CSP Magazine

Competitive Watch: Radio Shackles

Retailer’s major remodel, downsizing raise a critical question: Can the Shack come back?

For c-store operators tuning into the struggles of electronics retailer RadioShack and scanning for lessons learned, the message may lie in its rebirth—and whether the course correction proves too little too late.

While analysts and observers wonder if the company’s turnaround strategy will succeed, some are taking note of RadioShack’s strides to transform an iconic yet outdated 20th century small-box format into a do-it-yourself variation. Flagship locations in Boston and New York are serving as high-profile models of where the chain is headed. Specifically, Ft. Worth, Texas-based RadioShack is:

Delivering a more open retail environment by removing clutter, lowering center shelves and pushing merchandise to the walls of the store.

Organizing items based on association and compatibility.

Building “experiential zones” so customers can test headsets or listen to different speakers using their own devices.

“Our brand equity remains strong, reflected in the sales growth we’re seeing in our new concept stores, which redefine the RadioShack store experience,” said Joseph Magnacca, CEO of RadioShack, in a release. “Without minimizing the challenges ahead, we have a detailed strategic path to profitability.” Those steps include improvements in brand image, product assortment, store design, customer service and financial strategies.

But the road to recovery is formidable. Reeling from a net loss last quarter of $191.4 million—triple the loss of a year earlier—the retailer of devices and related parts such as cables, transistors and batteries this spring announced it sought to close 1,100 stores, or about a fifth of its network, leaving just more than 4,000 locations and 900 franchisees.

RadioShack’s latest woes stem from a weak Christmas season; inability to outpace competitors’ promotions, especially in consumer electronics; a soft mobile market; and “a few operational issues,” according to Magnacca. Company execs hope shuttering underperforming stores while continuing brand-repositioning efforts, including a memorable Super Bowl ad featuring iconic ’80s faces taking their store back, will put the almost 100-yearold chain back on strong financial footing.

Those observing the company’s efforts have expressed doubts. “They lost their unique selling proposition,” says Terry Monroe, president of American Business Brokers, Ft. Meyers, Fla. At one point in his business career, Monroe owned two RadioShack stores. “They’re searching. They’ve lost their hook.”

Others agree that the chain’s problems run deep. “With RadioShack, it’s not about righting the ship,” says Jim Fisher, CEO of IMST Corp., Houston. “The ship’s in dry dock. It needs a total reoutfitting.”

Fisher, a c-store site consultant, believes the chain’s business model is flawed, hyperfocused to appeal to techies and geeks. “If you’ve ever seen the TV show ‘Big Bang Theory’ ... they go to the classic magazine comic store and … RadioShack,” Fisher says. “[The chain] has really targeted themselves, reducing their potential customer base to a finite size.”

NEXT PAGE: How Is RadioShack Growing Its Appeal?

Growing Its Appeal

Far from distancing itself from the do-it-yourself technophile, RadioShack has devised—and has claimed success with—a “Do It Together” Idea Center, where it says “customers can bring their ideas to life through collaboration with store associates at a convenient work space.”

“We have also been encouraged by the positive response to our new brand positioning around ‘Do It Together,’ which we kicked off with our award-winning Super Bowl commercial,” Magnacca said during the company’s most recent investor call.

That commercial comically used pop-culture personalities such as wrestler Hulk Hogan and TV highway cop Erik Estrada to loot an “old” RadioShack store, leaving room to reinvent the space and showing store staff in a newly remodeled store helping customers with technology.

Staff assistance seems core to retaining current customers and reaching out to new ones, according to Joseph Bona, president of branded environments for CBX, New York, who has been retained to help RadioShack with its reimaging.

As technology becomes more central to people’s everyday lives, Bona says places such as RadioShack will still be destinations where customers can solve their problems: “Everyone from grandmas who want to learn how to use their phones to [people buying TVs]. … People still don’t know how to hook things up.”

Bona goes on to describe one of RadioShack’s core customers, so-called “makers,” or people who make things themselves, he says, “everything from metal airplanes for kids to entrepreneurs who create new things and build a business around them.”

“We interviewed a few of these guys and did not realize how big of a community it is—it’s a bit underground but becoming more mainstream,” Bona continues. “There’s a whole community of people who develop new ideas like wearable technology and things that make tasks easier.”

But retaining those do-it-yourself customers while expanding its customer base is a bigger issue of re-creating the store, Bona says. He credits the creative energy of former Duane Reade executives Magnacca and Michael De Fazio. The two joined RadioShack after helping the drug-store chain and its Deerfield, Ill.- based Walgreens parent create visionary flagship stores, which embrace high-end food options such as hand-rolled sushi and gourmet take-home meals.

