Can Entrepreneurs and Inventors Save RadioShack?

The struggling retail chain has a new product line coming to its shelves that could be the beginning of a new identity for the brand.

Daniel B. Kline
Daniel B. Kline
Jul 26, 2014 at 12:11PM
The Business

RadioShack (NASDAQOTH:RSHCQ) has struggled to find a new identity after it was rendered largely irrelevant by a potent combination of the Internet, department stores, and big-box electronics retailers such as Best Buy.

The company is well aware that it needs to change -- it mocked its outdated image in a Super Bowl ad that featured 1980s icons including Hulk Hogan and ALF ripping stores apart for a supposed makeover. But while RadioShack identified the problem -- that it's an outdated relic with little reason to exist in the modern retail landscape -- it hasn't come up with a solution as to what the company should be.

CEO Joseph Magnacca was brought in to turn things around. He took the helm in February 2013, and while he has somewhat stabilized the company's finances, he has not yet found a new path for the nearly 100-year-old brand. Magnacca has hit some roadblocks. A plan to close around 1,100 of the chain's 4,300 stores in the United States was upended when the company could not come to terms with its lenders on a deal to facilitate the closures.

RadioShack is a brand in need of a massive reboot. It's up to Magnacca to make the company something more than that place you used to go to buy blank tapes and batteries.

What is RadioShack doing?
Earlier this year, RadioShack announced plans to offer shelf space for entrepreneurs and inventors. Little had come of the announcement, but that will change. The company will soon begin selling a line of kits designed to help people make their own Internet-connected devices.

The new products comes from littleBits, a New York start-up that offers a series of brightly colored components that can be snapped together to create what Bloomberg Businessweek describes as "Rube Goldberg machines for the digital era." The products are part hobby, part practical, and the company calls them "the easiest and most exciting way to learn and prototype with electronics." 

Here's how the company describes itself on its website:

With over 60 modules and trillions of billions of combinations, we are moving electronics from late stages of the design process to its earliest ones, and from the hands of experts, to the hands of everyone.

Whether you're a designer who has never used electronics before, a young maker starting your maker journey, a professional engineer that wants to cut down your prototyping time, an entrepreneur with the next billion dollar idea, or an educator that wants to inspire the next generation problem-solvers, we believe you should be able to use hardware as a building block.

LittleBits sells a variety of kits. Its line to create Internet-connected devices is playful and it looks like a modern twist on the old RadioShack model. In the 1980s, the chain's customers bought soldering irons, circuits, and other items to make or modify technology. The littleBits items do that in a way that resonates today.

Being able to automate your lamp so you can control it over the Internet is neat and sort of useful. Making any piece of electronics Internet-connected opens up all sorts of possibilities. LittleBits looks like it has the potential to allow inventors and experimenters to join the Internet of Things without being limited to commercially available products. Most important, the line is unlike anything being sold by other electronics retailers. It might spur customers to actually visit a RadioShack. It also has the potential to be a Legos-like product that draws repeat visitors buying new pieces and kits.

Of course, one cool fad won't save RadioShack. It needs is a handful of products like these -- items that are modern and unique. That's a challenge, but by casting a wide net and looking to unlikely places like crowd-funding sites, it's not an impossible task.

Can RadioShack pull it of?
Magnacca clearly believes he can rescue RadioShack. In a recent press release, he expressed optimism and a commitment to bringing in more unique products. 

Even in this environment, we are making progress on our turnaround strategy. We are building the pipeline of new products that will bring differentiation and newness to our stores in the form of high-margin private brand and exclusive items, including those from new partnerships like Quirky and PCH. 

The PCH deal is "a collaboration to support inventors and start-ups that will promote product innovation and provide a path from concept to production to distribution." It should be especially valuable in helping RadioShack put some wow back onto its shelves -- perhaps leaving less space for overpriced smartphone accessories.

The last time RadioShack had a must-see product might date to the early days of personal computing, so making the brand a destination again won't be easy. But the company does have high visibility. Though it was unfortunate that Magnacca was not able to close the stores he wanted to, it does leave the company with a tremendous retail footprint. RadioShack is everywhere, and if it has something worth selling, the foot traffic that now passes its many locations might actually step inside.

It's a long shot, but for RadioShack, which lost $98.3 million in the first quarter, it's at least a plan. 

Recasting a tired relic as a hip place to buy products you don't see anywhere else is a bold strategy, but it's in line with what RadioShack used to be. It's certainly a better plan than continuing to be a store that operates more than 4,000 locations on the hopes that customers will pay way too much for an HDMI cable because they forgot to order it from Amazon