In the last month or so, RadioShack (NYSE:RSH) appears to have taken some steps in a bid to make a comeback in the market. This hasn’t come too soon as the company has been struggling for a while now, and with a new CEO finally in place, it is high time it started delivering results.
The overall thrust of RadioShack’s initiatives is on re-branding the chain and re-defining what it stands for. The company is making an effort to go after the younger demographic and the Do-It-Yourself (DIY) customer segment. The latter became disenchanted with the company following the 2009 re-positioning exercise by the chain and largely abandoned it.
RadioShack is making changes to the store inventory, appearance and even signage. It is also airing commercials targeted specifically at a younger audience. While it is too soon to gauge the impact of these efforts, let’s take a closer look at some of these initiatives.
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Headed To College
RadioShack has signed a five-year contract with a subsidiary of the National Association of College Stores to install RadioShack-branded fixtures in campus bookstores, which will be stocked with some of its popular items. While it is an opportunity for RadioShack to enter a non-traditional marketplace, bookstores may benefit as well. Bookstores have been facing competition from e-books and online shopping and cannot rely only on sales of books anymore to make profits. Results from the University of Texas have been encouraging with items like headphones and other accessories selling well.
The potential market size is 4,000 college bookstores. RadioShack-branded shelves come in 4-foot to 12-foot wall sections, or in a free-standing fixture option. The marketing of the idea to campus stores is being handled by the Association. 
Changes To Stores
The re-branding effort by RadioShack includes new advertising campaigns, better in-store signage, interactive store displays and products intended to attract a larger demographic of customers.
The company wants to get rid of “The Shack” signage, a re-branding effort it made in 2009 in an attempt to modernize. According to a company executive, people are more familiar with RadioShack, so the company will gradually convert the signage back to the original name.
RadioShack is also tinkering with the store inventory to target a wider customer base. This is being done together with an advertising campaign on television that’s different from what RadioShack is traditionally known for. It recently introduced the Beats Pill Bluetooth speakers and the television commercial for it was inspired by the music video for Robin Thicke’s pop single “Blurred Lines”. It even featured the singer himself. 
While advertising is one part, the company claims that it is making considerable efforts in its human resources and operations departments as well. Without it, the whole exercise may end up being cosmetic in nature and fizzle out after generating an initial buzz. 
Why RadioShack Needs Its Initiatives To Succeed
RadioShack has been reporting disappointing results for quite a while. In the first quarter, its net loss stood at $43.3 million as compared to a net loss of $8 million in Q1 2012. Gross profit margins fell by 0.8% from last year to reach 39.7%. The decline in gross margins occurred primarily as a result of lower gross margins in the postpaid wireless business and in turn led to a net loss. The company’s focus on mobile, a part of its “The Shack” exercise in 2009, has been really hurting the bottom-line because of low margins and stiff market competition from bigger players like Best Buy.
While we are still in a wait-and-watch mode to see how RadioShack’s efforts pan out, the company does deserve credit for sticking to the promises made in the previous earnings conference calls. If the efforts are successful, it should start being reflected in results over the next couple of quarters.
We have a Trefis price estimate of $3 for RadioShack, which we will be revising shortly in view of the recent results.Notes:
- RadioShack wants shelf space in college bookstores, Dallas News [↩]
- RadioShack hopes new marketing strategy leads to turnaround, Dallas Business Journal [↩]
- RadioShack Looks to Regain Relevance With Push for Younger Consumers, Ad Age [↩]