Can Hardware Startups Save RadioShack?

RadioShack stock

Hardware start-ups' products will soon make their way to RadioShack store shelves. Credit: RadioShack

Think brick-and-mortar stores are a dying breed? With the help of a new start-up driven initiative, RadioShack (NYSE: RSH  ) wants you to think again.

Shares of the beleaguered electronics retailer jumped nearly 9% going into yesterday's close following reports it would announce a partnership with PCH International. In RadioShack's words, PCH helps inventors and start-ups "overcome the hurdles of logistics and get their products in the hands of consumers." 

RadioShack made it official in a press release this morning, dubbing the collaboration "RadioShack Labs" and stating it will offer select PCH companies "special retail terms, and create a direct path to up to 2,000 RadioShack stores and preferred positioning on radioshack.com."

A breath of fresh air?
One of those companies will be LittleBits, a popular modular electronics kit which will make its way into RadioShack stores later this Summer. LittleBits founding CEO Ayah Bdeir touched on the significance of the partnership for hardware start-ups, saying, "I think a start-up friendly retail partner has the potential to transform brick and mortar by bringing in new talent and a much needed breath of fresh air."

But this also isn't an entirely selfless proposition. RadioShack, for its part, looks forward to the direct-to-store model for these products because it will reduce inventory requirements and increase inventory turn in stores. That's a great thing considering RadioShack has suffered from significant inventory losses in recent quarters as it attempted to retool its product mix to bring more customers through its doors.

Unfortunately, its efforts to date simply haven't worked. RadioShack is all set to announce fiscal first quarter results next Tuesday, but revenue plunged more than 20% year over year last quarter, driven by a 19% decline in comparable store sales. It should help that RadioShack simultaneously announced the closure of 1,100 underperforming locations, but it was apparent RadioShack desperately needed to give consumers more reasons to buy its wares in lieu of choosing cheaper online competitors.

By soon offering innovative new products from hardware start-ups unique to RadioShack, it might just be able to convince its former bread-and-butter tinkerers to start spending more money there.

No guarantees
This agreement might well help RadioShack restore its image as a go-to place for unique electronics products, and I agree it needed to do something to move away from its overreliance on decidedly "blah" items like prepaid mobile phones, portable speakers, and cell phone accessories.

But serving as an incubator for slick hardware start-ups is hardly the guaranteed success many hope it will be. However "cool" they are, betting on a series of unproven products as a differentiator won't convince most everyday consumers RadioShack isn't an indispensable business.

Then again -- and I say this as a child of the '80s -- I'd love to see RadioShack succeed in once again achieving sustained profitability. But as its debts grow ever larger and sales continue to fall, I'm not the only one who fears a turnaround may not happen anytime soon.

Warren Buffett just bought nearly 9 million shares of this company
Speaking of indispensable businesses, imagine a company that rents a very specific and valuable piece of machinery for $41,000 per hour (That's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2984066, ~/Articles/ArticleHandler.aspx, 10/22/2014 12:51:07 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement