RadioShack is lucky to still be in business. I worked there the summer before my freshman year in college, and saw directly the problems going on at the company. Nonetheless, I still learned a lot about business and sales. And by learn, I mean I learned what not to do in the business world.
In 2004, RadioShack nearly collapsed. Corporate decided that it was time to raise profits and go after slacking store managers. In a program called “Fix 1500”, upper management gave “warnings” to 1500 (out of a total of 5000) performance-lacking managers. During assessment interviews, upper management made the mistake of assessing a store manager’s ability by comparing him or her to other managers. This is controversial because upper management failed to evaluate a store manager’s skill set, making it a very subjective assessment. Although a particular manager may be performing better than a peer, he or she may not possess the proper qualifications. In a 6-month period, over 1700 store managers were demoted to sales associates or were let go. Eventually Fix 1500 was abolished and the creator of the program resigned from the company. By the middle of Q2 2005, the stock fell nearly 30%.
Few months later, a CEO scandal emerged. A local media source discovered that the CEO at the time, David Edmondson, lied about his education on his resume. To make matters worse, the Q4 2005 earnings had fallen 62 percent. The stock was now at a three-year low.
Corporate decided to make changes. RadioShack developed a strategy to lower costs and increase profits. At this time, nearly 500 stores closed. The reason for this is because initial strategic store planning appeared to be nonsensical. In some areas, there were dozens of stores within a few square miles. But the stock still sank (despite a booming economy). Next came job cuts. The company laid off 20% of its corporate workforce.
Here comes 2009. A new RadioShack emerges. After facing a series of customer relations issues from the Better Business Bureau, RadioShack made some changes and the BBB upgraded their rating. Then, RadioShack launched a campaign to homogenize every store. The purpose of this was to create a similar shopping experience and layout for every location.
But the most significant change has been the rebranding campaign. RadioShack now advertises itself as “The Shack”, all over the place. Employees were given marketing materials and promotional events took place in New York and San Francisco early August to spread the word. They also recently announced that they are planning to start a professional cycling team next year with Lance Armstrong. The strategic partnership with T-Mobile could also be strategically brilliant for the brand.
The real question is whether or not this rebranding campaign will be effective. In an economy where retail spending is lacking, RadioShack may have chosen a wrong time to spend the advertising dollars. But perhaps these campaigns may be effective in the near-future when the economy starts to rebound and consumers begin to spend money.
But “The Shack” is smart in advertising its recent alliance with T-Mobile to sell the MyTouch. Although overall cell phone sales are at a decline, smartphone sales are increasing. In Q1 2009, smartphone sales were up 12.7% compared to Q1 2008. In the overall cell phone market, sales were down 9.4%.
Therefore, it appears RadioShack is finally able to come up a smart marketing strategy. By targeting consumer demand, they are able to capitalize on consumer’s buying patterns. Although overall consumer spending is lower, RadioShack is reaching out to the sector that seems to be performing well.
This type of advertising model shows us that even in a recession, there are still opportunities out there. Hopefully this time, RadioShack is successful in their marketing campaigns. Let’s see how they position themselves to market the MyTouch while facing competition from the industry powerhouse iPhone.
Hopefully, RadioShack does not run into another set of bad luck. In addition, based on my past work experience at the company, they need to do a lot more than just rebrand. They need to do a lot of work to fix the inefficiencies and lack of corporate communication to the store level. They’ve created a great advertising campaign, but they are going to have to do a lot more if they want to win customers and keep retention rates high.
One of the biggest problems I’ve noticed with the store is the lack of consistency and loyalty to products. If you notice, most people don’t go into RadioShack to buy TVs. Yet RadioShack has a few televisions on display for sale. If they are going to sell TVs, they should do it right, otherwise no one is going to buy them period. Rather than selling archaic models at jacked up prices, RadioShack should stay with the trend of flat screen televisions and increase their selection and inventory. Or don’t sell them at all.
Same with laptops and PCs. They will always have one or two computers on display, but don’t carry anything else of that nature. Most people associate RadioShack with “odds and ends” products and cell phones. In my opinion, let the big dogs like Best Buy, Microcenter etc. carry and TVs and computers and RadioShack should focus on other lines of products such as cell phone sales and RadioShack unique products. By concentrating on these lines of business, RadioShack will focus on real revenue streams, operate efficiently, and become “masters” of particular products rather than being mediocre at all types of products. By keeping the stores “small” they can market themselves as customer friendly and loyal, an attribute that some of the larger stores are perceived to lack. When it comes to technology, customers value close attention and high quality service.
The next few quarters will be extremely interesting for RadioShack. Although we are in a rough economy, we could potentially see RadioShack performing better than its competitors. As long as the management stays strong, the company implements strategic marketing moves, and maintains focus on hot products that sell, we could see a revitalized and prosperous company. In addition, RadioShack has to clear up all the stereotypes that are out there and capitalize on its competitors weaknesses. Staying aggressive and allocating spending to proper areas will prove to be a very lucrative investment, not just an expense on the balance sheet.