
Radio Shack lost its way when it ditched its hobbyist customers - antr
http://www.economist.com/news/science-and-technology/21643461-radio-shack-lost-its-way-when-it-ditched-its-hobbyist-customers-making-it
======
replicatorblog
The final paragraphs about the rise of surface mount PCBs are a more accurate
diagnosis than anything to do with RadioShack's marketing strategy.

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.

~~~
larrys
"Changes in manufacturing took away RadioShack's raison d'être"

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.

------
VLM
There tends to be a lot of history rewriting in these kind of stories.

Check out

[http://www.radioshackcatalogs.com/](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.

~~~
ghaff
Bingo. Their strategy, from a revenue/profit perspective, in the 1970s and 80s
was mostly to sell high-margin, low to middling quality consumer electronics
to often unsophisticated buyers for whom the corner or mall Radio Shack store
was a convenient and non-intimidating shopping environment.

~~~
VLM
The quality really wasn't all that bad. Much as today the only difference
between brands is the label slapped on the box by the ONE factory in China
that makes them all, in the 80s it was the ONE factory in Mexico or ONE
factory in Taiwan or whatever slapping different stickers and shipping to
different stores.

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...

------
danpat
Radio Shack definitely missed the niche that Sparkfun/Adafruit and others have
filled.

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.

~~~
drzaiusapelord
>However, I suspect that niche is nowhere near big enough to support Radio
Shack's size.

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.

~~~
Eric_WVGG
Even in the glory days of Radio Shack, the real money came from CB radios and
“Realistic” brand stereo equipment.
[https://en.wikipedia.org/wiki/Realistic_(brand)](https://en.wikipedia.org/wiki/Realistic_\(brand\))

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.

------
jimmyswimmy
Unfortunately I couldn't read the article, but agree strongly with the title.
(It's like Slashdot, but I'll try hard to offer an informed response).

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.

~~~
dpark
The profit margin on your soldering iron isn't high enough to keep Radio Shack
afloat. That stuff never kept them going.

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.

~~~
dangayle
At Radioshack, literally everything is about the profit margin. The store in
the U-Village in Seattle is/was one of the top 5 revenue stores in the entire
chain, a fact they were proud of when they hired me.

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.

------
rograndom
I think one of the last times I went into a Radio Shack to purchase something
was in the late 1998 or 1999.

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.

~~~
lurkinggrue
And yet they had no problems selling those pocket tone dialer you could mod
into a pay phone red box and make free phone calls.

------
Ologn
I worked at Radio Shack 20 years ago. The ideal customer would probably be a
guy in his 30s coming in with his girlfriend or wife to buy a television and
VCR, or a stereo system. Maybe a parent looking for a remote controlled car as
a Christmas gift.

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.

~~~
VLM
From familial experience the best way "kids these days" can experience a Radio
Shack store from 30 years ago, is simply visit Best Buy. Imagine the small
legacy physical media section replaced with a small parts section, that's
about the only difference. Then shrink it at least 10x to physically fit the
smaller RS store footprint.

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"

~~~
emerod
No, Best Buy is more like RadioShack as it was becoming when it was self-
destructing 15 years ago. Fry's (which ironically took over an Incredible
Universe location where I live) represents what RadioShack would have
naturally turned into with proper business strategy.

~~~
smacktoward
Fry's, which has 34 locations, seems an odd choice to point to for what a
company with 4,000+ locations could have aspired to become. If anything it
reinforces the thought that the "maker" market is far too small to have saved
RS by itself.

~~~
emerod
Precisely. They needed to ditch the old Neighborhood Hobby Shop Full of Expert
Geeks marketing strategy in order to be competitive in the mass consumer
market. Radio Shack was always targeting the mass market. It would have
required a huge change of internal culture in the 1990s for Radio Shack to
actually cater to the niche hacker/maker community.

------
ChuckMcM
I love it when the comments here capture it better than the article did. Three
things:

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.

------
VikingCoder
I disagree with the premise.

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.

------
amelius
Apple also ditched its hobbyist customers a long time ago.

Therefore, I'm not sure that is the (only) reason.

~~~
liquidise
Apple sells industry competing products and can differentiate itself using
those products. What is radio shack's competitive differentiation?

------
eli
I see no reason to believe electronics hobbyists would be immune to the same
forces that put bookstores out of business as purchases moved online.

------
rebootthesystem
The issue is well described in The Innovators Dilema. Failure to recognize a
fork in the road and realign the enterprise. Having 7,000 stores is insane in
the contest of a transition to an internet centric landscape.

------
xpda
It's obvious in hindsight that the hobbyist market moved, and Radio Shack
moved in a different direction. The hobbyists went to Raspberry Pi, Arduino,
and quadcopters. Sales of electronics components, wired phones, and Radio
Shack PCs dried up almost overnight. Radio Shack went with their remaining big
sellers: Cell phones, sound systems, and other consumer electronics that
dropped in price and appeared in Walmart, Best Buy, Staples, etc. In the past
few years, there was not much to be found in Radio Shack that you couldn't
find at Walmart.

~~~
ac29
>the hobbyist market moved, and Radio Shack moved in a different direction.
The hobbyists went to Raspberry Pi, Arduino, and quadcopters.

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.

------
bt3
In my eyes, it's not so much that Radio Shack "ditched" the hobbyist, they
just tried to get their share of a bigger market, and in turn had to subsidize
their primary focus to a drawer of components in the back of the store.

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.

------
aidos
I went to Maplin's (similar sort of store, based in the UK) recently to get
some shielded cable. It took 3 "assistants" before I found one who knew what I
was talking about at all. I asked the first 2 if there were maybe some rolls
of thin looking black stuff out back but they both said they'd never seen
anything like that out there. Fortunately the 3rd guy went out back and got
exactly what I needed.

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/](http://www.techwillsaveus.com/shop/diy-kits/diy-synth-kit/)

------
ck2
The logic fails here.

Heathkit never ditched its hobbyist customers and collapsed far sooner not
even making it into the past two decades.

------
kalleboo
I think Radio Shack could have been saved if it was managed better. In Sweden
there's a chain (Kjell&Co [http://www.kjell.com](http://www.kjell.com)) that's
doing great doing pretty much the same thing you'd expect from Radio Shack and
they're doing well expanding all the time. One thing they do right is having a
whole catalog of SKUs in even tiny locations, available upon request (someone
goes into the back). They also have knowledgeable staff and even publish a
book of electronics knowledge along with pamphlets on different topics.

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.

~~~
emerod
It sounds like what some Radio Shack stores tried to be, and maybe what Radio
Shack marketed itself as in the 1960s.

------
angrybits
It lost its way when it bet the farm on cell phone plans and crappy rc cars.

~~~
ghaff
But before that they primarily sold crappy audio equipment--and consumables
like batteries and phonograph needles.

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.

------
dwarman
Never ditched us. To this day every store I visited had a wall of electronic
components and breadboards etc.

------
untog
Radio Shack embraced the internet way too late. Without doubt, the internet
was going to destroy every hobbyist store out there, and if they'd got out in
front of it they might have survived.

That said, I'd wager Sparkfun and the like are still _much_ smaller companies
than Radio Shack was at it's peak.

------
lkrubner
I am curious what people on Hacker News feel about ("public", traded)
companies that don't re-invent themselves? I have heard 2 conflicting
arguments about this:

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?

~~~
wtbob
I think that both of those are valid ideas, and that neither should be encoded
it law; it should be up to the shareholders which they prefer to pursue.

------
dalacv
what is a radio shack?

~~~
emerod
Like a love shack, but using electronics.

