Apple's Role in Radio Shack's Demise

Radio Shack has officially declared bankruptcy. Now, a judge will determine who will get paid and how much. Everything including the name will be auctioned. The analysis have already begun with the ink barely dry on the bankruptcy petition, including:

  • Joshua Brustein provides a concise history of the retailer's slow, lengthy demise.
  • Knowledge@Wharton offers lessons for managers to learn from Radio Shack.
  • Jodi Xu Klein recounts the role of a small lender - suffering its own run of misfortune - in Radio Shack's collapse.

Mark Pelletier writes about his experience from working on the floor at Radio Shack. The money employee insult:

I had a customer come in to buy an iPod for her son’s birthday. After building rapport with this customer and spending some time with her, this customer eventually purchased the iPod (which was not the color or capacity she wanted, but she wanted to purchase it from me anyway), a $600 laptop, a neoprene case for the laptop, a Nikon digital camera, a memory card for the camera, a leather case for the camera, a $50 iTunes card, headphones for the iPod, external speakers for the iPod, a few more add-on items and service plans. The sale came to over $1500. The customer left happy that we had fulfilled her needs. The very next day I was told that if I didn’t sell a cell phone that day I would be “written up”.

Pelletier gives additional examples that boil down to one thing: the in-store experience matters. Brustein's story also alludes to issues with the in-store experience. Both recount anecdotes of store managers abusing the floor employees. An abuse floor employee will contribute to an awful in-store experience.

Radio Shack was also plagued by bad floor layouts, terrible plan-o-grams for shelving and displaying merchandise, and employees who knew little about the products.

Americans would have put up with this experience if not for Apple. The company, which was reviled for opening a retail store, showed what was new in store design, merchandise arrangement, and floor employee management. Consumers responded by buying enough merchandise and services from Apple to drive the company's sales-per-square-foot figure to more than $4,000.

Radio Shack's management struggled to learn from Apple. Its attempt to reduce the amount of merchandise under The Shack repositioning effort was too little, too late. As Brustein repeatedly illustrates, Radio Shack's management struggled to learn. In turn, management could not better allocate its resources including financial, organizational, human, and physical. Hence, Radio Shack remained stuck in a position of low value and high cost and, ultimately and continuously, achieved inferior financial performance.

After seeing Apple, Radio Shack could not keep consumers in its stores. The ultimate Radio Shack lesson for managers is: competence matters. The signs and signals of poor retail management.

A more inviting retail experience