Radio Shack, the 94 year-old electronics retail chain, filed for Ch. 11 bankruptcy in 2015. At the end of 2014, they posted their 11th consecutive quarterly loss of $161 million on $650 million revenue…16% lower than the previous year. That year, their stock price eroded 95% to 13 cents and was delisted from the NYSE after market capitalization fell to $28 million, below the minimum requirement of $40 million. Eight years ago, it was $3 billion! What happened?
First, they lost their distinction of being a hangout for hobbyists (i.e., manuals, kits) as online prices and availability became available. Second, they entered the cell phone market when devices were commoditized and had low profit margins. Third, they did not have the skilled and trained employees to provide service as they had traditionally.
Radio Shack was one of the top companies I knew growing up. They abandoned their core strengths, lost their customer value proposition, and diversified to the point of no significant identity. “If everything is important, nothing is important.”
A couple of years ago, I was watching the Super Bowl – a television phenomenon in which half of the audience is there for the commercials instead of the football game. Radio Shack had one of the most memorable commercials that night: a 1980’s flashback. Their bankruptcy came shortly thereafter. As an advertising executive once said to me, “Great advertising kills a bad business.”
Does your company stay true to their core strengths?
