February 28, 2007
RadioShack Says It’s Rockin’
Look for more investors to come a knockin’ for RadioShack shares after the consumer electronics chain predicted its business will keep on rockin’ the retail world in 2007.
RadioShack announced its fourth quarter profit was up 64 percent as the company cut costs even as total revenues and same-store performance fell. Same-store sales were adversely affected by a poor performance in the wireless service portion of the business.
Cost reductions were largely the result of RadioShack closing hundreds of locations and slashing the number of workers at its headquarters in Fort Worth, Texas.
William Baldwin, an analyst with Baldwin Anthony Securities, told The Associated Press, “They’ve done a real good job of getting costs down” but what they still need to address is “what they’re going to do to generate top-line growth.”
“That’s going to be the tall order for RadioShack,” said Mr. Baldwin.
The wireless area has been a major concern for the chain, which faces competition on all fronts. Last year, RadioShack switched from selling Verizon Wireless service to selling Cingular instead.
Julian Day, chairman and CEO of RadioShack, acknowledged that the company needs to improve in the wireless portion of the business, but expressed confidence in the approach being taken with Cingular that, he predicted, would lead to “a relatively slow but steady ramp-up.”
While wireless has been off, RadioShack has found success in selling other items such as MP3 players and accessories.
Discussion Questions: RadioShack has shown success in reducing costs but what must it do to grow top line results? Do you see areas where it could continue to reduce costs through supply chain or other efficiencies that would not result in revenue reductions?
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A large enough audience of tech laggards and undesirable personas (think: Devil Customers) may be within 5 minutes of a RadioShack Store. Those customers are in play as are other important behavior segments like Busy Moms.
The educational video’s on Radioshack.com were pretty basic but I (the laggard) did learn something about HDTV and how to buy satellite receiver and how to buy a GPS systems (the section of the site called research library had around 40 pieces of content.)
They may pull it off. Seems like an earlier RetailWire discussion: Will Educated Consumers Shop at RadioShack? 10/20/2006, had some similar remarks–I looked back and saw that my recent comment was almost identical to the one back in ’06….
Cutting costs is important for profitability. But what happens after the cost cutting is done? At one time, RadioShack was a destination store. It had knowledgeable, customer service oriented personnel. It had a wide variety of electronic products. Now, with customer service lacking as well as lesser product options; what advantage do they have over a Best Buy or Circuit City? Customer experience in this commoditized world is often the differentiator. Thus, for RadioShack to rock, it must enhance the customer experience.
I would hesitate to describe what Julian Day has done elsewhere as turning around companies. I also wouldn’t be rushing to engage in any premature back slapping in this particular case either.
It’s tough to compete against the likes of Best Buy and Circuit City, but they are pointing the way Radio Shack must go: multi-channel integration, combining in-store and online environments both for consumer interface and for back office operations such as inventory and merchandise logistics. Retailers that use their web sites not just as a sales channel but also as a marketing opportunity to drive traffic to their physical stores will lead this sector.
This may require a change in business structure and organizational mindset, but multi-channel integration is the key to growth.
Of course Radio Shack will also need to merchandise better, provide a better customer experience, increase “share of customer,” get more women and minorities to shop there, build trust with consumers and employees, and get people to love doing business with it. That’s all!
I agree with Bernie Slome; customer service will be their success factor. The average consumer has many choices with places to go for the latest tech product but if they can get a quality product at a fair price–and advice to boot–then Radio Shack will be the winner. The Best Buys and Circuit Citys are having such a turnover rate, it’s hard to find an associate that knows what they are doing. And someone should take a poll on the advice of the Geek Squad; my guess is that 80% or more of the time it’s take everything off the computer and reload.
Recently, I visited a Radio Shack for a Bluetooth head piece and my experience was excellent. Staffed by three tech geeks, they offered me advice and assistance after purchasing the product. “Do you know how to set it up? Let us help you!” I also observed the numerous baby boomers entering the store. With that age group embarking on the fringe of technology, this type of customer service will be a huge win! The young man mentioned, “If you have any problems, ask your grandson…he’ll know how to fix it.”
