Tuesday, February 03, 2015

End of an Era for One-Time Electronics Giant Radio Shack

Once the "go to" company for innovators, engineers, and electronics enthusiasts, Radio Shack executed its final trade on the New York Stock Exchange on Monday, February 2, 2015.  How far has this giant fallen?  In 1999 at the height of the Dotcom boom, Radio Shack soared to $79.50 per share.  Their final closing price yesterday was 24 cents per share. 

The New York Stock Exchange has delisted the stock for failure to submit a plan to return to a $50 Million market cap as required for membership in the exchange.  Radio Shack is expected to default on its debt this month, and a bankruptcy filing is seen as imminent.  Reports have surfaced that both Amazon and Sprint are interested in purchasing a few of their stores,  however the bulk of their tangible assets will likely be liquidated at auction.

How could a 94-year giant like Radio Shack crumble so quickly?  In just 15-years they went from an electronics giant to extinction.  The answer can be summed up in two words: Quality and Delivery.  From the 1980s forward, the quality of products sold under the Realistic and Tandy brands were increasingly called into question and, in many circles, openly ridiculed.  The TRS-80, Radio Shack's popular personal computer line was nicknamed the "Trash-80" and not without justification.  Realistic branded items become noted for extremely low quality and a much higher price tag than the company could justify.

While the Dotcom boom pushed Radio Shack's stock to record heights, the company never truly adapted to the online landscape.  While online retailers emerged in the electronics and technology space, Radio Shack was either unable or unwilling to shift their model away from an old-style brick and mortar strip-mall occupant.  They simply couldn't compete with the online giants, and in such a niche market, their business model was doomed to failure in the age of the highly versatile online superstore that also had a local physical presence.

The same failure to adapt to the online retail world is what doomed Borders, once a giant book retailer just as computer retailers like CompUSA fell victim to the same emerging online trends.  Radio Shack's failure should come as no surprise to anyone, but it should serve as a warning to any franchise that relies primarily on a local brick and mortar presence.  As companies like Amazon improve their delivery models, offering same-day service in many localities and next-day service in others, the traditional strip-mall franchises must either adapt or face extinction.  Any chain that is not growing their online presence at a rapid rate must take a hard look at their business model since the retail world may well be passing them by.  Just ask Radio Shack.

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