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How does RadioShack stay in business?

Tuesday, January 13, 2009

My wife asked this exact same question just the other day, "How does RadioShack stay in business?"

I've long wondered the same thing, though, with me, the question is usually dismissed rather quickly since there is a special place in my heart for these stores going all the way back to the early-80s when, as an Electrical Engineering student, many purchases were made there for lab projects (e.g., octal buffers, dual flip-flops, breadboards, wire strippers, and tons of wire).

Others say that RadioShack is just a giant money laundering business like the sanitation company that Tony Soprano used to run in New Jersey prior to the HBO hit ending its long run a couple years ago.

The folks at The Onion have now added to the intrigue with this report:

Even CEO Can't Figure Out How RadioShack Still In Business
Despite having been on the job for nine months, RadioShack CEO Julian Day said Monday that he still has "no idea" how the home electronics store manages to stay open.

"There must be some sort of business model that enables this company to make money, but I'll be damned if I know what it is," Day said. "You wouldn't think that people still buy enough strobe lights and extension cords to support an entire nationwide chain, but I guess they must, or I wouldn't have this desk to sit behind all day."

The retail outlet boasts more than 6,000 locations in the United States, and is known best for its wall-sized displays of obscure-looking analog electronics components and its notoriously desperate, high-pressure sales staff. Nevertheless, it ranks as a Fortune 500 company, with gross revenues of over $4.5 billion and fiscal quarter earnings averaging tens of millions of dollars.

"Have you even been inside of a RadioShack recently?" Day asked. "Just walking into the place makes you feel vaguely depressed and alienated. Maybe our customers are at the mall anyway and don't feel like driving to Best Buy? I suppose that's possible, but still, it's just...weird."

A RadioShack store that somehow manages to bring in enough paying customers to turn a profit.

After taking over as CEO, Day ordered a comprehensive, top-down review of RadioShack's administrative operations, inventory and purchasing, suppliers, demographics, and marketing strategies. He has also diligently pored over weekly budget reports, met with investors, taken numerous conference calls with regional managers about "circulars or flyers or something," and even spent hours playing with the company's "baffling" 200-In-One electronics kit. Yet so far none of these things have helped Day understand the moribund company's apparent allure.
There's more at The Onion - funny.


Dan said...

What the hell is a "Radio"?!?!
What the hell is a "Shack"?!?!

Anonymous said...

Radio Shack was great for the parts I needed for my Coke machine controller...

I think ive bought one thing there since 1982.

Anonymous said...

Some CEO.
Anyway, I've spent
more money at RatShack in the past 5 years than Best Buy.
Hey, it's not cool to be a do it yourself electronics nut, but maybe there are more of us around than you think. Where else can you buy a capacitor or cable that you happen to need without waiting to have it shipped or driving to the nearest mega-strip.

Anthony J. Alfidi said...

I bought some plug converters there (converts 3-prong plug to fit a 2-prong socket). It's great for obscure needs that big box retailers ignore.

Chuck Ponzi said...


did anon 3 not realize that the Onion is tongue in cheek?

Talk about retarded.

Anonymous said...

The Onion is a fairly amusing site, but the article itself outside of that reflects exactly what I've questioned for many years. I've only been in their stores less than a dozen times in my entire life, an average of once
every 4 years statistically. I know a local RS that closed that was a very small outlet. I can't help but wonder if there's something to the theory that it's a front for money laundering. Every time I ever visited it was rare that there were any other customers in the store(s), and it did make me feel edgy...the salesguy (NEVER female) would practically be up your ass if you'd let him until you got what you needed, paid, and vacated the premises. I did and still do like knowing where to find that obscure item that's impossible to find in other brick 'n mortar retails.

Suki said...

I went in there a year or two ago looking fora miniature FM radio for my boyfriend. The salesperson said they didn't have anything like that -- only MP3 players. "But you're RADIO shack" I replied. And then the kid just shrugged.

Anonymous said...

Hey Chuck Ponzi,

I was smart enough
not to waste my time reading
the article. Get a life.

Mathlete said...

Maybe the answer is another question. If Radio Shack wasn't there, where would you buy those electronic parts? There's nowhere to go except online.

Almost every store in the local mall at the opening, including those in the food court, eventually left. Except for the movie theater, a jeweler, Sears and J.C. Penney...and Radio Shack.

Chuck Ponzi said...

So, Anon 3, you feel impressed enough to comment on an article you did not read.

I suppose you know it all already so you don't need to read? Or, do you have some innate ability like ESP to deduce others' thoughts without actually hearing them out?

Just a question, how do you perform your investment due diligence? Do you simply look at a company's annual report cover, or do you channel the CEO directly in his sleep?


Tim said...

I think this post spurred another one of those dreams last night where I thought I was still in school and had a test in the morning (for which I hadn't studied), a paper due on Friday (which I hadn't started), and a project due next week (which I hadn't even thought about starting).

It ended the way they usually do where I wake up and think, "Thank God I'm not still in school" ala Val Kilmer in Top Secret.

M- said...

A decade ago I worked for RS over a couple of summers. I have some simple answers for how they stay in business:

1) Batteries. Their markup is insane, and they sell an insane volume of them.

2) Pay people peanuts. Staff are (were) paid minimum wage *or* commissions, whichever was higher. Working OT? That's coming off your commissions check.

3) Location. At least where I live, RS is more convenient than Best Buy.

Anonymous said...

why would radioshack online qualify as a strategic information system?

Anonymous said...

Superfunny Onion article that pretty much summarizes the questions I've had for a long time. Fact is, Radio Shack blows (or sucks, guess you'd have to get the 200 in one electronics kit to figure it out).

Yes, you CAN get electronic knick-knacks but you can't get the pattiwacks. Or, should I say, they USED to carry every little electronic doo-dad under the sun but even THAT area which they held a seeming monopoly on, is vaporizing as they allot more floor space to stuff you can get pretty much anywhere else at a much better price. Even their educational kits are stuff you could pick up at a hobby lobby for much cheaper.

But what's worse is stepping inside such a loser store makes me feel like a loser. Kind of like Walmart. Walmart's cheapness makes me feel cheap. Radio Shack's desperate sales staff make me feel desperate. Heaven help anyone who might walk into the store should Walmart and Radio Shack merge: desperate, cheap and inexplicably still in business.

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