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Nothing Can Save RadioShack Now

Its fate is sealed. The decision to close 1,100 stores and rebuild the remaining ones around some tech-centric concept featuring interactive displays means RadioShack (NYSE: RSHCQ  ) has thrown in the towel, run out of ideas, and essentially given up even the pretense of trying. It's done. Finished. Kaput.

Whatever hope there had been for resurrecting the once-cool -- in a geeky sort of way -- brand from the dustbin of history of other failed electronics retailers, it gave up the ghost when it settled on the tried-but-failed concept of clearing out the clutter and featuring even more prominently the mobile phone cart it's hitched its wagon to but that thus far has only led to pain and misery. And a $2.25-per-share stock price.

RadioShack seems unalterably wedded to the notion that it can be a new, smaller Best Buy (NYSE: BBY  ) , which itself underwent dramatic transformations necessitated by a changing retail landscape. Everybody and their brother thought mobile phones were the quick path to profits, but it's a marketplace saturated with outlets where there can only really be a few winners, and not even Best Buy is really succeeding there anymore.

In its fourth-quarter earnings announcement, the electronics superstore reported its gross profits were squeezed from a heavily promotional environment to get customers to even come in the door. But Best Buy has also suffered as a result of a new mobile warranty program it introduced last quarter that sucked 35 basis points from its margins while lower attach rates to its service plans took it down another notch or two.

RadioShack wasn't even that fortunate, as its own same-store sales plunged 19% driven primarily from a lack of customers wanting its mobile phone offerings. So now it thinks that by displaying them even more prominently -- they already took up the main focus of the store as soon as you walked into one -- and allowing customers to play with them, it will drive sales.

When department store operator J.C. Penney ran into trouble, it thought getting rid of clothing racks and throwing in random bits of technology would do the trick, too. Sales only got worse. Kohl's is now following that playbook precisely, thinking adding electronic price signs will give it a touch of gee-whiz feel. Things aren't looking up for it, either.

Source: Wikimedia Commons.

In the years before its demise, Circuit City also sought the supposedly greener pastures of cellphones and technology. Its investment in DivX, a competing technology to plain DVDs that amounted to being a single-use disk (someone actually thought that was a winning business model?), ended up draining hundreds of millions of dollars from the company before it finally abandoned it. Circuit City, of course, eventually went bankrupt.

By trying to become just another electronics store, RadioShack is ensuring it will follow a long line of similar failed ventures including Circuit City, Sixth Avenue Electronics, Nobody Beats the Wiz, Topps Appliance City, and Crazy Eddie. hhgregg and Conn's are barely able to keep it together these days.

I've already said that the one thing RadioShack can do to turn things around, to make itself the leader once again and the go-to place for technology for the do-it-yourself electronics geek, is to revisit its roots and simultaneously capitalize on the nascent maker revolution: 3-D printing and cutting-edge technology as represented by Arduino microcontrollers and Raspberry Pi minicomputers. This is where the real future of tech lies. Not only do the 1980s want their store back, the 1990s and 2000s want to repossess it, too.

Unfortunately, RadioShack's chosen to bitterly cling to a failed past, one that's already proven its ability to bankrupt businesses that thought they could be different. They can't and RadioShack's not. This is the end, as it's chosen a path from which no one can save it.

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Read/Post Comments (7) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On March 05, 2014, at 10:34 PM, graciefan1 wrote:

    "Nothing Can Save RadioShack Now"

    You may be right but I heard the same thing about Alcatel-Lucent , RiteAid , Jo-Ann Stores and Zales..!

    Check them out

  • Report this Comment On March 06, 2014, at 12:52 PM, bluemoon53 wrote:

    Having worked for Lafayette Radio (for a former RS VP) at headquarters in the buying dept in the late 70's and subsequently Wards Co (Circuit City) when they bought the Lafayette's name in the early 80's, it's really sad to see Radio Shack go.

    Like the old Lafayette, Radio Shack is a geek parts store and I still go to the small, LOCAL(underline that) RS for informed and helpful advice, and the odd items that other retailers just don't carry. To schlepp to a big box like Best Buy for a phone battery is not an option.

    RIP Radio Shack- another momento of the past- gone!

  • Report this Comment On March 06, 2014, at 2:41 PM, sm5574 wrote:

    Radio Shack's problem is that it outgrew its demographic. That is, when electronics was a booming hobby up to and through the '80s and '90s, Radio Shack grew so large that it couldn't adapt when electronics stopped being a hobby at the turn of the century.

    Radio Shack thrived when it was cheaper to buy your own computer, when there weren't a lot of electronic gadgets available, when electronics was the next big thing, and when RS was the only place to get anything. But now, most people either use laptops or tablets, which you can't build yourself; now there's an app for most of the stuff you would want to build; now electronics is something your grandparents found innovative; now you can buy anything online.

    Radio Shack, sadly, is a dinosaur. It is a fond memory of a different time. To survive, RS would need to return to its niche roots, though I'm not exactly sure what niche that would be. Even so, good luck selling that idea to the shareholders. All Wall Street cares about is growth...until you outgrow your demographic. Then they jump ship.

  • Report this Comment On March 06, 2014, at 4:39 PM, Chrislorl wrote:

    I spent several years as a top producing mgr at Radio Shack, made a lot of money there too. This is a shame and I agree with the comments above. The niche that can be filled is customer service, knowledgeable sales staff, and reliable products.

    I want my 80's store back too, and the profits that came with it. This is a prime example of upper management not listening to the what the customers want.

    You can not continue to change the shelving color and think it will make a difference.

    With Circuit City gone, Best buy... who knows where, and so many other chains gone where will these Exec's go to work now? Sears... ha!

  • Report this Comment On March 06, 2014, at 4:46 PM, donnoh1 wrote:

    If Radio shack and other brick and mortar retailers want to succeed they are going to have realize, though they can't put a number on it, that service is their only advantage over internet shopping. Service requires people, people, people and the people need to be product knowledgeable and trained to sell me the best product for me, not run up the ticket with warranties and stupidly over priced accessories. Printer cables for $35 that cost $2.50 online? Guess why internet sales are killing brick and mortar? Promotions are a gimmick too. I feel like I'm being cheated when I pay full price for anything. Retailers are killing themselves with the constant promotions. Put a realistic price on your products and provide customer service. Service leads to sales. Service comes first and should be priority. Merchandising will not drive sales. A huge building with thousands of products for twice the price as I can find online won't make you a profit. have fewer products and more people to honestly advise me and I'll be on your store. Bear in mind that a salesperson who attacks me at the door with a phony greeting and a list of promos only makes me think I've walked into a scammery.

  • Report this Comment On March 06, 2014, at 5:50 PM, sm5574 wrote:

    I also think the days of commissioned salesmen in retail stores are starting to wane. I worked in RS in the late '90s, and I can say little good came of that arrangement. Customers wanted to haggle, but we had no authority; and I actually worked under an assistant manager who would connive to steal our sales by entering his code in the register first.

    And as a customer, it makes me wonder if the salesman is truly being helpful in his suggestions or if he's just trying to make an extra buck. That can't help your business.

  • Report this Comment On March 06, 2014, at 9:55 PM, Burstedbladder wrote:

    I drive by them but never stop to see what they have. The last time was over ten years ago and their store was filled with overpriced stuff and limited junk. Most of their stuff had dust on it and that was the last time I went in to one of these ailing stores. Just shut them down gracefully and go online. Not sure you will do good online either since Frys Electronics, Ebay, Amazon and Tiger direct are the better places to shop at.

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Rich Duprey

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.


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