| April 13, 2015
After 94 years, RadioShack finally joined Circuit City and filed for bankruptcy last week. The company that rose to fame on the back of the radio revolution finally succumbed to the rise of mobile phones and online shopping. But as the new owners of RadioShack do their “best to make lemonade from lemons”, Best Buy finally serves up some sweeter results, in part due to mobile phones.
RadioShack’s bankruptcy has been a long time coming. Back in 2011, when BrandZ measured the electrical retailer category in the USA for the first time, RadioShack was already struggling. The brand’s lack of relevance was apparent. One in five people would not even consider shopping there. Of those predisposed to shop at RadioShack, 80 percent ended up shopping somewhere else. RadioShack’s loss was Walmart and Best Buy’s gain.
Wind forward to 2014 and things had only got worse for RadioShack, now one in three would not consider shopping there, and the percentage of people who were predisposed to shop at the store had fallen by nearly 20 percent. Clicks had replaced bricks as the alternative. Between 2011 and 2014 Amazon went from a good choice for electrical goods, to THE choice for many people. Of people who were inclined to shop at RadioShack, a third were diverted to Amazon.
Amazon’s Power score – its share of consumer demand based on brand associations – grew by 24 percent between 2011 and 2014, taking it from third place behind Best Buy and Walmart to first. Amazon’s growth hit Best Buy, Sears, Staples and RadioShack particularly hard. Back in 2011, Amazon was seen as more meaningful and different than the average for the category, but was not as salient. Three years later and Amazon is still meaningful and different, but far more salient.
Amazon’s is a classic growth story. Innovate, create something meaningfully different from the incumbent brands in a category, and then make that offer salient to as many people as possible. Convenience has a timeless appeal and, as I noted last week, Amazon is doing everything it can to satisfy that desire, even if it means coming up short on profits.
So what about Best Buy? Some might have bet Best Buy would go bankrupt before now, but while the brand has struggled to reverse a decline in same store sales, it has finally produced some results that indicate hope for the future. In March, Best Buy reported a 77 percent jump in quarterly profit, as the electronics retailer reported strong sales growth. Sales of large-screen TVs and mobile phones helped boost sales, and as noted in this Forbes article, installment billing accounted for nearly a third of the 2.8 percent same-store sales growth. Unlike RadioShack, Best Buy seems to have found salvation not damnation in the rise of the mobile phone.
So Best Buy may manage to recover its mojo but the future for RadioShack seems a lot gloomier. What is your opinion? Will RadioShack make it? Please share your thoughts.