they aren't electronics stores like Radio Shack. Again, important part of this story for me is that they might eventually have Macs! Intel Macs at that, most likely. The intro of the iMac (based on intel) should be beyond HUGE when it comes. Remember, Jobs said it would be the consumer end first. Maybe the high end will be out too, with both intel and ppc chips?
All in all, probably a better deal for RS than Apple. But I think it should not hurt Apple, if they do this right. Radio Shack employees need an education on Macs though. For example, in all my years of using Macs, I think RS is the only place I have gone for PRAM batteries. But, the guys working there will insist they don't have them if you tell them anything about it being for a Mac. I just tell them the part, and not what it is for... Probably not a lot of Mac using guys working at Radio Shack--just a guess--but I hope they are open mided enough to give it a real shot and not just demean the systems to the customers.
Originally posted by Skittles_the_cat
Actually, there is no way all of those people are stupid. It might not have been the smartest thing they did in their lives, but that's another story. Besides, intelligence isn't everthing.
There are not Apple stores or even COMP-USA (a horrible second choice to a real Apple store) everywhere. Take Louisville, KY for example. FOUR MILLION people. Nearest Apple store: about 80 Miles to Cincinatti. 110 miles to Indy. There is a Comp USA, and lots of places that carry iPod, but they aren't electronics stores like Radio Shack. Again, important part of this story for me is that they might eventually have Macs! Intel Macs at that, most likely. The intro of the iMac (based on intel) should be beyond HUGE when it comes. Remember, Jobs said it would be the consumer end first. Maybe the high end will be out too, with both intel and ppc chips?
All in all, probably a better deal for RS than Apple. But I think it should not hurt Apple, if they do this right. Radio Shack employees need an education on Macs though. For example, in all my years of using Macs, I think RS is the only place I have gone for PRAM batteries. But, the guys working there will insist they don't have them if you tell them anything about it being for a Mac. I just tell them the part, and not what it is for... Probably not a lot of Mac using guys working at Radio Shack--just a guess--but I hope they are open mided enough to give it a real shot and not just demean the systems to the customers.
Wow I didn't know Louisville was so centrally located to so many other cities. Portland, Oregon was high and dry for Apple Stores too until now there are 2 in the metro area - though I think Macs are represented at a higher than normal rate here.
I like your idea of iPods being the educational bridge for RS. The idea of iMacs there would be a huge boon, now that Jobs has probably an idea for about how many Apple Stores they really need, the RS outlets should fill in the gaps nicely, hit a newer market and get Macs out to places that only a Wal-Mart would be.
Also if Apple is evolving more of a phone presence (whether they actually brand a phone or not) RS stores are great places to display stuff in windows in suburban malls.
Slowly follow Sony...