Consumers now need a reason to go to a retail store to buy a product; being able to see, touch, and try a product appears to be a major reason. However, that doesn’t produce sales, necessarily. If the price is significantly better online, many consumers return home and then purchase the product. Can the retailers offer anything in addition to the opportunity to experience the product? Knowledgeable personnel would be another reason to go to the store. However, retailers face a challenge in keeping a full and part-time staff (with a high turnover rate) informed about all the products in the stores (with the number of new products being introduced). As everyone has said cutting costs is the easy part, providing what consumers need and want to generate new sales is more difficult.
I agree with everyone–RadioShack needs to polish its position as the customer-service leader for geeks and people who need geeks.
One distinct advantage RadioShack has over any online destination is that you can go there on a Sunday afternoon and get the cable that has the right number of pins and be back with it, finishing your project, the same afternoon. Pricing aside, the same connector won’t even ship out from the online store until Monday, and I think there’s gold in that proposition–especially as media (read: video) convergence comes more out of fantasy land and into real hardware.
If it were me, I’d drive an entire integrated-marketing effort around how easy it is to get all the different kinds of pictures (moving or not) and noises out of all the different holes in the walls and play them on almost any box you want in any room you want. The three key points: if you can plug a lamp into a wall socket, you can figure out what other cables go where, you can get it done on your schedule, not UPS/FedEx’s–and you can get in and out of the stores without all that big-box distraction and navigation.
As an electronics “convenience store” there’s only so much RS can carry in stock, so while they have a lot of obscure stuff, they are nowhere near a Fry’s for example, where you can walk out with everything you need to build a computer (or probably a nuclear reactor!) from scratch.
So I agree with the others that there is a big opportunity in services; not just for computers, but for cell phones and (especially) smartphones as well. As these devices become little computers, consumers will need similar handholding services to get the most out of them. Synching them with your computer will cause all kinds of confusion and lost data. A Geek-Squad like opportunity if there ever was one!
I agree that customer service has to be the differentiator, but the customer service experience of a convenience store is much different than that of the big box store, and I think that analogy is very appropriate to RadioShack.
How can any electronics retailer supercharge the customer experience? I don’t know that RadioShack has the square footage to do it, but they need a page out of Apple’s book–mini-classes on how to make the most of all your cell phone features, or HDTV cabling de-mystified….
Let’s not forget Radio Shack’s other advantage: convenience.
There are times when I just don’t want to wander through a 40,000 square foot store. I know what I want to buy, and I want convenient, close-in parking, and I want to get in and get out fast. For me, that’s the quintessential Radio Shack experience.
As long as the employees can be helpful, and lead me to what I’m looking for, that’s good enough.
Of course, it’s important to note, Radio Shack may not be in a high growth mode for the foreseeable future. So, if they can become consistently profitable, and drive money to the bottom line without comparable store sales growth, they may be a great target for an equity buy-out.
Convenience store is a good description of the Radio Shack of today. Do you go there to make a significant electronics purchase or to buy the accessories and one-off items the big boxes don’t carry? While being the second stop shop is fine, it may not have the most winning selling proposition. Cutting costs also works in the short term, but it isn’t a growth strategy. It seems like the jury is still out on what Mr. Day will do to turn Radio Shack into a retail growth engine.
Seems like the earlier piece by the author: Will Educated Consumers Shop at RadioShack? 10/20/2006, had some similar remarks – I looked back and saw that my recent comment was almost identical to the one back in ’06.
“RadioShack may have an appeal to the technical laggards – they may also be the go-to place for the folks that Best Buy etc is not after due to BB focus on the Angel Customers – the other side of the bell curve of adopters is = to the front side so this could be a great move to start the sales cycle. Proximity to these folks due to their numerous locations may help as well in selling to this group. (I believe the statistic is they have stores that are 5 minutes away from 90% of Americans.) This is a big segment that will be adopting soon. If RS can deliver the follow-up total customer solution, then this may be a great move.”
