Successful turnarounds are rare birds but come in many colors. In retail, turnarounds that increase sales per square foot is generally a good start, along with becoming more profitable, increasing cash flow or preening to become a better buyout candidate. What follows is a riot of models with which RadioShack should consider experimenting.
Cell Service Concierge
Cell phone manufacture and the provision of plans on which they work facilitate the exchange of gobs of cash every year. Cell phones themselves, particularly those smartphones that half of cell phone toting Americans now carry, would cost at least half a Cleveland ($500 for those not in the know) as unlocked phones. But for carrier subsidies and our agreement to two year contracts are we allowed to pay “only” $200 for those phones. By the end of a two year contract, a cell phone user could easily have paid $2,500 or more for a decent minutes, text and data plan This is why there are mobile kiosks everywhere, including in the bathroom of your local cell phone store (apologies and thanks to the Onion for that one). While a $50, $100, or $200 finders fee seems high on the surface, the marginal benefit of a new subscriber on a network that is essentially paid off is exceptional. Thus finders fees on new or upgraded cell phone users feed store proliferation.
By the mid-2000’s, RadioShack chained the entire company to this strategy. While still one of the few electronic products that aren’t hot death for retailers, as an increasingly commodity product, this strategy is slowly failing RSH as intense competition rises around them in the form of ubiquitous cell phone saturation via stores, kiosks, and online upgrades.
Astonishing as it is, little innovation has occurred in selling of cell phone service in over a decade. In the increasingly pervasive store/kiosk form, a chummy guy or cute gal who may or may not know anything about the phones tries as hard as they can to get you to choose from the few models they have to offer. Sure, the stores and kiosks look a little better they used to. All carriers have improved their national networks versus a decade ago. A few more phones are offered by each provider than ten years ago. Yet while you can go almost anywhere now for a phone upgrade or carrier change, it isn’t what it should be. Does the carrier / phone combo work in your area? Given my data consumption habits, what will my plan cost me? Once you settle on a carrier, there is the maddeningly error prone process of number and carrier switching and phone data porting. That is followed by resolving the first bill surprise, byzantine methods for blocking numbers, and inadequate documentation on how to use phone functions and features.
I dream of a world where all stores are like B&H photo. It is difficult to explain quite how great they are and why, given that they may even be better than the mythical bygone days of retailing. They sell you what you need, not what you heard about in an exceptional sales pitch or advertisement. Stories are regularly told of sales associates convincing a customer to buy a model half as expensive because it does the same or better job than the product the customer came in to buy. While not as lucrative in the moment, it builds a fiercely loyal clientele and generates an order of magnitude greater referral business. Add spectacular selection and live online help; now that would be a sales model hard to reproduce if RadioShack pulled it off in this niche.
Imagine, a RadioShack with twice as many phones as the largest cell phone retailer. With a pre-purchase system that allows you to borrow phones from multiple carriers to see which ones work at home, at work or on your jog. From Jitterbugs to diamond encrusted cell phones, prepaid to all you can eat plans, their selection could be matched by none. Offer an app backup and locker service. Carry a solid accessory selection and don’t charge a digit or limb for them. And back it with expert sales people who know and LOVE phones, selected, trained and paid to create good-word-spreading customers for life. That would be a cell phone store with a lucrative future.
High Touch Sales Center
In my head there exists a pendulum – the Bose Pendulum.
“Bose products are overpriced toys”.
“Why do so few pieces of audio equipment sound like Bose products?”
“Are you kidding me, $400 for a clock radio?”
“These Panasonic noise cancelling headsets only block 30% of the sound that a pair of Bose noise cancelling headphones
…but my Panasonics cost $15 versus $300 and at least let me sleep on the plane.”
The Bose Pendulum applies to their retail stores, as well. Bose retail stores always communicated the wrong message to me; that they were an indulgent waste of high rent mall space. Until I stood in the sonic sweet spot of their listening area and let splendid music surround me. Then back again as my jaw drops upon hearing the price for that system. The stores often seemed uncomfortably empty of product and people, excessively beige, and the salespeople a little too anxious.
While I suppose this works for Bose, and a better executed version certainly works for Apple, there are surprisingly few national electronics chains that have pulled off this high-end feat. Most outlets that sell high end consumer media equipment are stores begun as labors of love and survive due to the proprietors and close associates direct accountability to the customers and their experience with the products and service. Virtually all are single locations, with the leap to multiple locations seldom succeeding.
Tweeter, the east coast retailer which was once a potential heir to the national high end throne with 100 stores in 18 states, failed in the mid to late aughts. Best Buy tries with its listening rooms, but earns under $1,000 a square foot from its stores as opposed to over $5,500 for Apple stores, while few retail chains of any kind break the $1,000 per square foot mark. Retail is hard, while electronics retail is apocalyptic for those not named Apple.
