No one seems to be very surprised by news that RadioShack (RSHC) has filed for bankruptcy and will close more than 1,700 stores. Sometime long ago, the 94-year-old brand, which had once been a leading destination for cutting-edge electronics, lost its relevance in a nation of consumers who are addicted to electronics.
Some of those consumers, in fact, were more surprised to know that RadioShack was still in business than to learn that many of its stores were going out of business. The company’s very name is a relic of another time when a smart phone was one that dialed by touch-tone instead of rotary.
But don’t be so quick to explain the demise of this storied retailer that once dominated sales of clunky home computers, brick-sized cell phones and the first generation of video games. While RadioShack was established when retail was a purely brick-and-mortar play, and maintained an extensive retail presence of more than 4,000 stores, the company did not fail because it was a brick-and-mortar retailer.
Just ask Apple (NASDAQ: AAPL), which consistently attracts dense crowds at its retail stores, and sometimes long lines outside as well. Consumers still like the instant gratification of shopping in physical spaces.
The difference between the retail sector when RadioShack was born in 1921 and the retail sector in 2015 is not simply that more retail is online. It’s that retail is more competitive than ever. At a time that consumers have more choices, retailers online and off have to work harder than ever to win their business.
The successful ones are winning that business with a superior product selection (Apple Stores have the edge here), superb customer service, competitive prices, and a shopping experience that is both pleasant and convenient.
While RadioShack did maintain an online store, it was not a compelling one. The search function appeared outdated, producing lengthy results that were difficult to sort and did not show the merchandise in its best light. The company also failed to understand that it is not enough to offer both online and offline sales. The two approaches need to be integrated. Many of today’s customers use physical retail stores for “showrooming,” effectively browsing the merchandise before going online to look for the best deal. The best retail strategies embrace this trend and use their physical spaces to drive shoppers to their own retail stores, and vice versa.
Perhaps that’s why Apple maintains fewer than 300 strategically-located stores in the United States. With more than ten times as many retail outlets as Apple, RadioShack was overexposed and lacked focus.
With the demise of RadioShack, Best Buy Co. (NYSE: BBY) is a stock to watch. Like RadioShack, Best Buy is a major brick-and-mortar retailer of consumer electronics. In fact, in dense retail locations, many Best Buys are within a stone’s throw of RadioShack. Best Buy has also had its challenges operating in a multi-channel retail environment, but it’s had more success integrating its online and offline stores and recently enjoyed a strong holiday season.
But there aren’t so many major electronics chains these days. As more RadioShack’s go out of business, look for many consumers to turn to the likes of Amazon.com (NASDAQ: AMZN) and Wal-Mart Stores (NYSE: WMT), which sell consumer electronics and a whole lot more.
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