Radio Shack lost its way when it ditched its hobbyist customers
economist.com
economist.com
Just look at AdaFruit Industries and Sparkfun. These two companies couldn't do a better job marketing to the DIY audience and have done an incredible job expanding the reach of DIY, but even taken together, with MakerFaire thrown in, I don't think they'd crack $200MM in revenue. Topline. Assuming margins of 30%, it's a great catalog business, but not one that can support a 7,000 store chain.
The reality is during RS's heyday, if you wanted electronics, you had to build them. Or at least know the rudiments of repairing them. Today, the stuff we get from Shenzen is just too good. Too advanced and too cheap and too disposable.
While experimenting with Raspberry Pi boards is cool, it's a hobby, or educational experience, not a replacement for manufactured goods.
Changes in manufacturing took away RadioShack's raison d'être. Big box retail applied purchasing power leverage to take away many of RS's most profitable categories and Amazon/Walmart piled on. This left them as a weird Frankenstein combo of a Brookstone and cell phone retailer. Selling a few more Arduinos and Zigbee breakout boards wouldn't have saved them.
Being around in the hey day of Radio Shack I will also add that there are many more things that you can do for "fun and learning" today than you could do back them. People (not everyone who would buy things at Radio Shack is hardcore) only have so much time. If they have something better to do than a stamp collection (was big years ago) or a model train set (also a big thing) or building model airliners with glue (did that one myself) then they will do the most fun interesting useful thing with their time. Oh yeah some kids did baseball cards. And we even collected decals and stickers at one point.
One thing I did back in the 70's was I had a darkroom in the basement which I would spend hours in. So I visited specialty camera stores and bought darkroom supplies, cameras and so on and spent hours upon hours doing that (turning it into a business which I made a bit of money from). While there were many reasons I did that, one was that there really weren't many things that I could do with my time that I found more interesting. This was before PC's or at least where I was located and that type of "hobby". I'm sure if I had a PC back then I probably might not have done so much photography or some of the other things I spent my time on.
Check out
http://www.radioshackcatalogs.com/
for a somewhat more realistic and balanced view of their business model.
They always owned the niche of small electronics parts, but what paid the store rental bill and the salaries was CB radios, car stereos, TVs, vcrs, dvd players, hi fi, 80s computers... all that stuff was gone by the mid 90s replaced by numerous big box stores. Nobody has taken over retail parts.
(Part of the history rewriting is I don't think "kids these days" understand life before big box stores. In 1989 you want a VCR you don't drive to the local walmart or best buy because there wasn't a single one of them in the state. You could drive into the city and shop at Sears, or the local Radio Shack sold VCRs, or there were audiophool stores that charged $500 per cable. Thats about it. Then the big boxes arrived in the 90s and annihilated RS's primary revenue stream, so history is rewritten that RS was in business in 1985 by selling 79 cent resistors to proto-makers and nothing else, LOL. Maybe its fear of offending currently existing big box advertisers.)
Selling one clock radio for $49.95 per week was always more important to the bottom line than selling five 79 cent resistors.
Turning themselves into the worlds largest, most expensive, and highest overhead mall cell phone kiosk in the world was at best a temporary delaying tactic. Historically RS stepped into big markets accidentally, look at CB radios in the 70s, early computers in the 80s, and they did pretty well with the first cellphones in the 90s. But they never got lucky in the 00s and 10s so away they go.
There obviously was no difference between VCRs stickered as RS or Sears brands, for example.
Some of the toys were junk, but there were no higher quality options. You could pay more money at Sears, but its not like it would be any better quality for the same product from the same factory.
One source of the reputation was ironically parts. The markup being about 1000% customers would expect aerospace grade parts for aerospace prices but what they were actually paying for was the cash and carry convenience of 4000 local stores, and they got all wound up about the quality only being commercial/industrial grade.
They made huge money off what amounts to fads. They cleaned up during the CB fad, early home computers...
However, I suspect that niche is nowhere near big enough to support Radio Shack's size. All those retail outlets can't be cheap to run. They needed a business/market that was easy to transition to and would support their existing size. They chose wrong, but I don't think ditching the hobby market was necessarily a wrong move in their position. Once the improved experience of ordering hobby electronics online became more widely available, "storefront supply of hobby electronics" was not a business model that could ever support a massive chain of retail stores.
This is my thinking as well. Retail is brutal. Each shelf needs to being in x amount of money as space is limited. You have to worry about staffing, taxes, inventory, etc and knowing the full time that amazon or monocable beats you everytime on your high-margin items must be scary.
All these geek friendly narratives keep getting built (oh if they did this or if they did that) but I think the reality is that retail only fits certain business models. Radio shack not longer fits in one of those models since the rise of the big box store and the web. We're talking, what, 5 to 10 stores per market? That's a lot of infrastructure to support and big bills to pay every month. Even during its heydey it was a dumping ground of low quality stuff, namely its Realistic house brand, and its own computer brand which never really competed with its peers like the Apple //e or c or VIC20/C64. I think there's more than little brand nostalgia applied to Radio Shack. Its always been a poor business and its once formidable component supply wasn't ever enough to keep it afloat.