But a need still exists for taming the chaos that is modern home electronics. High-end-high-tech media, entertainment, lighting, computing and even home automation could benefit from a chain offering well crafted, well sold high end solutions. RadioShack could re-start, partner with the maker of, or buy, a line of high end audio, video, novel computer and electronics, and/or home automation products and systems and use store space to sell the virtues of those products. How about a complete selection of robots available at retail complete with demonstrations and selection assistance? Even if Radioshack isn’t acquired by a previously mentioned non-retailer, companies such as Google may still be interested in partnerships for spreading their software and hardware including tablet computers. While selling products as insanely great as Apple – and insanely profitable – might be difficult, success could be obtained with much more modest gains in sales per square foot. A store doesn’t need as many products if the ones it does sell are sufficiently more expensive than those it previously sold – and if it sells those new products in sufficient quantities.
High and Medium Tech Services
Personal laziness, ignorance, excess disposable income and time constraints, along with technological complexity rock……for businesses that create paid services out of resolving those problems. Before Best Buy’s Geek Squad, CircuitCity’s Firedog, and Sear’s Blue Crew (huh?), there were the tech pros at RadioShack. Relied upon for technical expertise, they helped generations install audio and video equipment, assemble Ham and CB radio rigs, repair electronics and assemble a multitude of kits. Nay, they did not generally do house calls. Perhaps that should change, with their offering installation, repair and maintenance of the products it sells – and even of ones it doesn’t sell.
Like the Tardis or Baba Yaga’s Hut, services could extend RadioShack’s reach beyond its 2,500 square foot average footprint. For example, Sears has been a prolific business within business creator, offering cabinet installation, home siding and other home improvement quotes, kitchen cabinet upgrade and replacement, floor covering installation, carpet cleaning, duct cleaning, automotive repair services, appliance repair, and a gold buying service. Many of these services use a mobile workforce to conduct potential client visits and many work materials are either shipped directly from the manufacturer or from distribution centers to the work site and thus require minimal in-store space.
RadioShack has participated in occasional referral and business within business programs over the years, such as its cell phone kiosks in Sam’s club and Target and most recently with its Trade & Save cell phone trade in program in partnership with Consumer Electronics Exchange (CExchange.com). It could easily add services for allied products including: installation of the high-touch audio, video, and home automation equipment; computer installation, repair, upgrades and maintenance for personal or business use and the same for various business machines; mobile automotive systems installation including audio and video; and home security systems installation, repair and maintenance.
Trusted Global Electronics Retailer
While struggling, RadioShack is still a strong, trusted brand. You know your purchases are quality products with a responsible corporation behind them. Leveraging that quality and trust globally may be of huge value. And while it has recently re-emphasized global expansion, announcing a south Asian partnership and a north Asian partnership, RadioShack needs to be careful that it extends itself in ways that allow it to stand out. Two personal stories may help identify how to do that.
Being the hardhead that I am, I find myself spending time on eBay trying to purchase extra chargers, batteries and accessories for the huge number of electronic devices I own. Often succumbing to the foolish temptation to buy the lowest price item, I am almost invariably disappointed at the result. More than one cheap Chinese car charger has popped in half, leaving part of itself in the cigarette lighter. Forget just long charging time, cheap wall chargers regularly fall behind the power draw of my cell phone. In its own stores and more so in its global expansion stores, RadioShack needs to make sure that it does not let its retailers or itself put inferior quality products into its stores. Otherwise, there would be nothing to differentiate RadioShack except the higher price on low quality merchandise.
Ireland is a photogenic place, which in my case resulted in filled SD cards. In order to continue to snap away with freedom, I wandered around a downtown looking for an SD card. The centrally located local tourist trap retailer charged 50 Euro (which at the time exchanged for $1.60) for a card which in the states should have been 15 dollars, encouraging me to ask area drugstore clerks if they had any store recommendations. A good tip finally led me to a card with the same capacity for 25 Euro. A global niche awaits a trusted retailer who can offer quality, convenience and a price competitive with the highway robbery prices typically charged at retail store checkout displays and in tourist traps.
Global scales of economy would continue to accrue to RadioShack as it expanded, allowing it to get better deals on bulk purchases. And as its partnerships begin to bear fruit, the chain could become the preferred retail partner for electronics retailers and manufacturers worldwide – the Foxconn of Retailing. Finally, as its global platform matures, it will be able to locally tune its product mix for the local and tourist populations for each country. For example, product mix in South Korea, where mobile phone market penetration is over 100 percent (!!) and is smartphone oriented, would differ from that of its United States stores where “only” half of mobile phone owning Americans have smartphones.
