RadioShack's Lesson: The Electronics Store Is Dead

RadioShack continues to tumble, underlining the end of brick-and-mortar electronics.

Mar 11, 2014 at 7:14AM

Following the news that 2013 fourth-quarter sales were down by more than 20% from 2012, RadioShack (NYSE:RSHCQ) announced that it will close 1,100 stores in the United States. The stock immediately fell by 24%. RadioShack shares have been on a downward trajectory since 2010, when the stock price was around $20. Now the stock price is struggling to stay at $2, the company's sales are falling by around 19% a year, and investors should not be surprised. The concept of a specialty electronics storefront is obsolete.

Just ask Best Buy (NYSE:BBY), which has also been struggling with an outdated business model and sales which have been floundering for years. Unlike RadioShack, Best Buy and its stock saw a boost in late February when it announced that it had achieved a net profit in the fourth quarter of 2013, but this was not because the company gained sales; it was because CEO Joly had set a goal of cutting $1 billion from annual costs to try to save the unwieldy business. A closer look at Best Buy shows that revenue fell by 3% in the fourth quarter as the company watched its operating margin decline once again, and it cut nearly 1,000 jobs back in January.

The online world wins
Keep in mind that the losses for both companies occurred during the holiday season, when electronics sales are expected to be especially high and certainly expected to be profitable. They were -- just not for the old school brick-and-mortar retailers with outdated profit models. For the first time, online shopping sales surpassed $1 billion for the 2013 Black Friday, with e-commerce companies like Amazon (NASDAQ:AMZN) and eBay profiting the most. The trend is expected to continue. Back in 2011 around one in five electronics sales took place online, and the number is expected to grow to one in three if it hasn't already reached that ratio (the full data is delayed by several years).

Consumer Reports surveys indicate that online electronics stores are steadily receiving higher ratings  than brick-and-mortar stores, thanks to their greater selection, ease of shopping, and a myriad of other factors that make the old electronics store unnecessary. Since the fall of Circuit City in 2009, the demise of the electronics store was evident. Today's online shopping options along with brand stores like Apple have taken their place. It is no surprise that while RadioShack stock has plummeted the share price of Amazon has grown, and it has shown a recovery from its 8% drop at the end of January. After all, Amazon's revenue grew by 20% in 2013 and its EPS rose by 21%. This growth was less than analysts expected but it was undeniably positive, just as electronics sales had an undeniable impact on the results.

A lost industry
Not only has online electronics shopping grown more convenient because of our tablets and smartphones, it has also become far cheaper. Why pay full MSRP at Best Buy or RadioShack when you can bring up Amazon, Crutchfield, Newegg or one of their newer competitors and shop for deals? Most electronics products are expensive enough to qualify for free shipping, and consumers can get their shopping done in minutes. No rewards programs can compete with those bonuses.

The slim ray of hope that electronics stores have is the lingering need for customers to examine certain products in person before buying them. At a certain point customers want hands-on experience with a game console or a TV before making purchase decisions. However, this experience is also available at many broader retail stores which have more reliable discounts (Target, Wal-Mart, etc.), which still leaves the specialty store without a purpose. Thanks to the growing trend of showrooming, in-store examination has been more frequently leading to online purchases rather than brick-and-mortar buys, so foot traffic no longer guarantees sales anyway.

Where will RadioShack and the other electronics stores go from here? A transition into a full e-commerce model is one possibility, although established online competitors will make this a difficult move. Diversification away from consumer electronics is another option for the coming years. Perhaps RadioShack, Best Buy, and friends should focus more on their consumer services, commercial electronics, and appliances to help prepare for the inevitable.

Which companies aren't struggling in the retail sector?
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.

Tyler Lacoma has no position in any stocks mentioned. The Motley Fool recommends, Apple, and eBay. The Motley Fool owns shares of, Apple, and eBay. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers