New Day at RadioShack
It’s all on Julian Day now.
The former Kmart and Sears exec, hired last month to turn around the struggling RadioShack chain, said goodbye to Claire Babrowski, the former interim CEO and president and COO of the company, who will leave the company officially on August 31.
“Claire is an exceptional leader who was at the helm of our company during some very challenging times,” said Mr. Day in a company press release. “In addition, she has been extremely helpful to me during my period of orientation at the company. She has immense talent and is in the prime of her career, and I respect her desire to transition out of the company to pursue other interests.”
The company has no immediate plans to fill the role of president and COO held by Ms. Babrowski. Her departure follows the resignation last month by former CFO David Barnes.
James Gooch was named as the new CFO for RadioShack teaming him up again with Mr. Day. The two men previously worked together at Kmart and Sears Holdings.
Discussion Question: What should (will) Julian Day
do to turn RadioShack around?
When his hiring was announced, RadioShack sent out a press
release with the following quote from Thomas Plaskett, presiding director of
the company’s board of directors.
“Julian has a deep understanding of the retail industry
in North America, and he is widely recognized for his ability to create value
for shareholders at the companies where he has served. His extensive knowledge
of retail operations and his experience in revitalizing some of the great American
retail brands make him the ideal person to lead RadioShack as we re-establish
its pre-eminent position in the industry.”
There is no question Julian Day knows numbers and can
make deals. That’s a long way from suggesting he has any clue when it comes
to bringing back a retail brand to its former glory. His tenure at Kmart and
Sears are proof-positive (or should that be negative) of that.
Comparing RS to Best Buy or Circuit City is quite a stretch. About the same stretch as considering that the situation and expertise derived at Sears/K-Mart can be sold as a turnaround.
That being said, RS has always been to me much like the local hardware store. It’s a place you go when you need help identifying exactly what you need. They usually have help that is knowledgeable and well trained. They may be a bit too well trained at checkout time.
It can be a really neat niche’ place to go. They can provide products and services that the others cannot or cannot do as well. It does however have an image problem and is a bit of a joke in the industry on what they require at the checkout. Making the experience better will go a long way. A cleaner, brighter, well-stocked store wouldn’t hurt either.
Ok, I’m coming from a different angle here. When I think of all of the stores mentioned, I think the merchandising of the stores is awful with RadioShack being the worst of the worst. The big boxes, in my humble opinion, are intimidating. RadioShack is always a mess, not categorized etc.
I think they could do a lot to make the stores more visibly appealing and exciting and encourage impulse buys, which typically are higher margin. Perhaps if they marketed themselves as a poor man’s Sharper Image they would find success. It always seemed to me like someone could take serious market share from them, by having equally cool stores but bringing the pricing down a tier or two. I don’t think it would be incongruent for them to keep the aspects they are known for, but doing it with a hip new makeover to the retail space and maybe 30-40% of the product mix.
RadioShack’s heavy reliance on cell phone service commissions has to be balanced with its traditional strength: high margin “something else”. In the company’s early history they realized there was no way to be profitable selling black and white televisions (the margins were poor) so they used high margins as the initial qualifier for any item to be added to the assortment. Batteries (their own brand, with decent margins) were seen as a way to invite repetitive traffic that would buy impulse (high margin) items. Radio Shack will never be the low cost provider. Just as Kroger and 7-Eleven are not in the same industry, neither are Radio Shack and Best Buy.
RadioShack has one huge opportunity and that is security. They need to become the home/small business security experts. It plays to their strengths – electronics, video cameras, do-it-yourself.
They need to study the insurance benefits available and line themselves up with some insurance companies and become the personal protection experts. RadioShack can become the leader in both direct sell to consumer and supplier to installers. It’s there for the taking. Go get it boys!
I agree that differentiation in a way that matters to customers is the key, as it always is. I will add, however, this is very difficult for many, many retailers to do. For one, they seem to have a difficult time deciding how to truly differentiate themselves: “the numbers show such conflicting things,” we have heard dozens of times. Then there are the political struggles over whose area will be kept and whose will be shed. Shedding product lines is so difficult because it looks like shedding income — “SOMEONE is making a lot of money on these lines, so why shouldn’t it be we?,” is another phrase we hear a lot. The skills and knowledge base needed to successfully differentiate are not strong in many executives. This is why we so seldom see it really occurring.
