Tuesday, February 21, 2006

Why RadioShack Will Be Fried! And What They Should Have Tried . . . (hint; sell Macs)

I read an interesting post on Forbes & Slashdot this morning.

Looks like the Radioshack CEO is resigning after the company announced a 62% drop in fourth quarter earnings. That's 62% less than last year and includes Christmas.

No one really touched on the REAL reason Radioshack has lost money and is just saying, "We are restructuring". Restructuring usually means cutting back on full time employees, paying part timers less, cutting out at as little executive management as possible, and closing a few stores.

I don't know if any of you have ever been to a Fry's Electronics or not, but it is nothing short of a geek paradise ... they are like an Apple Store, a Circuit City, a Barnes and Noble, a Best Buy, and a Radioshack ... all under one roof. (Outpost.com is Fry's online storefront) They sell pretty much everything that Radioshack does ... they don't sell much if anything under their own brand name.

Tandy corporation, which owns Radioshack seems to think the Radioshack namebrand is a strong name ... so therefore they brand everything with the logo you see at the top of this post. Only until recently (the last 5 years or so) has Radioshack started selling a lot of non branded electronics. A lot of items that Radioshack carries and has carried in the past ... have been rebrands of other products ... some with their supposedly prestigious name Optimus.

Here are the key areas Radioshack has truly failed and most likely can never recover ...

1) Too many store locations ... in my area we have one every 10 miles or so. Do people need Radioshack like McDonald's?

2) Rebranding instead of carrying unique items ... I know of few people who actually want to own Radioshack branded products ... in fact it bothers me that simple cables have the Radioshack name embossed on their connector ends ... I feel cheap just plugging it in. Radioshack's name is not a strong name brand ... of course nothing with the word "shack" in it when referring to high end consumer items is appealing.

3) Radio Shack has the same problem as Toys R Us ... they sell things in their retail stores that kids simply do not want. The most recent example I can think of ... Cat In the Hat remote control cars ... from the Cat In The Hat live action movie ... this movie was out 2 years ago and some stores STILL have stock! Merchandise managers and purchasers are just plain clueless when it comes to what it's customers want.

4) Most Radioshack stores I have visited (even if newly renovated or newly opened) are crowded or messy ... one thing the Apple Retail Stores excel at is cleanliness and focus on product ... eventhough each store has thousands of items for sale.

5) Competitors like Fry's are expanding and offering a greater selection ... kind of ties in to # 4

6) Their commercials are some of the worst in the advertising industry and almost solely focus on cellphones. Really ... Radioshack commercials are often idiotic featuring ignorant or whiney characters. Their Christmas holiday ads were ineffective.

I have always thought that Radioshack's should try to sell Apple computers. The deal with HP was very awkward and from what I know ... HP reps rarely visited Radioshack stores. This would be an opportune way for Radioshack to get true geeks in their store and get them a fan base that would visit and buy because of loyalty. It would also allow radioshack to carry a truly prestigious name in their stores. Maybe Apple would even share in some advertising and merchandising.

One other tip I have for Radioshack that I see a lot of other big electronics business do; is sell on eBay. I don't think Radioshack does this.

What do you think?


Anonymous said...

I for one would miss them because out here in the boonies if you need a say a strange battery or connector you got one choice RS. Everything else is mail order over the net, which is great but if you need it right now forget it.

I've been in Frys and would really love it if we had one around here, the best we can do is a Tractor Supply with a really well stocked hydraulics department.


Middle-agedman said...

Regarding Frys, there are very few locations--the location in Atlanta is the only one that I know of that is in the Southeast at all. I don't think that there are more than 12 stores in all. Radio Shack's model is structured toward the mall size and local size store which is almost polar opposite of Frys. The parallel to the Apple store is more appropriate, but people go to Apple Stores for the big iron and see the accessories whereas people go to Radio Shack for the small stuff and see the larger things when they are in there.

The things that stick out in my mind regarding Radio Shack are some of the same things that you mention in your article. First, anything that is branded with their name has no more value to me than any low-end no-name something you would find in KMart. It shouldn't be that way; it should be just the opposite. Radio Shack has been in business long enough that their name should mean something.
Small stuff is really, really expensive. I never think of going to Radio Shack to get a "good deal" on something. People go to Radio Shack to get things that they can't get anywhere else.
Salespeople are really anoying. They want too much information, they are not much help, and are always trying to get you to buy something you don't need. I get the sense that they want to "help" me, they want to sell me something.
The path to profitability in any business is to focus on the customer. Radio Shack focuses on themselves, not the customer. This is evidenced by many of the points that are in the article.
I'm surprised that they've lasted this long.

FYT said...

You have questions ... we have answers ... the answer is "we don't know"

Anonymous said...

Regarding Frys - Remember - walk into any Frys and the customer always comes LAST - you are simply a WALLET to them and the will do anything to upsell you into a longer, larger sales receipt. Do not believe the 'deals'. The cheap stuff there is just that - cheap crap. Steer clear - go to an Apple Store.

