How Radio Shack Can Shine

Opportunity for the electronics retailer

So Circuit City (CCTYQ.PK) is gone, and it's Best Buy (NYSE: BBY) and Radio Shack (NYSE: RSH). How opportune for Radio Shack, whose stock seems to be in miracle zone, namely above $10 a share.

In August 2007, we wrote on BrandlandUSA some of our ideas for improving Radio Shack. They included bringing back some of its store brands like Archer, concentrating on the male electronics enthusiast and offering education for everyone in how to use new electronics, much as Home Depot (NYSE: HD) and Lowe's (NYSE: LOW) offer Saturday "How to install tile" classes led by sales associates. The idea was to find out the sorts of things that spurred small sales and neighborhood store traffic, and differentiate Radio Shack from the big boxes.

There was one other aspect of the brand that was also being ignored that we mentioned. Namely, Radio Shack's status as a place where the electronics enthusiast could not only buy parts and pieces, but average folk could go in with their questions about AC/DC adapters, and not only get an answer, but plunk down $5 for a part that might cost them $1. The stores would go from being over-merchandised and designed, to a solution-oriented place with lots of plastic-baggie parts and batteries hanging on pegboards, essentially how the store was merchandised (or un-merchandised) in the the era when the company was Tandy.

We got a new comment today on another Radio Shack article from a fellow named Will. I thought it showed perfectly not only the opportunity for Radio Shack, but that they still have a ways to go:

Will: There was a time not so long ago when I spent over $1,200 in a year at Radio Shack and most components were under $2. I do not go there at all now.

This business model was confirmed by no less than Martha Stewart of (NYSE: MSO), though not mentioning Radio Shack by name. I wish I could remember where I read the story, but it bears repeating and is a good example nonetheless. Apparently after hearing Sony (NYSE: SNE) CEO Howard Stringer speak, Martha Stewart raised her hand, with a big tangle of power cords and converters for all of her personal electronics, and said "What can you do about THIS?!" Well, "This" is still around, and Radio Shack can help consumers sort the proverbial cords out. Interestingly, one of the busiest retail stores I have seen lately was a Florida franchisee of Batteries Plus, based in Hartland, Wisconsin.

A look at Radio Shack's website mentions all of these points, including that they sell 200,000 items and are the perfect place to buy HDTV adapters. Radio Shack has also moved in the direction of the enthusiast with an Invention Lab where customers win a prize for the most interesting gadget made from all the funky parts found at Radio Shack. And they now offer an online Learning Center where consumers can register for online classes and learn how to set up home wireless networks. This is good, but I don't see evidence of it at stores, which have many square feet of floor space, floor space that could be occasionally occupied by folding chairs for PDA classes and an increased number of racks full of new SKUs.

Radio Shack can still differentiate through product innovation. In the 1970s, its candy colored Flavoradio was almost certainly the inspiration for the original multicolor versions of the iMac. One of my personal favorite products (and one that was in every household with a boat) was the Deskube Weatheradio, a little wood-grained box with piano-key on/off and an antenna on top; it received National Weather Service forecasts. These items where designed by Radio Shack, and were essentially low-tech items. But they were useful, and consumers loved them.

We all know what Best Buy and Wal-Mart (WMT) are going to do with the closing of Circuit City; sell lots more electronics. But with HD radio and television conversion on the immediate horizon, and radio stations struggling, Radio Shack could have a golden moment. Actual radio station groups including Clear Channel (NYSE: CCO) and CBS (NYSE: CBS), themselves slightly struggling, could partner with Radio Shack to push HD radio. In a time when consumers are cutting back, spending a few bucks for a converter for radios and TVs can free consumers from cable bills.

Radio Shack has one other advantage that it can exploit, even if times get REALLY tough. It can sell stores to managers; many Radio Shack stores are already franchises, some located within other stores.

So there is the opportunity. Radio Shack will just have to seize it in order to get Will, and his $1,200, back.