RS is not a lost cause yet. They do outnumber both CC and BB in outlets in the US. What they need, as my colleagues have stated, is to 1st build their Brand. This can be done by targeting the audience who now shops for electronics – the young adults and teens. Yes, teens have a lot of buying power, but RS doesn’t seem to understand that at all as they cater to a more adult crowd. A huge change in philosophy is in order.
RadioShack’s future depends on recognizing its success from the past; location, location, location. It is not a price leader or a brand innovator. So long as Mr. Day recognizes this strength, and builds upon it, he will steer the company into great margins and profits. However, should he wish to innovate and become another Circuit City or Best Buy, he will be faced with a long, expensive, uphill battle. Radio Shack is a store of convenience and location. Because of this they can charge higher prices, while offering the customer service and product satisfaction that their markets are looking for.
What a tough row to hoe for Mr. Day.
When I think of RadioShack electronic kitsch is what comes to mind. While everyone agrees it would be suicidal to go head-to-head with Best Buy and Circuit City, I don’t think there is enough profit in plugs and jacks and whatnots to make a serious go of it. Sorry, but I think RadioShack ( as if the name wasn’t a big enough hint ) has become an anachronism. RadioShack started out as a major player in a niche market but failed to transition when that niche market became a major market. I have a hard time seeing a future for the company.
I’m a little late on this one and some of you seemed to have hinted at it, but the biggest thing RadioShack can focus on is service. Their distinguishing feature is the number of convenient locations where customers can make a “non-hassled” pick-up of something they need quickly. Our home environments are becoming more technically challenging each day. Just as many of us have given up tuning up the car since we no longer recognize any of the parts under the hood, we will soon no longer be able to manage all the digital connections that are driving our home entertainment and environmental control appliances. A “house visit” will become the only solution.
Here is where RadioShack has an opportunity to compete against the Geek mobile with an online booking facility that allows customers to schedule a house call and a flexible staffing scenario that allows technicians to service multiple geographic areas. This way when the home enthusiast needs more than an extra cable, they can rely on their RadioShack mentor to be around to help. This level of trust leads to further online shopping and RadioShack can become the home enthusiast’s single source of electronics information. That franchise will give them the clout to negotiate with manufacturers and may even allow them to revive the RadioShack brand. Although, I’m not sure consumers are sophisticated enough to ignore the national brands.
Since I just stopped at the local RadioShack, I wanted to remind everyone that for many of us shopping Best Buy or Circuit City requires an expedition. Radio Shack is in small towns where the nearest mall or big box is at least an hour away. I know that we don’t register on corporate radar, but we’re here and we buy.
I think I agree with Bernie. RadioShack is many things and master of none. I think its best bet would be to leverage the “geek” image that they seem to encourage through staffing their stores with the, ahem, socially-challenged. They should have been the ones to create the Geek Squad and I think there’s room for competition there. Focus on products that are high-margin and high-tech and still very confusing for consumers, and work intensely on a reputation for selling not at the lowest price, but with the lowest frustration level.
With Circuit City and Best Buy breathing all of the available oxygen in the electronics industry it seems; there needs to be a point of difference for Radio Shack. I cannot tell you what they are “good at” or “what they stand for” and I wonder if it is just me or if others feel as I do.
I do not know Julian Day and cannot provide insight into strengths or skills – but trumpeting Sears and Kmart executive management experience does not seem like a reassurance of one’s competence. Unfair and as unfortunate as it may be – having those on your resume would not provide confidence that you can “turn things around.”
In response to David Zahn’s question, RadioShack stands for convenient electronics, to me at least. If you are looking for a phone charger, an answering machine, batteries, stuff like that; you can usually get it at a good price and without having to navigate the cavernous worlds of Best Buy, Circuit City, or Wal-Mart. They also usually have staff that is up to speed on various models of electronics, and what works with what.
So their three assets would seem to be convenience, expertise, and price, in that order. Seems like a turnaround should be able to be built on those, right?