Julian Day’s successful turnaround work at other long-troubled retailers (Safeway, Sears, Kmart) makes him well-qualified to lead Radio Shack. For years, Radio Shack’s bread and butter was cell phone commissions. Radio Shack needs to broaden its appeal into more categories, and given its format, they need to be high margin categories. They’ll never be the low cost producer since their strategic footprint makes them the convenience stores of electronics versus the big-box of Circuit City and Best Buy. Convenience stores are located everywhere and need high margins to pay for the low average weekly sales. Big-box stores can afford lower margins to be the price leaders.
Too bad Radio Shack didn’t start the Geek Squad. Their store staff fits that description much better than the Best Buy folks. Radio Shack could still take the high-service positioning for computers, small office networking and phone systems, and high-end home entertainment. There’s more margin in service than products.
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A large enough audience of tech laggards and undesirable personas (think: Devil Customers) may be within 5 minutes of a RadioShack Store. Those customers are in play as are other important behavior segments like Busy Moms.
The educational video’s on Radioshack.com were pretty basic but I (the laggard) did learn something about HDTV and how to buy satellite receiver and how to buy a GPS systems (the section of the site called research library had around 40 pieces of content.)
They may pull it off. Seems like an earlier RetailWire discussion: Will Educated Consumers Shop at RadioShack? 10/20/2006, had some similar remarks–I looked back and saw that my recent comment was almost identical to the one back in ’06….
Cutting costs is important for profitability. But what happens after the cost cutting is done? At one time, RadioShack was a destination store. It had knowledgeable, customer service oriented personnel. It had a wide variety of electronic products. Now, with customer service lacking as well as lesser product options; what advantage do they have over a Best Buy or Circuit City? Customer experience in this commoditized world is often the differentiator. Thus, for RadioShack to rock, it must enhance the customer experience.
I would hesitate to describe what Julian Day has done elsewhere as turning around companies. I also wouldn’t be rushing to engage in any premature back slapping in this particular case either.
It’s tough to compete against the likes of Best Buy and Circuit City, but they are pointing the way Radio Shack must go: multi-channel integration, combining in-store and online environments both for consumer interface and for back office operations such as inventory and merchandise logistics. Retailers that use their web sites not just as a sales channel but also as a marketing opportunity to drive traffic to their physical stores will lead this sector.
This may require a change in business structure and organizational mindset, but multi-channel integration is the key to growth.
Of course Radio Shack will also need to merchandise better, provide a better customer experience, increase “share of customer,” get more women and minorities to shop there, build trust with consumers and employees, and get people to love doing business with it. That’s all!
I agree with Bernie Slome; customer service will be their success factor. The average consumer has many choices with places to go for the latest tech product but if they can get a quality product at a fair price–and advice to boot–then Radio Shack will be the winner. The Best Buys and Circuit Citys are having such a turnover rate, it’s hard to find an associate that knows what they are doing. And someone should take a poll on the advice of the Geek Squad; my guess is that 80% or more of the time it’s take everything off the computer and reload.
Recently, I visited a Radio Shack for a Bluetooth head piece and my experience was excellent. Staffed by three tech geeks, they offered me advice and assistance after purchasing the product. “Do you know how to set it up? Let us help you!” I also observed the numerous baby boomers entering the store. With that age group embarking on the fringe of technology, this type of customer service will be a huge win! The young man mentioned, “If you have any problems, ask your grandson…he’ll know how to fix it.”
Consumers now need a reason to go to a retail store to buy a product; being able to see, touch, and try a product appears to be a major reason. However, that doesn’t produce sales, necessarily. If the price is significantly better online, many consumers return home and then purchase the product. Can the retailers offer anything in addition to the opportunity to experience the product? Knowledgeable personnel would be another reason to go to the store. However, retailers face a challenge in keeping a full and part-time staff (with a high turnover rate) informed about all the products in the stores (with the number of new products being introduced). As everyone has said cutting costs is the easy part, providing what consumers need and want to generate new sales is more difficult.
I agree with everyone–RadioShack needs to polish its position as the customer-service leader for geeks and people who need geeks.