Disclosure: no positions

Comments

[PocketRadio:]

"HD Slowly Passes Into The Night"

"Radio Shack has given up on HD Radio. Their stores have two radios in stock and both are on clearance. One radio that sold for $249 is now on closeout at $82. The other was $149 and now sells for $99. If that isn’t ‘get this out of here’ pricing what is? It appears no new models are coming to replace them. No surprise really... Best Buy, Circuit City and Fry’s are the same story. They don’t have HD units except for some car units and their people don’t have a clue what it does. Just ask them."

tinyurl.com/5s8zfk

Yea, good-luck with that one!

Jan 25 08:59 AM

[Garland Pol...:]

That's bad news. And just thinking of it, it took from the 1930s to the late 70s before FM eclipsed AM.. 40 years....

If radio networks want it to be adopted they ought to do some barter for their unsold radio time to RSH and the rest.

Jan 25 12:30 PM

[PocketRadio:]

"That's bad news. And just thinking of it, it took from the 1930s to the late 70s before FM eclipsed AM.. 40 years...."

I see this comparison over-and-over again - no offense. Mark Ramsey has pointed this out a number of times, that the media landscape is totally different today, with iPods, the Internet, cell phones, SIRI, etc. Besides, HD Radio is not really much different from analog FM, just more channels of the same programming. With dropouts, interference, lousy coverage, and digital artifacting, HD Radio is actually inferior to analog, especially with the AM-HD debacle with adjacent-channel interference. If you are interested in learning more, I have researched HD Radio for two years and have created this extensive HD Radio blog:

hdradiofarce.blogspot....

Jan 25 02:59 PM

[notsosmart:]

got to get more enthusiastic & knowledgeable employes.without that-same as cc,bye-bye.

Jan 25 03:31 PM

[thunderbird...:]

any one remember AM Stereo?

Jan 27 10:31 AM

[Leftfield:]

I went there to buy a universal voltage adaptor. Now, the transformer is about $18 and the little adaptor plugs are about $1.99/ea. rather than all included. It might cost about $10 to get all the plugs that were once included. Online, probably $6 for the whole thing.

I see Radio Shack as going the typical corporate MBA-by-the-books routine of trying to leave no money "on the table." Fleecing wherever and whenever possible.

Just like Ebay, and it's rampant amongst American corporations. These businesses are run by hacks who are paid insanely well to milk short term gains and tend to lose in the end. By the time they're gone.

No wonder American "leaders" are so focused on compliant boards and golden parachutes. Now, if you are overpaid enough you're a real friend of the politicians and can keep your bonuses through failure and bailout.

They don't care about their businesses. They don't have to. And, flavoradios were what, 30 years ago?

Jan 30 06:08 PM

[RetailDM:]

There is a problem with RS and it's called UPPER MANAGEMENT. Over the last 5-10 years, RS has gradually, but systematically, been divesting itself of its primary foundation - its trained and knowledgable personnel. They have over the period of time revamped pay plans for their managers, their associates and their part-timers to the point that PTers are barely making min. wage The management plan that is now used is MANAGEMENT BY INTIMIATION.

Years ago, RS had a slogan, "You've got Questions, We've got Answers."

No more.

Store personnel are barely trained and what they are trained on the most is cellular phone sales. There is little to no emphasis on other products. Just walk into any RS store and see what happens. The first thing you get hit with is "Can I interest you in a cell phone" (paraphrasing here." They're simply not interested in selling you anything else. And when you do start to ask questions about something like adapter cords or pieces/parts that you need, you're often met with a glazed over stare because the kid has no earthly idea what you're talking about. If you look at other blogs and customer complaints, you'll find a reoccurring theme - they don't know what they're doing, they don't know what they're talking about, and they're most often rude.

RS has virtually put its eggs in 1 basket. Yeah, they've had increased sales, But take a GOOD look at what it's REALLY about. HD Converter boxes is what's pulled their proverbial fat out of the fire. What's going to happen after this quarter's over? And cell phones. They've put SO much into cell phones that that's the basic commission that their people make. And then if the sales quota isn't met, out goes the manager. Turn-over rate has gotten to be unbelievable of late. With every one, including convenience stores, selling cell phones, is there any wonder WHY RS is putting so much pressure on their own people?

