Nothing took it’s place, unless you consider the internet.

Radio Shacks failure was due to the inability to adapt. I worked for “The Shack” from 2004 to 2010 and spent 4 years as a store manager, running 2 different stores. Although I was not with Radio Shack at the end I saw the writing on the wall long before I left the company to open my own business. During this time I watched the upper management fall like a house of cards. There were three CEO’s and only one of them seemed like they had any idea how to turn the company around and that person was only an interim CEO until they could hire someone else.

Radio Shack’s ultimate down fall was they neglected the product lines and customers that had built the company. Radio Shack started by selling radios and other equipment to the amature ham rado operators. This was a thriving business from the 1920’s through the 1940’s when the were just a small company operating only a few stores in the northeast. In the 1950’s televisions were driving customers into the stores. Then in the 60’s and 70’s CB radios became the thing to have and Radio Shack was leading the industry. By the late 70’s and early 80’s sales shifted to high fi audio. Then in the mid 80’s Radio Shack hit a home run with one of the very first affordable home computers the TRS 80. In the 80’s Radio Shack was the place to go if you needed a computer or any accessories. That’s difficult to think of today but it was such a huge market Radio Shack opened several locations that were nothing but computer stores. This continued through the mid to late 90’s. High fi and computers were the primary products in the stores, but there was this one little product that was kept in the display case, often ignored and only sold to the occasional customer who had very deep pockets. These were the first cell phones.

I started working at the Shack at in interesting time, in an interesting location. In the late 90’s and early 2000’s the cell phone industry was booming. Cell phone companies were offering huge subsidies on their products to get customers to sign up for a plan. This is why cell phones cost next to nothing. You could get an average cell phone for anywhere from free to $20. However what the customer didn’t know is the cell companies were subsidizing each phone and paying Radio Shack the full retail price. So the phone might actually cost $300 to $400 and whatever the customer didn’t pay, the carrier did. Many stores were selling between 10 to 20 phones every day. At an average of $350 for each phone, the stores were raking in some serious cash and the customer was paying almost nothing. The carriers of course made that back by locking the customer in to a 2 year contract where a portion of their bill each month went to pay off the subsidy. Also Radio Shack got a small portion of the customers bill each month. This was a great deal as long as people were activating a new cell phone with a new phone number, and that was their achilles heal.

Around 2004–05, the cell phone market in my area became saturated. This meant 80% of all customers who could own a cell phone did. The only people who were still activating new phones were the elderly and the kids who had just turned 18 and were now able to sign a contract. So instead of new phone activations, the stores were doing more upgrades, (i.e. replacing an older phone with a newer model.) The carriers didn’t like this as much and didn’t pay the full subsidy. Often this required the customer to pay more. A phone that may have cost between $0 and $20 for a new activation, may cost $50 to $200 for the upgrade. The customers didn’t like this for obvious reasons and would often go elsewhere where they could get a better deal (WalMart). As the market became saturated cell phone sales started to decline. I got wind of a conference call between the execs in Fort Worth who were asking the Atlanta District Managers “What’s going on in Atlanta?” Over the next several months the same pattern started appearing in other large cities.

Due to this Radio Shack doubled down on it’s cell phone business. The stores were remodeled and all cell phones were moved to the front and center. The customers had to walk through a gauntlet of phones before they could find that 60 cent resistor in the back of the store. Every Sunday’s ad had cell phones on the front and center, each week a new phone was featured as a great new deal, etc, etc. Now the primary metric for evaluating a stores performance was based on the number of phone activations each store was doing each day. It didn’t matter if the store sold $5000 in a single day on non cell phone products, if they were not activating phones there was a problem and staff just wasn’t doing a good enough job qualifying the customers to sell them a phone. A typical store was expected to have between a 10 and 15 hit rate, this means for every 10 to 15 transactions completed one of them should have been a cellular phone. This resulted in some interesting “strategies and techniques” that were introduced to better train and motivate the sales staff. Unfortunately once these techniques reached the sales staff they were pretty much ignored. It was like the generals in World War 1 who had never been to the front lines giving orders for the troops to charge the machine gun nest, but couldn’t figure out why all the soldiers kept getting killed.

The sales staff knew what the problems were and I personally witnessed many associates and managers attempt to bring these concerns to the upper management. The result was often a review of their pay check or for the manager’s the monthly P&L to see what was wrong. Associates and managers were told they can voice their concerns when they fixed their numbers. 99% of the time it had something to do with too few cell phone activations.

