FOOL PLATE SPECIAL
RadioShackled.com

Microsoft announced that it would sell back its minority stake in RadioShack.com to RadioShack. While the market let out a big yawn over last week's news, it's an event that speaks volumes about what will and won't work online. Necessities like groceries and electronic accessories can't always wait for a dot-com delivery. The Internet can dish out instant information, but instant gratification is another thing entirely.

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By Rick Aristotle Munarriz (TMF Edible)
July 9, 2001

RadioShack (NYSE: RSH), the electronics hub that prides itself on having a store within a five-minute trek from 94% of the stateside population, is buying back Microsoft's (Nasdaq: MSFT) 25% stake in its RadioShack.com site.

The Friday announcement sent nary a ripple through Wall Street. Microsoft is a company that doesn't need any excess baggage right now, and for a paltry $88 million Radio Shack can now claim its online namesake as a fully owned subsidiary. The strategic alliance, bonded back in 1999 as a way for Microsoft to receive featured status on the site and the company's more than 7,100 stores, will remain. In the end, the parting of equity ways was more of a formality than anything else.

Or was it? Let me ask you something: When was the last time you made a purchase at RadioShack.com? Better question: Did you even know RadioShack had an online store?

That's the problem. Sometimes the brand can be the hurdle. No one associates RadioShack with e-commerce. If you need speaker cables or a fresh pair of batteries, you head out to the RadioShack at the strip mall a few blocks down. RadioShack built its reputation as a place to satisfy your need for a blank video tape right now, not an online order that will arrive a week later. After all, how many times do you think you'd drive by a RadioShack before your order would finally arrive?

Check the shipping terms. If on Friday you decide you need a $2 blank audiocassette for the next day, it'll cost you another $22.50 to have it delivered. You can't blame RadioShack for that -- it's just what overnight Saturday deliveries will run you. Still, why is there a RadioShack.com? To satisfy the 6% of the country that lives a few blocks out of the five-minute radius?

To its credit, the site itself rocks as a reference bookmark. From a wide catalog of product manuals online to a battery-finder tool, RadioShack.com is a worthy informational site for its bricks-and-mortar clients. But as a model for consumer e-commerce? I can't say I blame Microsoft for cashing out. (Even the company seemingly knew this from the start, as an executive told us in a June 2000 StockTalk interview.)

Some sectors just don't work online. Online grocers like Peapod (Nasdaq: PPOD) and Webvan (Nasdaq: WBVN) have become penny stocks after overspending in catering to the immediacy that consumers expect with their supermarket purchases. (The latter filed for Chapter 11 bankruptcy protection today.) Is there anyone out there who thought that postage peddler Stamps.com (Nasdaq: STMP) ever had a chance? (Investment bankers, put your hands down.)

RadioShack would probably do itself in if it tried to make RadioShack.com work as an e-tail venture. It could mimic office supply chains like Staples (Nasdaq: SPLS) and Office Depot (NYSE: ODP) by decentralizing its distribution down to the local level but, even then it would likely falter. Free next-day delivery works, barely, for the office superstores with large-sized orders. What would RadioShack gain by making sure you got that handset cord you wanted by tomorrow? 

RadioShack has questions. You have the answer. It wouldn't work, now would it? 

Rick Aristotle Munarriz is not fond of the small charged bursts that happen when you take your tongue to an active 9-volt battery. Rick's stock holdings can be viewed online, as can the Fool's disclosure policy.