CAVR 10Q out. Circuit City deal ended. I figured it was a matter of time, when that would happen. A huge company like Circuit City is not going to continue business with a supplier that goes into competition with them, by selling direct via the internet [or any other means]. It would not surprise me if many other established retail chains drop Carver for the same reason.
When any company decides to sell direct to the public, they are making one enormous step. They are essentially stating to the world that they are no longer merely a manufacturer/supplier. They become a retailer. Thus, if a system cost 100 to make and they wholesale it to retailers at 300, the retailers then sell it for 600. [the largest chains like CC would buy same for 250]
But selling direct, cuts out all middlemen, IE distributors, regional warehousing, sales rep groups, etc. So in the above hypothetical example Carver might net 200 per sale, whereas a direct sale to the consumer at the same 600, brings Carver 500 for the same sale.
While this move is costly for Carver, and will no doubt take a year or so to absorb, in the long run, it is my opinion that they will make more money. I don't anticipate good financials for the rest of 98. But I will average down to hold long term for the financial turnaround I believe will happen sooner or later [sooner preferred].
Incidently, companies turning from wholesale to retail don't always turn around. Carver products are boxed and shipped one at a time, therefore lending themselves easily to direct sales. Household products, for instance would be a terrible thing to try and sell directly. Most orders would be 1 unit sell per product. So instead of boxing 144 and shipping off to a distributor, the same amount of invoicing, picking, packing, labeling, shipping, etc. would go into boxing a single item. With the smaller margins that household items have, a direct sale would result in a net LOSS for each product sold.
Keep that in mind, as other companies attempt to switch to Internet for their main source of revenue. Some will win. Others will lose terribly. I think Carver will ultimately win. But this news will no doubt take its toll in the near term.
Rande Is
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