What’s wrong with RadioShack?
I asked my middle-schoolers on Sunday what they thought about RadioShack. Josh, one of my gadget-happy boys, seem to understand what RadioShack executives don’t.
“RadioShack isn’t about anything,” he said. “I mean, are they a cellphone company? Parts? You just don’t know what they’re about. They never have anything you want, either.
“And,” he added, “the stuff they do have is crap. Why would you go to RadioShack?”
It’s a savvy insight. From out of the mouths of babes, of course.
By now, most of us have heard the news of former RadioShack CEO Dave Edmondson’s fall from grace for allegedly misrepresenting his college background on his resume/CV years back. According to reports, Mr. Edmondson claimed to have gotten a couple of degrees from a college where, according to them, he only studied for two semesters.
If Mr. Edmondson had seen better numbers under his tenure at RadioShack, he might have stayed on. But the Shack has hit a major downturn in recent years. A quick look at the max charts over at Yahoo! Finance shows their stock falling from a high in late 1999 of about $75 to about $29 at the start of 2006. And then the steady slide: RadioShack (RSH) trades at about 19.5 today. Two massive losses, apparently tied to their earnings reports, mark the companies slide.
What went wrong? What can they do to correct it?
RadioShack’s failures stem from a failing of insight. Their eyes grew dim in the 1980s, and Len Roberts — Edmondson’s predecessor who came from Arby’s — didn’t give them the long range that they needed.
I see RadioShack’s problems stemming from the following failures of response:
- Radio Shack (then two words) had lines of high end equipment back in the 1980s. They responded to the rise of Sony and other Asian brands by simply getting out of the markets.
- The Rise of the Big Box Stores met with almost no real resistance from Radio Shack. “We’ll just do what we’ve been doing but better” seemed to be the motto.
- RadioShack did not foresee the commoditization of either computers or wireless products.
RadioShack still has some tricks up its sleeves. Xmods, a line of you-put-them-together radio-controlled cars, met with great success, as did it’s line of mini-RC cars, the ZipZaps. It created FRS for walkie-talkies about ten years ago, opening up new life in that market. So the company can innovate, or at least produce great products.
And that’s where it’s solution must be.
For RadioShack to survive over even the next five years, the company must create new products that excite the market. iPod type excitement.
Think about it: one of the company’s big problems this Christmas stemmed from its pushing iPods and other MP3 players but not having the products. Customers couldn’t get their iPods at RadioShack even when they went in. When you go in and can’t get what you went in for, you’re not likely to go back.
So here’s some solutions. Call it my “Modernization, Innovation and Servicing” strategy for RadioShack. Nothing very complex, so even RadioShack’s board should be able to understand it.
- Determine whether or not they want the stores run locally or centrally. I would opt for giving local managers authority in-line with their stores.
- Revamp the reporting structures for the retail arm. Reports indicate RadioShack is already doing this. It’s obvious that they do not have a Real Boss structure within their regional, district and local management. They have too long relied upon promoting strong salespeople to regional and district roles, something that makes little sense. The regional and district managers should be great administrators with retail backgrounds, but shouldn’t be culled from your best salespeople.
- Change up the product lines to fit the markets of each individual store. RadioShack now has too many things that could work in one segment (say, inner city) and not others (farm towns). Product should be differentiated from market to market. Which brings up the following.
- Markets are not the region that you’re in any more. It’s the socio-economic status of the customers. Why RadioShack marketing has not learned this lesson, which has even made the Atlantic Monthly, is troubling. I believe that it stems from too much power in the regional managers.
- Give more authority for local marketing to local managers. This seems obvious to me, given the boutique nature of the stores. But it seems like heresy within the company.
- Change the store types. At the same level within the company are managers running $400k stores and $1.6M stores. These are very different operations. Most of the bigger stores should be converted to a new type, something that differentiates them from the smaller, lower volume outlets. This means tampering or jetisoning the brand. But with RadioShack enjoying a “it’s the 80s” reputation, creating a new brand might not be a bad idea. The current state of the cash might be a problem, though. The larger stores could then compete by increasing their size. Best Buy has about 800 stores compared to RadioShack’s 5,000 (with 2,500 more franchisees). By moving the upper echelon stores into a bigger market, you would be able to compete successfully against the boxes. Actually, I’m not sure that this would work. But either this or my next strategy or some combination of the two.
- Become a boutique with only high end products. RadioShack in many neighbourhoods has knowledgeable staff that get overwhelmed by the massive product mix. What if you turned a good number of these outlets into boutiques focusing on, say, nothing but wireless and high-end home theaters. Installations of these $40k systems would be handled by subcontractors, who would enjoy a franchisee relationship with the company. RadioShack would provide training, etc., in return for guarantees and contractual lock outs. RadioShack would then not be a place for 75 year-olds to come in and get a part for their 1985 television. Parts for the latest technology would be stocked. This might be too late now, though, but RadioShack’s penetration in the marketplace means that it could work.
- Provide services like the Geek Squad but centralizing a call center for most inquiries. A whole lot of computer problems can be solved over the phone if you have installed something that allows me to look at your system remotely. There’s a slew of security concerns that would have to be addressed, but that’s what implementers are for.
- Hire young, cutting edge designers to create some killer products. RadioShack should have created its own iPod imitator, private-labelling and private-encasing someone else’s technology. The new Olympus player could have been a big seller for the company if they could have kept it in stock. There are serious challenges to creating a product in some category (pick one) that will bring people in. Of course, RadioShack has attempted this half-heartedly before with its Inventors’ Contest awhile back. It brought Cold Heat to market but the rumour is that they screwed the Cold Heat creator and he didn’t want to have any more of a relationship with RadioShack than he contractually had to. If even that. But product innovation is the only area where RadioShack has a strength that Best Buy doesn’t.
- Get rid of non-moving stock. Yes, people won’t be able to find their obscure part any more. But that’s what online is all about. Babrowski has already spearheaded several working initiatives: let’s see if she can move this one.
But all of these are dependent upon money, something that the markets are increasingly not willing to share with RadioShack. They need to find a Stratum 7 or 8 leader who can turn the company around, and then turn it over to a Stratum 6 to run it. Or simply carve the company apart, selling off the highest volume stores to someone who wants it, and taking the cash to close the low-volume stores, becoming just a manufacturer of radio controlled toys.
Image credit: RadioShack building exterior. Public domain image via Wikimedia Commons.