To focus on the customer experience in the new RadioShack concept sites, the company decluttered the store by rationalizing the product mix, then pulling high gondolas packed with products from the middle of the store and pushing them to the walls, replacing those shelves with lower fixtures to create better sightlines and improve interior navigation.

They also created “high touch” areas, where customers can try on headsets or plug their mobile music devices into speakers and actually compare sound.

In short, RadioShack is striving to be a touch-and-feel electronics center, a personalized place where people can play and create, and even try things on for size and fashion.

Take headphones. “They’re really fashion statements accessorizing who you are, like sunglasses,” Bona says. “So we put mirrors at each stand for people to see what they look like and try them on. I may like hot pink; you may like lime green. We’ve fundamentally changed the stores so they’re much more interactive.”

NEXT PAGE: RadioShack's Uphill Battle

Uphill Battle

Still, great ideas initiated at a few flagship stores may serve only as an epitaph to what the chain could have been had it undertaken such changes a decade or two ago.

“RadioShack for so many years hung onto the same old [image]—it’s where you can get a transistor, a little of this or that that you can’t get anywhere else. But they did not change with the times,” says Michael Lawshe, president of Paragon Solutions, Ft. Worth, Texas. “I don’t see how they can compete with Best Buy. They’re too small, their offering is not broad enough, they don’t have the sizzling technologies that customers today want.”

The questions Lawshe raises are ones of relevance and differentiation. Relevant stores know what their customers want, he says. Their inventory is data-driven, reflective of current and predicted buying habits. “Are you able to offer more just-in-time products? Something you’re currently not getting from suppliers?” Lawshe says. “When you’re a vendor-driven store, it limits you. It puts you in the same boat as everyone who’s with that vendor. Be customer-controlled and get what they want.”

Those kinds of customer-driven revelations may very well be what’s reflected in RadioShack’s concept locations, but will its transition to that vision survive under the weight of its current infrastructure? Will today’s network, including its underperforming assets, drain its resources before any significant change can occur?

Lawshe points out that the c-store industry itself has a difficult time letting go of underperforming assets, mostly for emotional reasons.

That’s a big mistake, according to Monroe of American Business Bankers. “It’s not just losing cash—you have a liability factor, [such as] employee lawsuits, customers falling in your store and suing,” he says. “Just because the P&L says you’re breaking even doesn’t mean you’re not losing money. There’s a hidden liability that says you can’t get rid of an underperforming store fast enough.”

“What was your rationalization for doing this?” Fisher of IMST asks. “Total irrationalization begets rationalization. Why would anybody ever build [a store] there?”

In his line of work, Fisher has seen many competent executives build a location with very little due diligence other than holding onto old philosophies, be it growth for growth’s sake, avoiding real competitors or simply blind faith.

Fisher questions the number of RadioShack stores that seem to be in smaller towns, with fewer technophiles to attract than in more populated markets. In metro areas, the issues may range from a growing number of direct competitors to oversaturation by its own chain.

“In my business, we do a lot of cannibalization- impact studies,” Fisher says. “If there’s a store on First and Main and another on First and Main, how will building a store on 21st and Main impact the one on First or 21st?”

No matter how big the business, Fisher says, “No one wants to build a marginal location, but if it happens—and some do it—then some companies are more capable of surviving than others.”

C-Store Relevance

The retailer’s plight does offer lessons for the c-store industry. First, RadioShack’s store size is comparable to that of most c-stores. A typical RadioShack is 2,400 square feet. That’s a deadly size for an electronics store, Monroe believes, especially in the days of Best Buy and Amazon. “The biggest fear in retail is having stock that you hope the customer will buy, but small retail stores are limited to the amount of product they can have,” he says. “The consumer doesn’t want to go in and hope you have what they want. They’ll get on the Internet and have it in two days.”

And like the items in c-stores, much of its product line is me-too, a la the Cokes and Snickers found in every convenience store.

There is also the challenge of losing relevance, abdicating that point of differentiation and thus staying in business merely for survival purposes rather than for a sense of mission.

 Will customers and investors give RadioShack the patience this venerable retailer so desperately needs? As a publicly traded company, it must project quarterly returns and uncover its blemishes.

“In the end, good design can’t save a bad idea,” says Bona of CBX. “A lot of our job is working with smart people ... to bring to life their ideas. They have the pulse of the business. They know what they’re trying to achieve.”

Bona has faith in Magnacca and De Fazio, believing their designs have the foundation of purpose. “Many people build a nice store,” he says. “But that’s table stakes. The idea is, ‘What’s the purpose of the nice store? How do you put a specific spin on it?’ A lot of c-store industry people are building nice stores, but there’s no point of difference.”

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