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[21 comments]

Will New CEO Be the Right Rx For What Ails RadioShack?

February 12, 2013

While president of Walgreens' Duane Reade division, Joe Magnacca helped develop a flagship concept he called "the most exciting drugstore in the world." That concept, with an emphasis on fresh and healthy food offerings, became the inspiration, if not the blueprint, for the latest generation Walgreens. Now, many are wondering if Mr. Magnacca will be able to bring his brand of marketing and merchandising magic to RadioShack as the chain's new chief executive officer.

"Joe is a leader with significant experience in transforming iconic brand names into strong operating businesses," said Daniel R. Feehan, non-executive chairman of RadioShack, in a statement. "We believe he will be a catalyst for change at RadioShack in refining our merchandising strategies, reinvigorating the shopping experience for our customers and building sustainable value for our shareholders."

Mr. Magnacca, who most recently served as executive vice president and president of Daily Living Products and Solutions for Walgreens, becomes RadioShack's fourth CEO in the past three years. Before Walgreens/Duane Reade, he worked at Shoppers Drug Mart and Loblaws.

"I see advantages in being a small box retailer in the consumer electronics space today, particularly with the broad retail footprint and convenience RadioShack offers its customers," Mr. Magnacca said. "I believe my experiences will help the team identify and execute on new opportunities that can return this great company to a position of prominence in the lexicon of American retailers."

There are some who believe that even a merchant of Mr. Magnacca's stature will face steep challenges in getting RadioShack on the right track in today's consumer electronics business.

"Merchandising remains a big challenge, handicapped by the company's small stores. I think it's a tough go for any executive," Scott Tilghman, an analyst at B. Riley & Co., told Bloomberg News.

FINANCIALS:     [NYSE:RSH] [ ]

Discussion Questions:

What will it take for Joe Magnacca to get RadioShack turned around? Are there specific steps you think he would be wise to take?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How optimistic are you that Joe Magnacca will get RadioShack turned around?

Comments:

Joe Magnacca is the consummate merchant. As such, I believe he will approach this new opportunity with vigor to reignite the RadioShack experience.

Specific steps? Some areas of focus will be competitive strengths/advantages of RS; locations and real estate; integrated store sites (including Internet, mobile, and social); and RS operational efficiencies. It's certainly a full plate ... but Joe's up to the task.

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Dave Wendland, Vice President, Hamacher Resource Group

Systematically, I think this brand needs as swift a good culture change as I think Ron Johnson has been a bad one. Who doesn't remember "the Shack" firing people by email?

I was in a RadioShack a couple weeks ago looking for additional iPhone 5 cables; the guy pointed to the wall and said, "Over there." He couldn't be bothered until I came to the register. "For only $3 more we will replace them if they break in the next two years." No thanks. "Really?" he asked, as if I had turned down free backstage passes to the Oscars.

RadioShack was the very first brand to aggressively grow a direct mail list second to none. Maybe if they got out of the heavy sell of warranties and figured out exactly why they exist and how to use their list appropriately, they can reinvent themselves to deliver for the customer rather than disparage.

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Bob Phibbs, President/CEO, The Retail Doctor

If Neighborhood Markets work for food, why wouldn't RadioShack work for electronics? It's the same principle really....you need something quickly, it's not an expensive item, so you stop off and buy it at RadioShack. Easier than going to a big box electronics retailer, faster than Amazon (and you might even get some help while you're there).

I don't think square footage is the issue. Its roots were as a parts store. That works. The mobile phone business is being taken over by providers. So parts is parts.

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Paula Rosenblum, Managing Partner, RSR Research

Yes Bob, I do remember Radio Shack firing people by email and giving long term devoted, committed employees a matter of minutes to leave the building with an escort to the door. They had to return to pick up their personal belongings. I have friends who were included in the exodus.

Back to today, my hope is Mr. Magnacca can bring his magic to the Ft. Worth headquarters building that they had to sell to a local college a few years back. The internal culture and fear has to be changed before the external customer can again say RadioShack is a player. This reminds me of what we were asked regarding JC Penney's a few months back. I hope the results are more favorable at RadioShack.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I am a big fan of both Mr. Magnacca and RadioShack and believe the combination will be just what RadioShack needs. Some thoughts on what to focus on:

  1. Location, Location, Location. RadioShack has a great network of stores around the country. Take advantage of that asset.
  2. RadioShack was the original Geek Squad. If you had a technical issue you went to RadioShack. Get back to that model.
  3. Focus on being the project solution company. Wireless, HDTV antennas, green solution provider (become a distributor for solar panels?), Crafts and kits for kids (pinewood Derby), robots, etc.
  4. RadioShack focused on Mobile being the catalyst for change and success over the last 18 months. Move away from that model. Mobile is important, but don't make it the focal point.