Anonymous said...

Yeah, I second Middle. Where are Frys in the South? I've seen precisely zero. RS is a sad tale. They used to be the place for hobbyists because they stocked all kinds of transistors, solder, batteries, odds and ends that made it at least fun to make your own stuff. Because they've veered away from that, they've become just another junk store moving cheap Chinese trash.

FYT said...

One in ATL and one in Charlotte (about to open)

Jack Campbell said...

RS is a classic tale of a 70's and 80's growth company that has since lost its way through inept choices in how to seek growth. I use Tandy as a negative example in my own business consulting marketting, as the company has made just about every possible classic mistake. The sad reality is that the core differentiation points that hurtled RS to the top of the CE retail heap 20 years ago are still valid today, just not the primary focus of the RS marketing and operations methods any more: Personal, knowledgeable service... deep stocks of raw electronics components and education products and materials... finished CE goods that are solidly logical extensions of the geek/tinkerer core RS customer mentality... those would be just as valid today as central tenets for RS operations as the were back in The Day. If only the RS management would snap out of their desire to somehow make these stores into Mini BestBuys, the company would still have some growth and sustained profitability in its future.

Good catch on bringing this discussion into the light. I was raised as a Radio Shack Kid, and miss what the chain represented in its glory years. Thanks for reminding me.

Anonymous said...

I think that you might have just barely missed with your McDonalds comparison. Like McDonalds, RadioShack is sold mostly as franchises, right?

That business model is to have 3 in every town, or more, I used to spend a lot of time getting components from RadioShack when I was a kid. A friend of my mom's owned one - we got to see some of the first cell phones for cars that they carried. Some pretty cool stuff.

Today I go into one and unfortunately I'm beginning to be shocked if they actually have what I need. I went into a couple recently looking for thermal silver paste (or pads) to put between a CPU and computer fan. Nope, they don't carry that. Or many other components that you might want. I tried getting a CRT monitor at RS recently - they had one 17", for about twice the correct price.

So? I think that a lot of small business owners, with their Radio Shack franchises, are simply not as geek and kid savvy as they could be. The market they are trying to hit is that of the electronic convenience store. A small selection of all the stuff you might need for your house, plus some components for geeks, and some stuff for kids.

But the real substance of electronic convenience store has been lost. The one where I live in LA is not much more than a glorified cellphone and battery store. That being said, I don't believe that RadioShack owners have the buying power or business model to create megastores, in a meaningfully significant number.


Middle-agedman said...

This whole discussion reminds me of when I walked into a conversation that some Hewlett-Packard retail program people were having at a national sales conference about three or four years ago. I was one of the local full-time reps attending the conference and they were joking about how the Apple Stores were "going to be out of business." I was shocked, because I was good friends with one of the people that had help set up the Apple Stores and their program and he had said they were doing very well. The Vice President of the program I was on and the Regional Director of the HP Program for my area were the ones having the discussion. The RD looked at me with a smirk and said that he would bet me that the Apple Stores would go belly up within six months. In front of my program VP and about six to ten other people I told him in no uncertain terms that that "was a bet he would lose." Good thing he didn't bet me.
Why was I so sure of this that I would pop off like this in front of the people that essentially wrote my paycheck at the time? Here's why:

First of all, Apple built their stores and constructed their program like it would never go out of business. Go into their stores and you see state of the art displays, high-end fixtures, beautiful floors and furniture, and primo locations. They are first-class all the way.
Second, Apple made their stores into a DESTINATION. The Apple Stores are not unlike a Barnes and Noble kind of store in that you could go there NOT TO BUY anything. There are seminars, workshops, meetings, trainings, and other activities to say nothing of the conversations that you can get into with personnel and customers alike.
Third, they stock what people want and cannot get just anywhere. No one has as complete of a selection as the Apple Store. I would also go out on a limb and say that the Apple Store does not carry junk or cheap crap o' the moment designed to generate a quick cash buzz. CompUSA is famous for doing this.
Fourth, if you want to talk about a place that Has Answers, the Apple Store is the only store OF ANY KIND that has a resident GENIUS. This is an official position, not a stroke of luck.
Fifth, I defy anyone to come up with a stronger brand than Apple. While Radio Shack branding items with its own branding template either matters not or puts a negative on the product, an Apple brand could turn straw into gold. I would buy anything that was Apple branded because I have that kind of confidence in their brand and reputatin.
Sixth, Apple has and has always had, the coolest advertising. The coolness factor makes people feel good about being seen in an Apple Store. They might even lie about being in an Apple Store because it is so cool. "Dude, did I see you at Radio Shack last Wednesday?" "Uh, no, no, it was the APPLE STORE that you saw me in, yeah, that's it, that's the ticket."

Apple Stores are doing everything right and that is one reason why Apple is showing the profitability that they are.