Contract Educator
Apple has admitted that its Apple stores were as much about education as sales when they first started them. Other manufacturers can surely benefit from this function but may not want the full commitment of chain store ownership. Similar to the High Touch Sales Center concept, this model would be establish an educator for hire for contractual period of time. A sort of permanent pop-up electronics store, cycling through various manufacturer’s products to demonstrate all they have to offer. A platform of sorts, if you will, uniquely suited to the new retail world.
Media Octopus
Media distribution is blowing up, not so much disintermediating as switching intermediators. DVD Kiosks are replacing rental stores. IP distribution is competing with coax distribution. IPads are replacing physical newspapers. RadioShack, and most other companies, have not experimented sufficiently in this realm.
Walmart does have one of these experiments going; its Disc-to-Digital initiative where it validates your DVDs, resulting in a play anywhere online copy on the “Ultraviolet” consortium platform. Regular CDs cost $2 to convert, Blue-Ray costs $5. RadioShack could offer a similar service, perhaps partnering with Netflix and serving as its exclusive conversion location partner?
Why stop there? How about CD to digital conversion? Cassette to digital, 8-track to digital, LP to digital, 78 / 45 / 33 ½ to digital, phonograph cylinder to digital? Perhaps go the other way; iTunes or other online digital service to disc given a verified account. How about a physical books scanning service to convert your personal library to digital? Photo, slide, and video conversions, in both directions? Binary’s the limit!
Giving consumers better ways to understand new media tools including media receivers and senders is sorely needed in this changing marketplace. Combining a decision tree tool (online or used by retail associates) along with in-store demonstrations of Vudus, Rokus, Boxees, Xboxes, Tivos and DVRs, Slingboxes and related products would allow consumers to choose the right product for their media exploits.
Along those lines, perhaps a video gaming system cage match section of the store where the latest and not so recent models can be handled, played and compared in a more user friendly manner than those at Walmart and other big boxes. Handheld models as well console systems could be auditioned. Any foray into selling video games would have to be very well vetted by the bean counters; if the used trade-in part of Gamestop’s business is lucrative enough, it might be worth the effort. However, if physical game media’s death is accelerating too rapidly, then RadioShack should avoid competing for a slice of that shrinking market.
Bricks and mortar media innovations await us, with the DVD conversion experiment just the beginning.
Storefront to the Internet
Where have all the EBay stores gone (cue the music)? Quite common a few years ago, the craze for formal auction seller storefronts seems to have subsided. However, something new is happening in the virtual-actual boundary; physical storefronts for previously virtual retailers. Online, direct mail and telephone retailers are going real world; recently spotted include BatteriesPlus.com with 500 mostly franchise locations as well as storefronts for 1-800-Flowers.com and its half dozen allied business. Instead of Amazon buying RadioShack, perhaps RadioShack could become a kind of virtual physical storefront for one or more online business? Batteries.com is already 500 stores behind! Display and demo some or all of the products from large or small online stores and both sell stock on the spot as well as facilitate the ordering of unavailable products online. I predict that business model variants of the above will be common in ten years.
Contract Shipping Consolidator and Destination
Even if an online store like Amazon doesn’t purchase RadioShack, the chain could still serve the same shipping consolidation function with which Amazon is experimenting. For a small fee paid by the customer, manufacturer, or retail partner, packages could be received and stored at RadioShack stores until customers pick them up. RadioShack could be an important new force in the free shipping club field.
One way or the other…..
One more reason to be cautious when buying RadioShack; even covetous companies wait for bankruptcy filings by their prey before they bid for what they want; the risk of losing out on a deal is sometimes outweighed by the potential of getting a better price on distressed assets without the baggage of existing contracts and obligations. We may see a renewal or buyout after the declaration of bankruptcy, thus eliminating the value of stock holdings. My crystal ball suggests interest from multiple suitors or a newly energized management engaging in a metamorphosis will prevent bankruptcy.
As a current or past customer, shareholder, or someone interested in being annoying, what can you do to get the RadioShack transformation moving? Get a question in on the next conference call. Go to their annual meeting and any other open board meetings you can. Send unsolicited letters of encouragement and suggestion to top staff. Call your activist shareholder friend to rattle the cage. Rally your local maker cabal to stage protests outside of RadioShack.
The next six months to year should be interesting for RadioShack, its employees, shareholders and rubberneckers. Will the company take control of its own future instead of letting consumers and the market decide for it? Tune in your Realistic radio receivers to find out!