In an alternate universe, RadioShack Corp. would rule the world, supplying all of your electronics needs from computers to cellphones, and even making them. But in this world, RadioShack is almost bankrupt, having missed almost every opportunity to be the centre of the technology revolution.
Last week, the electronics retailer announced its latest quarterly loss – $119.4 million (U.S.) – and said that it might not have enough capital to continue as a “going concern.” The announcement was a surprise to no one. RadioShack, despite some terrific marketing, has been in turnaround mode for almost two decades. Now, with 10 consecutive unprofitable quarters and a stock worth a little over $1, RadioShack is a battery running out of charge.
More Related to this Story
RadioShack would be yet another tale about a business failing to adapt to the times, if it were not RadioShack. This is the retailer that sat at the heart of the electronics revolution and had many paths to glory, most of which it took. Yet, in what should be a Harvard Business School case study, it executed all of them badly.
The story of RadioShack begins with failure. The company, founded in 1921, sold radio parts and surplus supplies by outlet and catalog. But it was almost bankrupt when it was purchased in 1963 by Tandy Corp., a leather retailer.
At the time, RadioShack had just nine stores. But it expanded rapidly to become a hobbyist’s dream. RadioShack became a mythical place for all things related to electronics, catering not just to the do-it-yourselfers but also to anyone in search of the latest gadgets.
RadioShack also knew how to ride a wave. During the CB radio craze of the 1970s (you had to be there to understand), RadioShack was the leading retailer of CBs. It was doing so well that at one point, it was opening about three stores a day.
RadioShack entered the 1980s poised to be the centre of the computer revolution. Indeed, in 1977, the company had introduced one of the first mass-produced computers, the TRS-80, and initially outsold Apple using the power of its retail channel and its thousands of locations.
But from that perch, RadioShack went nowhere. RadioShack’s computer business lost traction and was eventually made obsolete as companies like IBM and Dell delivered more powerful computers through different channels.
Failures abounded. RadioShack phased out its computer business in 1993 along with its circuit board business. That year, too, the company sold its cellphone manufacturing business.
Instead of concentrating on RadioShack and building up its offerings, the company tried new concepts with new stores: Computer City to sell computers, Energy Express Plus to sell batteries, Famous Brand Electronics for refurbished electronics, McDuff and Video Concepts for audio and video, and the Incredible Universe, which became the company’s Best Buy knockoff.
None of these worked, and all were either closed or sold off by the late 1990s.
Still, RadioShack had a terrific reputation as the place to go for gear. In the Internet bubble, the stock closed at a high of $78.50 a share.
But the company had already lost its focus. The big box stores like Best Buy began to capture the bulk of the electronics business. RadioShack remained largely your local stop for electronics gear. The problem was that most of the equipment became cables and ancillary things to make the computers go.
Looking yet again for a new business model, RadioShack seized on mobile. But this merely made RadioShack a pawn in the cellphone wars as it tried to profit from selling a commodity.
RadioShack had some initial successes with sales in kiosks in Sam’s Clubs, but when RadioShack became too successful, Sam’s Club’s owner, Wal-Mart, took away the contract. And an attempt to sell phones at Target failed. The move to smartphones squeezed RadioShack’s margins, as did cellphone companies’ move to have their own stores.
In short, mobile has not panned out.
Now, RadioShack is trying again – it tried to rebrand itself in February with a slick $4 million Super Bowl commercial as not the store from the 1980s that you remember. But if RadioShack is not your 1980s store, what is it?
Best Buy may survive because it is so important to retailers and it finally has figured out how to sell in and around the Web.
But what is RadioShack’s purpose? It may make money selling headphones or computer cables, but that business model seems unsustainable. After all, how many cable cords can you sell to sustain 4,000-plus stores?
The company’s cash is evaporating. A plan to close about 1,100 stores was halted by RadioShack’s current lenders. And while RadioShack’s biggest shareholder, the hedge fund Standard General, is rumored to be in talks to provide new financing, the question would then become whether RadioShack’s latest attempt to leverage its name by adopting cleaner and brighter stores could be pulled off.
That question remains unanswered, but you have to shake your head at the missed opportunities.
RadioShack could have been Best Buy. It could have been Amazon. It could have become Dell. The paths that RadioShack could have taken are numerous. But instead of choosing one, it chose them all, walking away from its place as a hobbyist’s dream.
So what can we learn? RadioShack suffered from poor, often overpaid, leadership, which could not focus on a single plan and then was left grasping for a rescue strategy.
We can see echoes of this in the current mad dash by the Silicon Valley giants to become conglomerates. Google, Facebook and others also fear that their original mission will become obsolete and so they are buying anything new for billions of dollars to avoid a fate like RadioShack’s.
But perhaps the tech giants are missing one thing from the RadioShack story. RadioShack tried many paths. But going in all directions without a full commitment is not enough, particularly when the core brand is not sustained. RadioShack has branded itself well, but it led itself too far from its strengths.
It’s a cliché but true that retailers do not fare well in bankruptcy. Some bankruptcy experts have said the reason may be that the bankruptcy code forces the retailer to decide within nine months whether to confirm leases – too short a period to decide what will succeed or fail. But the problem with retailers is usually not that they have too much debt – something bankruptcy can solve – or even that they cannot decide on their locations. The problem is that bankrupt retailers cannot attract new customers or create a new survival plan.
It’s not an enviable place to be. RadioShack sits waiting for its new financiers to find some new path. As someone who bought a CB radio back in the 1970s, I hope they make it, but I wonder if such a path exists.
Follow us on Twitter: @GlobeBusiness
Article source: http://www.theglobeandmail.com/report-on-business/a-history-of-misses-haunt-radioshack/article20630336/