RadioShack decline belies its longevity
FORT WORTH — During nearly a century in retailing, RadioShack has reinvented itself time and again as the American consumer moved from primitive radio kits to ever-sophisticated audio equipment, CB radios, and computers and wireless phones.
But now the Fort Worth-based consumer electronics pioneer finds itself tethered to a bygone era, with its 4,000 company-owned stores as much a burden as a benefit, its website delivering only modest returns in this cyber age and competitors — from behemoths such as Amazon.com and Wal-Mart to wireless providers — attacking on all fronts. The company warned recently that bankruptcy could be near if it can't secure financing.
Just nine years ago, RadioShack enthusiastically opened its new $200 million headquarters, a complex of 900,000 square feet situated majestically on 38 acres on the banks of the Trinity River. With a 500-seat cafe, an open floor plan and a fitness center, it was supposed to help propel the chain to greater entrepreneurial heights.
But even as consumer electronics boomed with radical inventions at every turn, the retailer with a national footprint is struggling for oxygen. Sales have dropped 33 percent since 2005, when it recorded net profits of $267 million, compared with last year's loss of $400 million.
Observers cite numerous reasons for the steady decline, including missed and squandered opportunities.
“Call it death by a thousand cuts,” said Ed Fox, who teaches marketing at Southern Methodist University's Cox School of Business. “RadioShack is left with all these stores and not much differentiation” from big-box rivals and category killers like Best Buy.
“And the market for hobbyists and do-it-yourselfers has evaporated,” said Fox, a West Point-trained engineer-turned-professor. “Unlike the first small computers that arrived as kits, you simply cannot open most consumer electronic devices and work on them.”
RadioShack's very name is a blessing and curse, still carrying strong national brand recognition yet profoundly anachronistic in this age of digitization and cloud storage, not to mention smartphones that combine the functions of numerous separate devices.
With each new app, RadioShack is deprived of yet another opportunity to sell a product. In January, a blogger named Steve Cichon reprinted a 1991 RadioShack ad, noting that nearly everything being promoted at that time can now be performed with his Apple iPhone.
Apps have replaced a calculator, a computer, a camcorder, a CB, speed dial, a portable CD player, a scanner, an answering machine and a tape recorder. All would have cost $3,054.82 in 1991 dollars, the equivalent of $5,100 today.
At the company's shareholders meeting in June, a retired executive named Bernie Appel stood up to defend the retailer's embattled new chief executive, Canadian-born Joe Magnacca, calling him a gifted merchandiser who should have been hired years earlier instead of number-crunching types who trimmed costs to maintain profits but didn't adequately update the stores or product lines.
Magnacca, who energetically introduced hip new concept stores after being hired in February 2013, appears to be the best-equipped executive to lead the chain in years, Appel said.
But none of his predecessors have faced such grave challenges from a hypercompetitive marketplace that changes at Mach speed. The company lost $235.7 million in the first six months of 2014, while same-store sales tumbled nearly 17 percent.
“Joe Magnacca has all the right skill sets and experience,” said Len Roberts, who succeeded longtime CEO John Roach and served as the top executive from 1999 to 2005, when RadioShack owned an enviable chunk of the wireless business.
But, Roberts added, Magnacca “inherited a compromised brand and a very short liquidity runway.”
The odd part is that RadioShack is operating in perhaps the fastest-growing segment of retailing — consumer electronics.
It's all the more poignant because under iconic former CEO Charles Tandy, RadioShack established itself as the go-to store for personal computers, having mass-marketed in 1977 the first fully assembled unit — the TRS-80 — beating out Apple and Atari for market share for several years.
Tandy, who bought the small electronics chain in the 1960s and added it to a conglomerate that had started with a leather goods retailer co-founded by his father, approved an initial production run of 1,000 computers — for use in stores if they didn't sell. More than 100,000 sold the first year; Tandy died suddenly in 1978.
Later, RadioShack — carrying the moniker “The Technology Store” — would become the first to mass-market an early cellphone.
Magnacca is not without ideas. The CEO is working to see a return to private-label brands; collaborating with tech developers to bring unique products into stores; connecting with the growing Maker movement of tinkerers; and developing RadioShack's relationship with Apple. He has rolled out Fix It Here, a mobile-device repair service available at about 500 stores, with plans to expand to 750 this fall.
Noting Magnacca's introduction of cellphone repairs, Fox said the chain's sprawling network could set aside a section of each store as an Apple-like “genius bar.”
“It could be a place where its staff can help people use devices, having a ‘genius bar' 10 minutes from your home rather than having to drive long distances to an Apple Store,” he added. “I couldn't see why they couldn't give it a shot — it's where convenient counts. It's a service that RadioShack could provide and something people would be willing to pay beyond their subscription price.”
Mark Kazmer has a different perspective on RadioShack than analysts and consumers do.
The 52-year-old owns a RadioShack dealership with his wife in Spearfish, S.D., and said he has been approached to buy two company-owned stores in the state.
His business is blessed by its location in a college town (Black Hills State University) that's too small, at 10,700 people, to attract specialty rivals.
And Kazmer has learned how to compete with the town's Wal-Mart. His annual sales hover around $1 million but dropped to $900,000 this year — not because of competition or brand image but because of a freak blizzard in early October that killed hundreds of cattle and set back the agriculture-based local economy.
Kazmer was among the first four franchisees to sign up for RadioShack's new dealer program, which sells goods to participating stores at the corporation's cost but takes a 5 percent royalty on sales, including on merchandise bought wholesale elsewhere.
SMU's Fox said RadioShack's current crisis shouldn't obscure its enviable longevity.
“With the exception of Walgreens, they had at one point more stores than anybody,” the marketing professor said. “No question about it, for a company that never sold anything people had to have, to go nearly 100 years as a retailer is pretty impressive.”