Morale is probably at the lowest it's ever been in the company's history.
Used to be that RS actively recruited college grads for MIT's. Not anymore. The pay is so bad that they can't attract them. Managers in $1M stores were making 60 - 80K or more. Now, it's almost half that. Why? Because of all the revamps to the pay plans that they try to pass off as increases, but in the end, everyone sees how they've gotten screwed....again. Why don't people leave? They are. But right now, in this economy, if you're still in a store, they're holding on. But they also know, that it's Russian Roulette.

Walk into any store and you'll find LOTS of space that used to be filled with plenty of inventory. Not now. Inventory is strictly controlled by Ft. Worth and the managers are not allowed to deviate. Hot items during Black Friday were frequently out of stock, even on line. Items are also frequently overpriced. Though CC is now defunt, BB is the Big Boy on the block and quite frankly, RS cannot compete, either now, or in the future.

Day and crew have slashed and burned their way through the company until it is, in the view of many who work for it, ripe for a take over. However, in this economy, that's not going to happen anytime soon. They don't have the $ to sufficiently pay their people, but they'll go buy out stores south of the border. Since Day took over in 2006, stock has dropped from the 30s down to the 8s and has been hovering around 11 to 12. Seems to me that when the stock was in the 30s - 60s, the company was doing something right. Now it's below 12.

Wonder why?????????????????

RS is no longer a destination store and quite frankly, it's a dinosour.

Feb 02 06:17 PM

[User 471339:]

Ok.... So far today I have talked to 2 different stores (which were recommended by the annoying recording and like I'm buried under a rock and don't know where these stores are?)
The one clerk actually said to me, "when you are technically challenged" OMG - what was he thinking? Who did he think he was talking to? The post on his bunk bed??

I'm still dinking (cough) around with this RS equipment all bought in May and wellll over $100.
1 pk of double ended colored coaxial cables (still in the packaging 'cause their use is questionable now);
1 single coaxial cable (use = sold more nonsense)
1 box with two push levers 0n the front (to switch hardware use when I have 3 needs)
1 antenna that I bought with the converter box
1 converter box
1 antenna that looks like the Starship Enterprise = worked less than two months
1 box thing with 3 color holes and 3 buttons on the front with 9 color holes and maybe a couple of coaxial options on the back
You'll love this = I'm still "laughing" about it = it's so darn funny and obviously they see me as a money pit?
Here’s the funny part - Saturday Night Live did a skit about that thing!! They said something about it being the most amazing, totally complicated and ultimately without any function of anything they had seen. Hilarious - I'm sitting in my living room looking at this skit about my waste of more money Again!

The list continues.
1 "silver" plastic panel with rubberized sides (presumably to attract airwaves??) What nonsense. I picked it up, the screw holding the base (oh please base... ?) flew off - my cat will find it amusing if it doesn't jam up my vacuum cleaner first.

And along the equipment vein, one of the pins in the coaxial that connects the antenna to the TV (via some other little box), bent sideways one the first push to screw (pun intended).

Oh, and then, get ready for the frosting on my already frosted cake,
A Clerk in a store that was recommended by the helpful looped recorded message actually said:
Blah blah…. then… “When you are technically challenged” – can you believe that?? Who did he think he was talking to? A post in his bunk bed?
I'm speechless and money-less. Why continue with RS? I feel like I'm committed to the equipment - wait - what piece of close too $200 is actually working???
Anyway, thanks for the rant. I'm off to find a tech I guess - for another $100.
Where am I to turn next? This sad, pathetic no-nothing-technically challenge (maybe he'll invite me over to instal a new mother board and upgrade his RAM (although it seems he has his ram in the place he wants it...). Any suggestions? 'Cause RS is dead to me.

Anne in WA

Aug 13 07:37 PM