Radio Shack's Image Deficit

Radio Shack storefront

Radio Shack's Image Deficit
| Published March 4, 2014 |

By Thursday Review staff

Electronics retailer Radio Shack may have had one of the best ads in the 2014 Super Bowl—many people voted the retro 1980s piece as among the ten best of the big budget ads seen by over 111 million viewers—but Radio Shack’s business numbers have not fared as well lately.

The Fort Worth-based Radio Shack has been losing money. Some analysts would use the word hemorrhage to describe Radio Shack’s position. About the same time that J.C. Penney announced it planned to close 33 stores nationwide, rumors were circulating in the business press in February that there would be some layoffs and perhaps some store closures for Radio Shack.

Overall, Radio Shack’s sales were down 19% over the previous year.

When the announcement came this week its their fourth-quarter sales were far worse than expected, and that its profits so far this year were even worse, those familiar with the company braced for the bad news: Radio Shack plans to close over 1000 stores and lay off thousands.

Like many of the big retailers, Radio Shack suffered over the holidays for a variety of reasons. The two big problems were the Target hack, which may have inhibited credit card sales for all retailers in North America, and a particularly harsh winter which began its fury of snow and ice in the weeks before Christmas. Almost all retailers felt the pinch, and online sales spiked as many gift-buyers chose to shop online instead.

The Super Bowl ad, which featured a montage of images and icons from the 1970s and 80s, was meant as a light-hearted way to address a problem the company has had for a decade: the iconic electronics chain has been unable to transform its image from that of a “radio parts” and battery store, into the 21st century of high tech gadgets, smart phones and digital communication. The perception is strong that the typical Radio Shack has shelves stocked with audio cassette tapes, incandescent tubes, VHS head cleaners and “C” batteries. As a result, younger shoppers rarely visit Radio Shack.

Some marketing surveys indicate that few people realize that Radio Shack sells smart phones, laptops or other high tech swag.

Still, Radio Shack’s new CEO Joe Magnacca says that a reversal of this misfortune is possible, and, in fact, under way now. Much will depend upon the retailer wooing younger shoppers and technophiles back to the store, and this will almost certainly involve heavy advertising to transform its image. Time to fire the ad agency responsible for that clever, slick Super Bowl ad and hire a team which can turn Radio Shack’s image around, quickly.

Radio Shack’s stock value fell by 15% on the news of recent losses.

Related Thursday Review articles:

Target Faces Profit Loss; Thursday Review; February 26, 2014.

JC Penney to Close 33 Stores; Thursday Review; January 18, 2014.