A Radio Shack-manager friend once told me that his whole business was supported by WWII-era grandparents who refused to buy “jap” stereos. Their business didn’t just die; their customer base literally did too.
Radio Shack's problem was that they stopped selling anything you couldn't get elsewhere. They allocated more than half each store to cell phones, which are commodity items available everywhere. When I needed a soldering iron on travel, the selection was paltry compared with the Radio Shack of 20 years ago. But Radio Shack was the only place I could think of to buy one.
As another poster pointed out, electronics hobbyists are not immune to the market forces which push non-service industries like bookstores online. Price is so often king. But there is still room in the market for a service-oriented maker/hobby shop. I've thought for some time that there are areas of the country, primarily cities, where an electronics shop with a collaboration space could do very well. If they could find a way to make the gym model work - long, cheap contracts which aren't worth canceling - it could work out well. It's not a gym, of course, but if you push the education and personal enhancement side of the business, you might be able to achieve the same result.
A company called Techshop just opened a huge subscription-oriented machine shop near my office. The fees are around $100/person/month, and they are paying for a lot of currently empty space in a very expensive DC suburb. There's room for this business model. Radio Shack didn't just miss the boat, they sank their own ship when they switched from being the only place where strange electronic parts were sold, to being another cell phone shop.
There's a Radio Shack in West Seattle where I live. There's another a few miles south near White Center, and another downtown, and another near Beacon Hill, and two more near UW, and one in Ballard, and one at Northgate Mall, and still two more a bit further north.
I count ten on the map. TEN. These are all in Seattle proper, not even looking at the surrounding areas. How many hobbyists does Seattle have? No way hobbyists are keeping this going, no matter what Radio Shack puts on the shelves.
I worked there for less than a week before I quit because the culture was awful. It was a typical commission-based sales environment: We weren't encouraged to actually help anyone, we were encouraged to push bricks of batteries on people because they had the highest margin in the store. No one was to leave without a brick of batteries. Instead of making it easier for people to find a standard RCA cable, we hid them in the back and only left the "gold plated" RCA cables on the shelf. We were not allowed to sell an Apple computer, because the margin was too thin, so we were expected to push whatever PC we had on the shelf.
It was a poison environment, and I for one don't feel the slightest sympathy for Radioshack's demise.
Homedepot is where I got my last soldering iron. While I agree with the conclusion that
Radio Shack didn't just miss the boat, they sank their own ship when they switched from being the only place where strange electronic parts were sold, to being another cell phone shop.
I disagree with what that boat would be, they should have been more best buy\fry's than following hobbyist electronics in to the super niche that it is today. What I don't get is why they started to sell computers\ electronics then pivoted to brookstone crap gizmos and cell phones.
It seems to be working out well for them, and they do more than electronics. They have equipment for woodworking, metalworking, and electronics: http://ents.ca/index.php/Equipment
I'm not a member, but I've visited and can see the appeal.
I had been looking for a particular part for schematics I had found online. I had been able to get all of the other components at one of the three stores that were within 15 miles of my house, but they were all out of one part. But I was able to find out how much it cost, and it was about 1/3-1/4 of what it would cost ordering it online and having it shipped.
Finally while on a trip out of state, I found a really big Radio Shack that had huge aisles of parts. I went digging to see if I could find the part I was looking for, and still didn't see it. A sales associate came up and asked if there was something I was looking for.
"Yes, a 75pf-100pf variable capacitor."
"We might have those in the back, hold on a minute."
He leaves and is gone for about 10 minutes. Finally he comes back with it, along with a manager. The manager asks me:
"What are you going to use this for? A cable descrambler?"
"Um, yes. That's exactly what I'm going to use it for."
"Get out of my store."
I ordered the part online when I got home.
Hobbyists were not the customers we looked for. You'd spend five minutes with them looking for a one ohm resistor. The sale usually did not exceed $1. If you were lucky maybe they'd buy a stripboard or some solder.
The Internet has accelerated this, but even in those days hobbyists were buying most of their parts from Digikey or Mouser. Radio Shack's markup was insane so you can't blame them. Mostly they'd run in to buy some part they forgot to order or didn't realize they'd need. Most hobbyists already had a good soldering iron, solder, flux, a breadboard, stripboards and perfboards etc.
A Best Buy IS just a giant 1985 radio shack with lower prices, more selection and legacy media instead of parts. It really is that simple.
Journalists can't talk about "big box annihilating small retail" without offending the very popular big box advertiser contracts so we're being treated to an absolute flood of "it must have been feng shui" or "it must be those darn nerds" or "it must be bad luck"
jimmyswimmy: Radio Shack's problem was that they stopped selling anything you couldn't get elsewhere.
danpat: Radio Shack definitely missed the niche that Sparkfun/Adafruit and others have filled.
replicatorblog: Today, the stuff we get from Shenzen is just too good.