Joe, Have fun! RadioShack is an amazing iconic brand with a bunch of hard working people and loyal and past customers waiting for exciting change. You are just the guy to lead this endeavor.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

The common everyday use of Information Technology at work, at home and now on the go brings many retail opportunities that few executives have had long-term success with. RadioShack is the living story of what can go wrong when one creates or runs an IT retail business with a full catalog of the mistakes that have put many out of business or employment.

The easy part of the task at hand is vendor relations and support. If this new CEO is truly a retail merchandising maven, the problem is solved. The two problems that RadioShack needs some light shed on is their sales and consumer relations. As we see here and in previous discussions, there is much indifference and dislike from the audience. I suspect the common consumer is in agreement with either of these opinions. Advertising will help for a while but with high turnover and unenthusiastic employees the present opinions may only be galvanized to the name.

It may be a good time to enroll employees both current and new with a work environment and rewards structure that will create growth for individuals and of course the company. As for the name, let's review what Nissan did for Datsun and give it a go. As for sales, I think that the internet side of this effort is seriously lagging and in need of immediate supercharging. Acquiring and or merging with a company like Black Box might be a good idea with many rewards for both parties such as store pick up at reduced shipping cost. Whatever he does the new CEO's efforts will be worth the time invested to observe his efforts in this huge task. And it would be a benefit to all to see someone successfully figure this out for the long term.

'gjarnoldjr'

We just did a study on 45 retail brands measuring the responses of over 1,000 Millennials nationwide. RadioShack ranked very high in awareness (the good news) but very low in appeal and purchase. In other words; young people know who RadioShack is but don't like to go there, let alone buy something.

Irrelevance is a very tough thing to overcome, especially with younger shoppers. But if the RS board uses a long term filter, like that of JC Penney right now, there is a chance—IMO, with all those locations and all that awareness—that some savvy leader could take advantage of and make great things happen.

It's possible. There's potential for sure. Let's see what Joe (and the RS board) is made of!

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Lee Peterson, EVP Creative Services, WD Partners

Got to find a niche and own it. RadioShack can provide solutions to almost any electronic connection corundum, but I am not sure if that is enough. The small footprint does offer some advantages, as much of America isn't conveniently covered by Best Buy or even Sears.

Making RadioShack the "go to" solutions store might work. This could be accomplished with in-store tutorials that address problems with stereos, TVs, sound bars, DVD players, wireless networks, etc. Cater to the (on a budget) audiophiles and home theater market. I believe there is money to be made in home networking and "the wireless home" where home security and entertainment are linked. Show people how to make today's technology work for them. Advertise yourself as the solutions store and for gosh sakes get some employees who know how to explain things to those who don't know the difference between a dongle and a transistor.

Ed Dennis, Sales, Dennis Enterprises

Mr. Magnacca's biggest challenge may be his biggest lever for short term success. I once heard from a RadioShack marketer that average customer trip frequency is ONCE PER YEAR. This foots with Lee's finding on awareness vs. purchase frequency. If he can just get a small portion of shoppers to set foot in the store one more time this year, the resulting bump will be pretty amazing. Unfortunately, the things that typically will drive this (rebranding, assortment changes, pricing) have been tried with limited success. I wish him the best of luck.

Charles Billups, Dir New Product Development, In-Store Marketing Institute

Joe Magnacca may be the right leader for the job, and a big job it is. RadioShack's issues include its name, its identity, and its future. The retail industry wishes him the best.

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Cathy Hotka, Principal, Cathy Hotka & Associates

Listen, consult, decide. Joe needs to listen to his customers, consumers and his company's employees. Then he needs to build a great team around him, whom he can consult with on these matters, every day. Finally, he needs to decide which steps to take to create a clear, vision for his company, and communicate this to his employees, consumers and customers.

Joe's greatest asset is that he can build customer service as the core of his company, and give consumers the one thing that everyone loves when they are shopping...great customer service. Once he creates this, he can then build a retail structure that embraces this (on both a brick and mortar and click and mortar basis) so that their name becomes synonymous with customer-first quality.

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Kai Clarke, President, Kowa Optimed, Inc.

There ought to be some kind of "rule of three" here, i.e. if you're in RW three or more times within a year with CEO issues, the answer automatically defaults to "no." Good luck Joe!

