RadioShack, 94 years old and looking for new life in the aftermath of bankruptcy, has a plan: Act more like a convenience store.
After the Fort Worth-based retailer waved the white flag of Chapter 11 in February, its biggest creditor, Salus Capital Partners, fought to liquidate the Shack and squeeze out whatever value the brand had left. But Standard General, a hedge fund, pushed to keep open 1,740 of RadioShack’s 4,000 stores, and a Delaware court last week approved the fund’s takeover proposal
Standard General’s strategy calls for RadioShack to drop unprofitable big-name gadgets like cameras, laptops and tablets that shoppers now routinely scoop up online and rebrand itself as “the premier community destination for consumer electronics” – a national bodega of batteries and earbuds.
Think of the new Shack like the modern equivalent of a small-town corner store: Instead of milk and medicine, it will have cell-phone chargers, headphones and all the other little easily forgotten doodads that keep our Web-connected lives running. (Among RadioShack’s biggest best sellers: hearing-aid batteries.)
The company expects these little tech outposts to take off in small-town America, where online shopping and quick deliveries are not pervasive but where gadgets remain just as much a part of life. The best-performing Shack outlets, leaders said, weren’t often in busy cities or high-rent shopping centers, but in slower areas and strip malls, where competition was low and RadioShack was perhaps the only gadget game in town.
“The parts of the business that you think are unsexy are the ones that are doing great,” Soohyung Kim, Standard General’s managing partner, told The New York Times. “And the parts that you’d think are cool, the smartphones and the prime [retail] locations – horrendous.”
But not all market-watchers are holding their breath for the Shack’s revival to health. The cannibalization of RadioShack’s main business model by online shopping – and the rise of smartphones as a replacement for GPS units, music players and the other gizmos that once filled RadioShack shelves – has not changed, many argue, and won’t be reversed by the new unveiling of a convenience mart.
“The fact that they have a new lease on life does not change the competitive dynamics here,” said Anthony Chukumba, a senior research analyst with BB&T Capital Markets. “And to me it does not change the so many reasons that led them to going bankrupt in the first place.”
Only 7,500 of RadioShack’s 27,000 jobs will survive in the thinned-down chain’s surviving stores, most of which will share space with cellphone carrier Sprint. Salus, which sought to liquidate the company, still owns some of its most critical pieces, including customer data and the RadioShack name – meaning the new incarnation may have to start from square one with an entirely untested brand.
It is unclear what the stores Standard General keeps open will be called. Standard General and RadioShack did not return calls Tuesday.
But RadioShack has proclaimed its resurrection across social media:
“Thank you for the last 94 years, #TeamRadioShack. We look forward to continuing the journey.” (Posted by RadioShack on Thursday, April 2, 2015).
The retailer has championed Shack-is-back turnaround efforts before, but they’ve always been “too little, too late,” as Will Frohnhoefer, an equity research analyst at BTIG, told The Washington Post. “They had multiple years – a decade of decline – to try to reverse things, and they didn’t seem to come up with a coordinated strategy until very late in the game.”
Perhaps the Shack has a slim chance as a gadget supplier in a world where electronics are increasingly complicated and where fancy cords – like “the world’s most advanced charging cable” – can raise half a million dollars from crowdfunding sites. But if the effort proves unsuccessful, its new leaders could once again seek to put the Shack out of its misery, and some analysts expect the illnesses of the past will once again plague Shack’s shot at a second life.
“Even if you live in podunk U.S.A.,” Chukumba said, “you still have the Internet.”