Taken together, Radio Shack zigged and the market zagged. As the article points out, Fry's is more what Radio Shack envisioned itself to be than Radio Shack is. But I think the elements of that are above, Radio Shack used to sell parts you couldn't get easily elsewhere (text to speech chips for example), they completely missed the "small boards are the new components" transition (which happened long after they stopped paying attention), and the hobbyist "market" is not quite big enough to support 5 to 10 retail stores per market.
Radio Shack was doomed because of exponential curves.
The price/performance of consumer electronics is on a crazy curve. A $300 camera today is WAY better than a $300 camera from two years ago. The cost of repairing that two year old camera is staggeringly high, especially when compared to the cost of buying a new camera... that is significantly better than the old one.
When you have repairable, hackable, semi-permanent electronics, a Radio Shack makes tons of sense.
When you have hermetically sealed, atomic, disposable, depreciating electronics, a Radio Shack is doomed.
Therefore, I'm not sure that is the (only) reason.
I was in a Radio Shack a few days ago and they had all of those things. It had been at least 10 years since I had been there, and I was a bit surprised too.
Even though Radio Shack was making 1000% margins on diodes and resistors, I'd imagine the lure of selling phones, and headphones, and televisions was much higher. In that transition, they challenged the bigger players in the industry (e.g. BestBuy), and clearly lost.
It's sad to see after having spent so much of my youth in the NZ equivalent (Dick Smith, who I'm sure are just as broken now too) staring at wonder in the electronic kits.
Similarly disappointing - I was given a DIY Synth Kit for christmas [0]. I thought it would be a great learning experience but they didn't explain anything about what was going on. It was just plug and play. And even more frustrating, the illustrations were inconsistent with the descriptions (though I kept doubting myself, because surely that's just not possible).
Between those experiences I was left feeling like electronics had become rather inaccessible. From the days when there were enthusiastic people around to help you at your local store, now you have to know what you need to even get hold of it in the first place.
[0] http://www.techwillsaveus.com/shop/diy-kits/diy-synth-kit/
Heathkit never ditched its hobbyist customers and collapsed far sooner not even making it into the past two decades.
Being a one stop shop for all those cables, adapters, batteries, bulbs and mobile accessories that's aways nearby, usually open, you can rely on them having what you need, and bring able to help you figure out what you need is a good business idea. This stuff is more confusing than ever and a lot of people have no idea how to get help online.
From all accounts, Radio Shack didn't fulfill any of that, with a poor selection, poor prices and poor service.
Whenever the topic of Radio Shack comes up there's this nostalgic remembrance of them as some sort of "maker space" but that wasn't central to their business for a very long time if ever. I'm not sure it was even an important part of their brand for most people except insofar as a "place to grab a cable quickly" counts as being part of a hobbyist identity at a time when products were less integrated than today.
That said, I'd wager Sparkfun and the like are still much smaller companies than Radio Shack was at it's peak.
1.) as one sector dies, and another grows, a company in the dying sector should give all possible profits to its investors, so the investors can invest in the growing sector. Maximizing profits in the short term, and allowing the company to go bankrupt, is the responsible thing to do, since the goal is to maximize returns for investors.
2.) as one sector dies, and another grows, a company in the dying sector should re-invent itself, investing in those sectors that are growing. Making long-term investments in fields that might become big in the future is the responsible thing to do.
Some examples, mostly offered as counter-arguments to each proposition:
Possibly relevant to #1, I have heard people complain that Microsoft has wasted billions on Bing, all of which was money that could have been returned to investors, at which point the investors could have used the money to invest in Google.
Possibly relevant to #2, I have heard people complain that Jeff Bezos is being irresponsible by chasing growth, when he should instead be developing profits, which could then be given back to investors.
Possibly relevant to #1, I recall there were people who complained about KMarts (failed) attempt to re-invent itself in the late 1980s and early 1990s. The Harvard Business Review had a write-up of this, as an example of "pre-mature abandonment of core business". The money that KMart spent trying to re-invent itself is money that could have been given to investors, who then could have invested in Wal-Mart.
Possibly relevant to #2, some Western "activist" investors have tried to pressure Japanese companies to focus more on quarterly profits. I recall this was a big thing 15 years ago, there were complaints that Toyota was investing in itself too much, rather than giving back to its investors.
Possibly relevant to #1, some stakeholders have complained that General Motors has continued to pay out dividends for most of the last 40 years, when that money "really" should have been used to re-invent the company so it could better fight against Toyota.
Possibly relevant to #1, Barnes and Noble continues to pay dividends, when the money might be better spent re-inventing the company.
Possibly relevant to #1, The New York Times continues to pay dividends, when the money might be better spent re-inventing the company.
Possibly relevant to #2, in 1997 Apple re-invented itself, when it might have been better for its stock owners if it had maximized payouts, gone bankrupt, and allowed its investors to take what cash they could get and re-invest in Microsoft.
So which should be condoned? Should the law favor one of these options?