Solving The RadioShack Brand Crisis

| About: RadioShack Corporation (RSH)

My writing at SA involves predicting how company behavior will relate to stock price. I do not normally offer direct advice to corporations' management. However, I often imagine myself in management scenarios in order to attempt to better understand business models from the perspective of participants. And every once in a while I like to delude myself and think that I have arrived at some insight. So, in the tradition of a great television episode, I humbly present you one man's thoughts.

Modernist Solves The RadioShack (RSH) Brand Crisis:


RadioShack's legacy businesses as a retailer is consumer electronics "components". In particular, RadioShack emerged in the context of radios, offering high-fidelity equipment. So RadioShack has always sold on a higher end.


A convergence has occurred across most spectrums of consumer media, resulting in items like the iPhone, which replace many hardware component needs with app downloads. Hardware has been eaten by software, more than in the days of Windows 95 (MSFT).


As of late, RadioShack has responded appropriately, by scaling up its bet in mobile devices- with Apple (AAPL) products in particular. But its stock has fallen.

(Click to enlarge)Click to enlarge

(from Google Finance)


RadioShack struggles in its branding, because it has not found an effective way to integrate its legacy image of selling components with the convergent reality of postmodern devices.


The current branding is fragmented. RadioShack is being greedy and trying to advertise two companies at once: A cell phone kiosk and a legacy business. While in inventory it has embraced the cell phone business, in branding RadioShack has refused to commit to a unified message.

Nicknaming yourself "The Shack" was a lazy reinvention. RadioShack needs to really embrace the disruption and evolution of your legacy business. You should prominently feature a narrative illustrating the contrast between the old way of doing things with the new way.

This would signal that RadioShack really cares about consumers and is excited for its opportunity to benefit from technology's simplification. It also gets consumer attention, allowing a window of opportunity for RadioShack to pitch its unique consultation benefits and replacement plans. RadioShack, you should bet on the convergence -- don't just try to hedge it away. And there's still plenty of room for accessories, like watches.

But please, back off of the components! The hobbyists already know you sell them. Stop chasing the legacy revenues. This time it's different; profit margins won't ever go back to that paradigm.

What is the new high end?

The new high end is not what you buy. Technology has become cheap in cash terms. The new premium exists in the minimization of time you spend learning, using, or failing to use a product.

High-end consumer technology customers post-2010 care more about their time than their money. So explain to them why RadioShack in particular will optimize their use of time before, during, and after they purchase a product. These days, time is a compelling aspirational good, and it fits with RadioShack's immediacy advantage as a brick-and-mortar retailer.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.