NEW YORK – RadioShack’s bankruptcy was like a slow-motion replay of a car accident: You see it coming but are powerless to avert it.
Perhaps that was due to the myriad factors, both internal and external, that contributed to the chain’s decades-long decline.
Indeed, industry observers contacted by TWICE offered up a litany of whys and what ifs, ranging from a waning hobbyist customer base and over-dependence on mobile, to outdated distribution systems and the dearth of techno-innovation that had made RadioShack the Apple of its heyday.
But most concurred that its market share will be handily divvied up between carrier stores, Best Buy, Amazon.com and Walmart, and that, sadly, neither consumers nor vendors will miss it.
David Workman, president/COO of the ProSource buying organization, lived through a Chapter 11 reorganization as the CEO of the late Ultimate Electronics big-box CE chain. From his perspective, “RadioShack was built on a margin structure and a subscription model that doesn’t exist anymore. It prospered in sales of high-margin products that took time to explain, but the Internet stripped that away, and Apple and the carriers with their thousands of stores broke the cellphone model.”
Noah Herschman, COO of factory-direct e-commerce platform DHGate, and a former senior merchant at Amazon.com, eBay and Staples, also witnessed firsthand the fail of a CE chain as a VP-level exec at Tweeter Home Entertainment. He too pointed at an anachronistic business model built on slow turns and high margins.
“They really were the original China OEM customer,” he said, “holding inventory on thousands of SKUs, mostly accessories and component parts, under the Realistic or Radio Shack moniker, and all custom-built by Chinese factories to sell at super-high margins of 70 to 80 percent.”
Robert Heiblim, co-founder and principal of Blue Salve Professional Consulting and Interim Management, a past-president of Denon and a vice chair of CEA’s Audio Division board, said cost cuts, and failure to invest in infrastructure, proved to be the company’s undoing.
“Management could have taken steps over the years, but it would have hit the stock price or some other issue so investment in online commerce, improving logistics, and store refresh and renewal were put off and put off until, as we see, it became too late,” he observed.
This especially hit home in supply chain, which crimped inventory turns and hampered the company’s ability to compete. “When you compare operating costs where a Best Buy can operate its stores for about 20 percent or so of sales while RadioShack needed more than 30 percent, this is a dire issue and really the core problem,” he said. “At Best Buy, mobile sales are among their highest margin areas, yet at the same relative margins RadioShack was losing money.”
Sam Vanderveer, senior VP and general manager at onetime RadioShack headphone vendor House of Marley, struck an elegiac tone. “It’s unfortunate to lose a legacy retailer that was really built around the electronics geek. I think RadioShack really embraced the electronics geek in all of us,” he said.
The cautionary lesson here? “One of the things that lots of retailers face is that ‘What I did yesterday is not good enough for what I do tomorrow,’ ” he said. “ ‘How do I ensure I’m bringing a rewarding experience?’ ”