However, that is only one success story and an action taken in desperation as a result of its failing retail business. Egghead had to redefine its operation or risked being undersold by mail-order businesses and computer retail superstores. Not every business would dissolve everything but a name to try something new. I surmise that Dialtone has at least 30 days to pay for products that are not inventoried, providing the company with a tremendous amount of free working capital. These stores get product delivered daily with turnover of about three days and payment terms of 60 to 90 days, fueling a tremendous self-sustaining cash machine that can support margins far below most retail stores.
Prices matter, and retail prices are reduced by high inventory turnovers and increased efficiencies.
Be assured, the same thing is happening with the increased efficiencies available through the Internet. Dialtone is not the only player pushing cellular phones and parts. It has competitors in the marketplace, such as Power Inc. , Seattle, WA, that function in much the same way. However, Dialtone is driven by efficiencies. Donovan told me the company has recently added a shopping cart service, which allows the company to process more orders while keeping labor costs down.