Electrical Engineers Can't Sustain RadioShack Growth

RadioShack profits will miss the company's target for 2005. They say sales of cellular telephones and other highly profitable accessories are disappointing, and that 4% same store growth is coming mostly from low profit products such as MP3 players and digital cameras. Did RadioShack really expect that a store designed to appeal to recent graduates from the MIT School of Electrical Engineering would play well to mass market buyers of new consumer electronics products?

In the spirit of full disclosure: I love RadioShack. I enjoy browsing through chock-a-full aisles of electrical connectors, adaptors, converters, wiring harnesses, and power supplies. It's a cool place to shop if you're the "Do-It-Yourself" type of consumer when it comes to piecing together and actually using all those new gadgets and gizmos that the consumer electronics industry is pouring forth.

And best of all? Their sales assistants actually know what they're talking about! Not only that, they make helpful recommendations and provide genuinely useful advice as they navigate customers through the store, all the while creating an oddly reassuring white noise as they murmur on about product specs, cable lengths, amps, ohms, and watts. RadioShack is probably the only consumer electronics retailing chain in North America where store staff actually understand and can communicate in English about the products they sell.

So why the bad news on profits? (Profit Falls Short at RadioShack, New York Times, 1/12/06)

Unfortunately, like all the other consumer electronics retailers in the U.S., RadioShack is focused too inwardly on category profit and what retailers call "sell through velocity". The stores are high touch - a welcome virtue in the barren desert of consumer retailing - but in the wrong way. Stylistically, it's hardly inviting to the sweet spot of the market, what we marketers call "early majority" buyers . Rather than leveraging their roots in appealing to the techies, they wallow in it.

RadioShack's mandate is as straight-forward as it is elusive for them: they clearly need to broaden their stores' appeal to additional consumer segments. Case in point: they do a terrible job making their stores appealing to young people, especially young women, which may partly explain their disappointing results. Indeed, a recent Mintel study (Mintel/Phillips Electronics Consumer communications study, July 2005) found that while only 1/3 of males aged 12-17 saw cell phones as a "must have" purchase, over half of all females in the same age group rated cellphones a "must have". Why not cater to this group? Experiment with a small store-in-a-store corner "young women's" electronics boutique" modeled after the wildly profitable boutiques that cosmetics vendor Origins has developed within department stores.

Meanwhile, the same study shows that young men are almost four times mroe likely than young women to see an MP3 player as "must have". Maybe RadioShack needs a different concept for this group. No doubt, older adults, and other segments vary as well. Certainly a "one size fits all" approach seems destined for failure.

RadioShack, like virtually all other national consumer electronics retailers, has to shift corporate strategizing and decision-making away from dyed-in-the-wool retail merchandisers and their reams of category management data, to innovative, creative, excitement-oriented marketers and retailing executives.

But then we all know that there isn't any place where one size fits all. So RadioShack...open the windows and air out those stuffy conference rooms before it's too late!