Why RadioShack Fell Flat

RadioShack Corporation last week announced that it had signed an agreement to transfer between 1,500 and 2,400 of its U.S. company-owned stores to General Wireless, which will, in turn, transition the retail locations into Sprint Mobile storefronts.

The remaining of RadioShack’s 4,000 locations will likely close their doors, signaling the end of the line for the company that was founded in 1921, in Boston, by brothers Theodore and Milton Deutschmann.

The brothers first opened the “Radio Shack” — named after the small wooden structure that housed a ship’s radio equipment — to the then-nascent amateur radio market.

20th Century Timeline

In 1939 the retailer expanded its offerings and entered the high-fidelity music market, and in the 1950s, it introduced its own private label brand of electronics products, first dubbed “Realist” and later “Realistic.”

The current bad turn of events for RadioShack was not the company’s first failing. After almost going bankrupt in the 1960s, the company was purchased by Charles D. Tandy, who helped expand the brand worldwide.

In the 1970s, the company experienced additional growth thanks to the interest in Citizens Band (CB) radio and was on the ground floor during the computer revolution when RadioShack introduced the TRS-80, one of the world’s first mass-produced personal computers.

In the 1990s, Tandy attempted to take on then-rival CompUSA by launching its own big box retail outlet, Incredible Universe. However, that venture was never profitable. Most of the 17 locations were sold or closed — serving as a foreshadowing of things to come for the once-pioneering retailer.

Attempting to downplay its hobbyist and tinkerer roots, Radio Shack updated its look in the 1990s and introduced a new logo in 1995 that rebranded the store “RadioShack.”

Then, in 2000 the Tandy name of the parent corporation was dropped completely. While it had declared itself the largest seller of consumer telecommunications products in the world in the late 1990s, RadioShack’s executive leadership misread the tea leaves.

The company missed out on the widespread adoption of mobile phone stores, which soon displaced RadioShack for all things mobile — and its smaller stores couldn’t compete with the larger Best Buy and Circuit City chains.

End of the Hobbyist Store

For years, RadioShack had been the “go to” place for hobbyists, as well as the store where one could find everything from speaker cables to electrical adapters and gizmos to gadgets. It appealed as much to people who wanted to build a computer as use one. In the 1990s, it moved away from this market, leaving those hobbyists behind. Looking back, this can be seen as the beginning of its end.

“RadioShack was the last remaining place where you [could buy] component level devices,” said Roger Kay, principal analyst at Endpoint TechnologiesAssociates.

“CompUSA was one of those stores that carried components — and in the old days Best Buy — but now you really are only left with local hobbyist stores,” Kay told the E-Commerce Times.

In recent years “the idea of a store where you specifically go to get occasionally bought items is largely obsolete, thanks to Amazon and other online retailers,” added Rob Enderle, principal analyst at the Enderle Group. “It is now easier to figure out what you want online and just have someone send it to you.”

Missed the Pivot

RadioShack’s problem could be that as Best Buy transitioned into a big-box retailer with everything from TVs to tablets and mobile phone accessories to video games, RadioShack couldn’t entirely make that change. As a result, it has followed its rival CompUSA into retail oblivion.

“Best Buy did pivot into phones and TVs and made the deal to carry Apple products,” Kay added. “Best Buy made themselves more relevant to a changing marketplace, but even they aren’t in safe waters. They’re on the edge, but at least they’re still in business.”

For RadioShack it was not only a matter of misreading the signs but also pivoting in the wrong direction.

“They long had their own base-level products, but everything was a step down from what you could find at a Best Buy or the now-defunct Circuit City,” noted Charles King, principal analyst at Pund-IT.

“They misjudged the cultural impact with regards to how consumer electronics evolved, and [did the same] with hobbyists and people who were hands-on with electronics,” King told the E-Commerce Times. “The store didn’t cater to either one, and instead, it was like going to Sears to buy clothing in the mall instead of an actual fashion retailer.”

The ‘Maker’ Market

One irony could be that RadioShack’s demise coincides with the burgeoning “maker” market — where hobbyists now tinker and tailor-make all sorts of gadgets and share their creations online. It would seem that RadioShack could have found a niche with this crowd, but the timing was off.

“RadioShack really started to fall apart when they lost the technology hobbyist,” Enderle told the E-Commerce Times.

However, it could be argued that “the maker niche came way too late for RadioShack actually,” added Joel Espelien, senior analyst at TheDiffusion Group. “The other side of this is that geeks who used to go to Radio Shack and buy the hardware to build stuff are now just as often playing with software and apps.”

Mobile Missteps

It should also be remembered that RadioShack isn’t the first long-running gadget and gizmo retailer to shutter its doors. Rival Circuit City was founded in 1949 but barely made it into the 21st century, while regional consumer electronics retailers such as New York’s Nobody Beats the Wiz and the West Coast’s The Good Guys failed to fend off the growing behemoth Best Buy or compete successfully with Amazon online.

As noted, Best Buy, which survives even now while its competition is gone, successfully entered the mobile phone business. RadioShack was too late to do this, as well. Another irony — given that up to half of its locations could be turned into Sprint stores.

“If it pivoted the business model 15 years ago to become the true mobile phone store, they could have created a sustainable business model, “Espelien told the E-Commerce Times. “Today’s smaller ‘mom and pop’ phone stores have a RadioShack feel, and they found a sustainable business model.

“Even Best Buy survives from mobile phones,” Espelien added. “There isn’t really a non-carrier national mobile phone store — and hadRadioShack embraced it, they would have ended up with a valuable property. So looking back, the guys behind RadioShack were right about one thing, that technology would be an everyday thing.”