One distinct advantage RadioShack has over any online destination is that you can go there on a Sunday afternoon and get the cable that has the right number of pins and be back with it, finishing your project, the same afternoon. Pricing aside, the same connector won’t even ship out from the online store until Monday, and I think there’s gold in that proposition–especially as media (read: video) convergence comes more out of fantasy land and into real hardware.
If it were me, I’d drive an entire integrated-marketing effort around how easy it is to get all the different kinds of pictures (moving or not) and noises out of all the different holes in the walls and play them on almost any box you want in any room you want. The three key points: if you can plug a lamp into a wall socket, you can figure out what other cables go where, you can get it done on your schedule, not UPS/FedEx’s–and you can get in and out of the stores without all that big-box distraction and navigation.
As an electronics “convenience store” there’s only so much RS can carry in stock, so while they have a lot of obscure stuff, they are nowhere near a Fry’s for example, where you can walk out with everything you need to build a computer (or probably a nuclear reactor!) from scratch.
So I agree with the others that there is a big opportunity in services; not just for computers, but for cell phones and (especially) smartphones as well. As these devices become little computers, consumers will need similar handholding services to get the most out of them. Synching them with your computer will cause all kinds of confusion and lost data. A Geek-Squad like opportunity if there ever was one!
I agree that customer service has to be the differentiator, but the customer service experience of a convenience store is much different than that of the big box store, and I think that analogy is very appropriate to RadioShack.
How can any electronics retailer supercharge the customer experience? I don’t know that RadioShack has the square footage to do it, but they need a page out of Apple’s book–mini-classes on how to make the most of all your cell phone features, or HDTV cabling de-mystified….
Let’s not forget Radio Shack’s other advantage: convenience.
There are times when I just don’t want to wander through a 40,000 square foot store. I know what I want to buy, and I want convenient, close-in parking, and I want to get in and get out fast. For me, that’s the quintessential Radio Shack experience.
As long as the employees can be helpful, and lead me to what I’m looking for, that’s good enough.
Of course, it’s important to note, Radio Shack may not be in a high growth mode for the foreseeable future. So, if they can become consistently profitable, and drive money to the bottom line without comparable store sales growth, they may be a great target for an equity buy-out.
Convenience store is a good description of the Radio Shack of today. Do you go there to make a significant electronics purchase or to buy the accessories and one-off items the big boxes don’t carry? While being the second stop shop is fine, it may not have the most winning selling proposition. Cutting costs also works in the short term, but it isn’t a growth strategy. It seems like the jury is still out on what Mr. Day will do to turn Radio Shack into a retail growth engine.
Seems like the earlier piece by the author: Will Educated Consumers Shop at RadioShack? 10/20/2006, had some similar remarks – I looked back and saw that my recent comment was almost identical to the one back in ’06.
“RadioShack may have an appeal to the technical laggards – they may also be the go-to place for the folks that Best Buy etc is not after due to BB focus on the Angel Customers – the other side of the bell curve of adopters is = to the front side so this could be a great move to start the sales cycle. Proximity to these folks due to their numerous locations may help as well in selling to this group. (I believe the statistic is they have stores that are 5 minutes away from 90% of Americans.) This is a big segment that will be adopting soon. If RS can deliver the follow-up total customer solution, then this may be a great move.”
Julian Day’s successful turnaround work at other long-troubled retailers (Safeway, Sears, Kmart) makes him well-qualified to lead Radio Shack. For years, Radio Shack’s bread and butter was cell phone commissions. Radio Shack needs to broaden its appeal into more categories, and given its format, they need to be high margin categories. They’ll never be the low cost producer since their strategic footprint makes them the convenience stores of electronics versus the big-box of Circuit City and Best Buy. Convenience stores are located everywhere and need high margins to pay for the low average weekly sales. Big-box stores can afford lower margins to be the price leaders.
Too bad Radio Shack didn’t start the Geek Squad. Their store staff fits that description much better than the Best Buy folks. Radio Shack could still take the high-service positioning for computers, small office networking and phone systems, and high-end home entertainment. There’s more margin in service than products.