How Radio Shack Lost Its Roots

SMITH BRAIN TRUST -- The #RadioShackisBack campaign starring the likes of Orlando Jones and Carlos Mencia reminds consumers that the company remains alive after a Chapter 11 bankruptcy in February 2015 and the closure of more than half of its 4,000 stores. Nonetheless, a recent Yahoo Makers tribute to the iconic brand tapped P.K. Kannan to help explain how RadioShack lost its competitive advantage. He says the company “lost its roots” by pushing “the electronic toys, gadgets and DIY kits to the back of the store in favor of flashier mobile phone displays up front.”

The retailer was slow to exploit online channels and shifted its focus away from the items that fueled its once-explosive growth — chargers, batteries and other consumable electronics. Consumers who had an “acute need” for these things were willing to pay more, generating high margins for RadioShack, says Kannan, the Ralph J. Tyser Professor of Marketing Science in the University of Maryland’s Robert H. Smith School of Business.

Kannan gives further, anecdotal insight: “A few times I’ve needed electrical adapters before flights to Europe and Asia, where plug-ins are different.  Another time I went running to RadioShack with my son in tow as we had to finish a science project he was working on and needed wires to make the circuit complete. For such acute needs, I had to go to Radioshack and they made a lot of money off of me.”

Consider it akin to running to Home Depot to get a washer to fix a dripping faucet – a situation in which you can’t wait for an online order and delivery, he adds.

“RadioShack pushed aside customers with core needs and willing to pay higher margins for customers who purchase mobile phones,” Kannan says. This is how the retailer lost –- and now is attempting to regain -– its roots.

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