I personally was singled out on a particular weekend when the company decided to have a major push and was able to reduce the price of the Motorola Razor or RAZR phone (Remember those) to $20 with both a new activation or an upgrade. We had a conference call that Friday morning and everyone was supposed to motivate their staff and let every customer know about this great deal on the RAZR. Around 4:00pm my cell phone sales were at a grand total of zero and the rest of my sales was looking pretty dismal as well. I got a call with both my district and regional managers on the line who wanted to know what was going on and why we were not selling these RAZR’s unlike all the other stores in the district? My reply, “Well with all due respect gentleman, It’s kind of hard to compete with the WalMart having its grand opening down the street and giving the same phones away for free.” At the end of the day I believe I had just cleared $1000. The rest of that weekend was about the same. The only phones we sold were the little free ones and no RAZRs. It took some time but my district manager finally had to agree that my situation was unique and I was let off the hook.

The cell phone carriers were also looking out for themselves. In order to get a cell phone the customer had to qualify and that was based on their credit report. If the customers credit was low they had to pay a deposit. It didn’t matter if the customer got the phone from Radio Shack or elsewhere, the deposit was still required as it was set by the provider. Well the providers could be finicky. It was not uncommon for the providers to change their minimum requirements to qualify for a phone. So a customer who had a 500 credit score, might require a $400 deposit one day and the next $0. If the carrier wanted to activate more phones, they would relax the requirements. If they wanted to be cautious they would increase them. Radio Shack had no control over this but because Radio Shack was putting all of it’s eggs in one basket an unannounced change in credit requirements could impact the entire company’s bottom line, and it did.

Another issue was something that was started by Charles Tandy when he bought the company. In Mr. Tandy’s day this was a great concept but by the 2000’s it was outdated. Mr. Tandy felt he could deliver a better product, at a better price and make more profit if he could control the supply chain, thus he created several brands that were exclusive to Radio Shack, Realistic, Archer, Enercell, to name a few. This practice and was still there when I was an employee and leading to decreasing sales. For example the Apple Ipod was a very popular product at the time. Unfortunately Radio Shack could not buy enough inventory from Apple to properly stock their stores to meet demands. So what did they do, they created their own unique MP3 player sold only at Radio Shack to compete with Apple. Why pay $300 for an Ipod when you can get this MP3 player for $60? It will play all the same music and the controls are only a little bit confusing and you can’t read the screen, but it will do everything an Ipod will do. Oh would you like to buy the Radio Shack headphones to go with that? Again the generals at the rear didn’t get it. We just didn’t have the products the customer wanted. This is why Radio Shack became irrelevant.

Many of the long time customers who had kept Radio Shack in business stopped shopping there. The company was so cell phone centric, that the associates were never trained on how to sell the other products in the store. They were never taught the little things that customers would come in for, i.e. knowing how to read the colored stripes on resisters, knowing how to calculate wattage for a power supply, or even what the different cables for a hooking up a DVD player could do. All their training went to techniques in order to qualify customers for a new cell phone activation. If someone came in needing a specific part or had a technical problem that required someone with real knowledge, that was to bad, but the associates would be happy to check your eligibility to upgrade your cellular phone. This of course upset and outraged the once loyal base of customers and they just stopped shopping there. Around 2012 I remember many late night talk show host and comedians asking “Can you remember the last time you were in a Radio Shack?”. And that was considered a funny joke.

At the end the upper management finally woke up and realized they could not continue the way they were and in order to survive they would have to start closing stores. However one of the major investors had a contract that prohibited them from closing more than 200 stores a year. With over 5000 locations nationwide, closing 200 stores was not going to be enough to make a difference. This set up Radio Shack for a buyout and that is what happened. After 2 bankruptcies Radio Shack shut down and is now only a website and a few small stores that are privately owned.

Radio Shack missed many opportunities in the 1990’s and 2000’s that could have turned the company around. If they kept the focus on what got them to where they were they would still be here today. Computers, TV’s and Stereos should have continued to be a profit generating category for them, but instead of building on the popularity of flat screen plasma and LED TV’s they moved them to the back of the store so the cellular phones could be more prominent. Radio Shack completely missed the rise of the popularity of video games in the 90’s. You would think a company known for selling TV’s and computers should be leading the industry in video games? Nope, totally ignored it. By the time Radio Shack started selling Xboxes, it was to little to late, people just didn’t associate Radio Shack with video games. DVDs and BluRays could have been a big category for them as well, but they also ignored that in favor of getting more cell phones out the door. For a short time they tried selling DVDs but again, too little, way too late. Then in my opinion there was the final nail in the coffin. Radio Shack never embraced the internet. They had a web site, (technically still do). But it was never utilized correctly. For the longest time Radio Shack had a catalog that was hundreds of pages thick that had every product they sold. You would think that would be a great thing to put on the internet. Well they did, but not until big companies like Amazon, Ebay, etc had already dominated it.

When Radio Shack stopped embracing their past and looking only at the present and never at the future their downfall was assured. That’s what I saw in 2009 and decided I could run my own company better. So that’s what I did.

Edit…

I appreciate everyone that has suggested edits to this answer. I really do!

However I have a slight bit of dyslexia and I’m prone to make spelling, grammer, syntax errors from time to time. So for now I’m going to leave this the way it is as my own little signature. 😉

Thanks guys