I think RadioShack needs a better value proposition than convenient electronics, or at least a clearer definition of that value proposition. They have toys, but they have high-end TVs; they have resistors and capacitors, and on and on. They send a very mixed message. They tend to be better at their original core strength: having the bits and pieces you need to make everything work or work better.
While Mr. Day does have significant retail experience; big box experience doesn’t always translate well to the small box environment. A RadioShack store tucked into the corner of a strip mall has a different role than a Kmart.
I agree that RadioShack’s best bet is to focus on what it does best, and to train, train, train to excel in that area. If that is the convenient electronics niche, then they need to be the knowledge resource in that area with much more information in the store, both from employees and in-store materials. They should expand their focus on accessories and get rid of the TVs. They also need to look at store count and locations. To be a convenient electronics store, you need to have convenient stores. Many of the RadioShack locations I’ve seen look like they once were the right real estate pick but have since lost the prime position. It is easy to over expand with small boxes and Mr. Day would do well to have a smaller but higher performing chain.
I can see Al’s point about RadioShack’s three assets, but I also agree with David. I’m just not convinced that many people are aware of what the company is “good at.” I’m also not convinced that convenience is a major differentiator for retailers dealing in CE products.
Best Buy is cornering the consumer electronics “expertise” market, especially with the addition of Geek Squad. RadioShack should jump on that bandwagon by developing a similar type of program. They would call attention to their product “expertise”, and develop loyalty through their price points and convenience as well.
One visit to a RadioShack will show what needs to be done. There are large numbers of stock-outs, their wireless business has tanked, and even worse they appear to want to go head-to-head with Best Buy and Circuit City on flat screen televisions. The first two can be fixed but the third one will not play out well over the long-run.
I think RadioShack can look to Circuit City and see the path they need to choose. Just a couple of years ago Circuit City was getting their clock cleaned by Best Buy. For a while they tried to slug it out toe-to-toe with Best Buy, but finally figured out instead of trying to beat Best Buy at their own game they had to differentiate themselves. One of the smartest things Circuit City did was create their Buy Online and Pick-Up in the Store 24 Minute Guarantee. As a consumer I get the benefit of shopping online but can shoot over to my local Circuit City and pick it up within 24 minutes. The store experience at Circuit City is still mixed but the new offerings help mitigates that issue.
RadioShack needs to focus on being an awesome second stop. They are never going to be a cool place for young people to buy iPods, but they can be a place to have the largest selection of iPod accessories. They can also be the place consumers shop for all the installation and wiring help for the things they are buying at the big CE retailers or online. Of course this means that if “I’ve Got Questions” the staff at Radio Shack really needs to have answers. I see the need for more and more training. Now the question is will Mr. Day invest in long-term strategies like training and development, or will he cut his way to short-term profits? Time will tell.
Finally, quit asking me if I need batteries unless what I’m buying needs batteries!
The warning flag signaling a long and difficult road for RadioShack is in the first sentence of the corporate announcement: “…he is widely recognized for his ability to create value for shareholders…”
First it’s hard to reconcile that claim with Kmart and Sears as Mr. Day’s primary credentials.
Second, when will we ever learn that increasing shareholder value is a result not a cause? How about finding a leader widely recognized for creating amazing customer experiences…inspiring employees to supernatural performance… creating unique Blue Ocean enterprises or insightful and innovative competitive strategies.
No one is going to start shopping at RadioShack excited about the chance to increase shareholder value. But they might if the store starts creating value for customers.
With all the talk of Eddie Lampert acquiring another company, I wonder if RadioShack is next on his list. Considering that RadioShack is taking on more former Sears executives, there is already an existing connection.
From a merchandizing standpoint, this might make sense for Sears. In acquiring RadioShack, Sears would gain another reputable hard-line brand in their stores. I could easily imagine RadioShack operating as a “store within a store” concept for Sears. Essentially, a RadioShack inside a Sears store could replace the chain’s current lackluster electronics departments. The RadioShack brand could very easily come to rival Craftsman, Kennmore and Lands’ End as a prime brand for the company.
Such a move would also allow Sears to liquidate a number of existing independant RadioShack stores to generate cash for the corporation. These liquidations could occur as existing RadioShack stores are moved into nearby Sears locations.