All of a sudden it seems RadioShack (RSHCQ) has its creative juices flowing again, coming up with yet another worthy idea to get customers into its stores. Perhaps desperation and the very real possibility of bankruptcy lit the spark, but if it keeps this up, it may just become a viable investment once more.
The latest lightbulb turning on at the electronics gadgets store is the offering of in-store, same-day repair service for smartphones, tablets, and other mobile communications devices. RadioShack's "Fix It Here!" repair program was first launched at a handful of Dallas area stores, but it's now being added to 284 stores and could be rolled out to as many as 700 of its 4,300 nationwide locations by the end of the year.
I've been critical of The Shack's continued reliance upon cellphones as its primary path to growth. As the persistent yet increasingly sharp decline in same-store sales attests, it's a wrong-headed prescription for what ails the electronics retailer and clearly isn't working. When earlier this year it said it was planning on highlighting them even more by allowing customers to touch and play with them at prominently located displays in its stores, I said there was nothing that could save RadioShack now, as it had basically thrown in the towel.
Source: RadioShack SEC filings.
While it could be said the Fix It Here! program is simply more of the same, it's really not, but rather represents a smarter way of looking at the same problem.
RadioShack technicians will receive 40 hours of training and the repairs will be guaranteed for 90 days. The market for repairs has grown at around a 5% annual pace for the past few years, achieving an estimated $1.4 billion valuation in 2014. Although it's expected to continue expanding, it's also believed it will be at a much slower pace than before, as falling prices encourage replacement rather than repair.
Yet the fragmented industry provides high profit margins, and with the largest four companies comprising less than 10% of the market, the chance for a national player of prominence to enter and take a commanding piece of the business is large. Importantly for RadioShack, it also gives it a chance to make a sale.
The Dallas Morning News reports that CEO Joseph Magnacca, who was hired last year to turn around the ailing business, admitted that RadioShack might not have gotten the upgrade business beforehand, but now as a customer weighs the cost of a repair against that of a new smartphone, he may just choose to make the purchase. So it's a win-win situation, with RadioShack either getting the profitable repair business or potentially making a sale. It at least has the chance to do what its previous turnaround attempts have not: Get a customer in the door.
This builds on several other initiatives RadioShack has undertaken in recent weeks, moves that seem inspired and offer greater potential for change. Last week the electronics store announced it had formed RadioShack Labs, a partnership with PCH International to bring to its stores products from innovative start-ups and give them marketing promotion along with a retail and online presence. Providing inventors and entrepreneurs with a huge retail outlet for their products could be an attractive opportunity that harkens to its DIY past.
I've argued before that RadioShack needs to embrace that original ethic of the guy building stuff in his garage, and said it needs to build on the maker revolution to do so. It also recently attended a Maker Faire -- a gathering of individuals who like to tinker, tear apart, and build rather than just buy -- and even offers Make magazine in its stores, but the relationship with that movement needs to be more prominent, and with the advent of 3-D services and printing, could become a force for growth.
RadioShack reported earnings this morning that showed losses widened to $98 million, but that shouldn't come as a shock. However, as these rather bold new ideas it's implementing take hold, investors may just see those numbers turn around and the rebirth they've been counting on could yet manifest itself down the road.
