Doohickey heaven
Forget big-box retailers. RadioShack wants to be the local electronics convenience store
WESTLAKE, OHIO--"They carry every stupid little thing," says Kris Bedoya, who recently dragged her husband to the local RadioShack to check out a CB antenna for their Ford pickup. "I told him they would have it, but he didn't believe me," she says. Meanwhile, Doug Daniel of Farmington Hills, Mich., stopped in to buy some cable to hook up a home computer network for the friend he was visiting. "They have all the necessities," he says. Adds his friend Jim Rote: "You don't have to wander around a superstore to find what you want."
All of this is music to the ears of RadioShack executives, as the ubiquitous Fort Worth-based chain undergoes a fashion makeover to juice its sluggish sales growth and protect its niche in the hugely competitive consumer electronics field. Forget nifty large TV s, cutting-edge personal computers, snazzy audio systems, and other glitzy big-box home electronics. When RadioShack previously tried to be a major player in those categories, its limited displays, meager choice of models, and unappealing brands often worked against the firm and its modest-size stores--roughly 18 of which would fit into a typical Best Buy.
Instead, RadioShack has set its sights on a less grandiose direction. "We want to be the convenience store of the consumer electronics industry," says President and Chief Operating Officer David Edmondson. That means renewed emphasis on selling high-profit items like cables, electronic parts, batteries, and other must-have but often hard to find gadgets and accessories.
The new tack is in part a return home for the 83-year-old chain that built its reputation as the place to which even other retailers sent their customers for electronics odds and ends. The chain, named by its Boston founders in 1921 for the old wooden structure that used to house a ship's radio equipment, is well positioned for convenience-store status with some 7,000 locations throughout the United States.
Move over, 7-Eleven. "There's a RadioShack about two blocks from the gym I go to and another two blocks from my office," notes Joseph Beaulieu, an analyst with Chicago investment research firm Morningstar. Though he describes the firm as slow growing and "not very exciting for many investors," Beaulieu says that recent efforts to improve operating efficiency and increase inventory turnover could help the firm further strengthen its profitability. The stores--mostly company-owned but with some smaller ones franchised--rang up $4.6 billion in sales last year, up about 2 percent from the year before.
But though RadioShack enjoys better-than-average profit margins on its sales, the chain's continued vitality in a field dominated by superstores like Best Buy and Wal-Mart makes some analysts wary. What is encouraging, some experts say, is that management is trying to better tap the firm's strengths and recognize its limitations. The number of outlets, for example, makes it costly to stock big-ticket items in the array of models that consumers expect and would tie up scarce floor space with low-profit items. Selling a PC might yield 15 percent profit, for example, while an electronic connecting cable or power adapter can yield 75 percent.
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