'notcom'

I agree with Bob and Lee. Who actually 'wants' to go to RadioShack?

Let's start with the brand—radios and shacks—irrelevant remnants of the '60s. Then there was that stupid period where they'd spend ten minutes collecting all your information when all you wanted was a $2.95 battery. Motivational speaker Larry Winget has been telling a ridiculing RadioShack story in thousands of speeches for decades. They asked him to stop but he won't—it's just too good an example of dumb retail service.

There's this thing called a 'morphic field'—something that's happened so often it's become an immovable part of the situational fabric. The morphic field of RadioShack is about stupid policies, limited inventory, unhelpful employees and no love from consumers who avoid going if they possibly can. Breaking that up will take a nuclear transformation and IMHO a totally new branding initiative.

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Ian Percy, President, The Ian Percy Corporation

1. Understand and own the RadioShack equity. Don't presume RadioShack is Best Buy or Target or any other retailer. It has a unique identity that if dismissed out of hand, can hurt any growth initiative. I'll bet there's plenty of documentation/research in the RadioShack files.

2. Carefully define the marketplace RadioShack wants to dominate. Unless the company prepares to carve out a share of an identifiable space, it will flounder; staff and marketing included.

3. Evaluate consumer acceptance before the big investments. Appropriate marketing research among current and prospective shoppers will be critical in driving strategy forward. Focus groups and social media won't be sufficient for any broad plan. Base the research budget and appropriateness of the methodology on the risk associated with a poor or incorrect decision.

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Joan Treistman, President, The Treistman Group LLC

I agree with Ian that the name is a throwback, and not in a good way. But, you can't get rid of it all, at least all at once. How about something like eShack? I wonder how many radios they sell at this point?

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Al McClain, CEO, Founder, RetailWire.com

Are there specific steps you think he would be wise to take?

0. Advertise during the show, "The Big Bang Theory": ...and occasionally show Sheldon and Leonard going there to get things to build something that's part of the show.
1. Infiltrate and understand the current "'maker' trend" and find out what is needed to support that audience: Become the central supplier of El wire and Blinky things for the electronic music/rave crowds.
2. Jump on the Raspberry Pi phenomenon: http://en.wikipedia.org/wiki/Raspberry_Pi - including robotics and high altitude photography.
3. Jump on the Nest, home automation trend: Jump on anything relating to sensors that work with smart phones—or blue tooth sensors. Help people connect their smart phones to cars built before 2007.
4. Curate smart phone apps: Find amazing applications that relate to local problems and applications—the developers will drive traffic to your stores.
5. Facilitate hackathons in your local markets: Be the enabler of that crowd.
6. Make an amazing social/local/mobile application that leverages the fact that there is a store within 5 minutes of so many people in the US.
7. Curate and offer training: From basic literacy, to how to put up a blog.
8. Contract with local experts and facilitate their involvement in projects: Be the Home Depot of home electronics.
9. Create a capability to support weekend projects: "We will not let you fail" kind of thing.
10. Talk to everyone who buys your 1/4 watt resistors and figure out what the bigger picture is.

Vahe Katros, Consultant, Plan B

If Magnacca can turn the culture towards a consumer facing business, helping busy shoppers solve their problems in a friendly way, it could work. Locations are good, shoppers are there.
Ace Hardware reinvented itself in the face of the Home Depot expansion; many Ace locations are doing well—they understood what local shoppers wanted and execute well; great staff, right items on the shelf, easy to shop displays and more. Walgreens has come a long way, maybe RadioShack can transform and become our neighborhood electronics store?

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Go Vahe! Great response!

Ed Dennis, Sales, Dennis Enterprises

After reading the above article I'm taking bets on who the CEO will be next year at this time. I really don't like these "what will it take (to raise Lazarus from the dead)" discussions. I can't offer anything more than the canned answers previously given. Although Vahe Katros's response was so intriguing I read it three times.

David Livingston, Principal, DJL Research

Thank you for the kind words Ed and Dave! I am an amateur radio operator and got my license at age 14. The hobby changed my life and helped shape my life. I bought the radio study guide manual at RadioShack (started by hams.) If there was a DNA, it was to support hackers. That whole ethic is back and big. '73s Vahe, WA1QQK

Vahe Katros, Consultant, Plan B

First off, congrats to RS for hiring a proven merchant! Joe will have to take advantage of RS's "convenience store" differentiation and demographics and merchandise to those convenience items related to electronics and phones.

There must be test markets going on right now. Time to mine and make some decisions!

'vgallese'

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