Tuesday, January 18, 2011

Radio Shack's Plan B For Kiosks Is A Smart Move

"Companies get knocked down all the time. It's how they bounce back that matters."

Radio Shack has been a powerhouse in their sale of electronics and electronic goods. They have been able to be so successful because of the aid they have received from companies such as Sam's Club who have allowed them to set up numerous kiosks throughout stores across America, and sell their merchandise. The convenience of having those kiosks located in the Sam's Club drove sells out of the water. However in recent news, Radio Shack reported that the contract with Sam's Club has been terminated. The profit that Radio Shack once saw from the sale of those products is predicted to decline any where from 10-15 million dollars this year.
How does Radio Shack plan to deal with this declination? They didn't waste time sulking about their losses. Instead, they have already jumped the gun and began the process of teaming up with another retail giant, the Target Corporation. As reported in August of last year, Radio Shack had 850 mobile kiosks up and running, already twice as much that existed in Sam's. The amount of customers and the demographics of Target appeal greatly to the reasoning behind the contract agreement. A Target customer is more likely to purchase Radio Shack electronics than a Sam's customer is. Radio Shack figures that if the majority of people shopping in a Target store are more likely to stop and spend some money at an electronic kiosk, the future revenue will have double the revenue that they lost in the contract termination.
T-Mobile, Sprint, and AT&T are the only wireless companies that Radio Shack carries. This could potentially be a problem because of the increased popularity in the iPhone and Verizon's new deal of selling them could destroy AT&T's selling of the iPhone. It would be smart of Radio Shack to conjure up a plan in order to get Verizon on their side. While it may seem as if they have everything figured out, they are still suffering a decline in sales of accessories, modern home and personal electronics. They plan to solve this dilemma by "selling the entire solution", says CFO of Radio Shack Jim Gooch. Their motive is to up sell so that when a consumer comes to their kiosk only wanting to buy a phone, they will also leave with a matching hands free bluetooth, phone case, and car charger to complete the package ultimately receiving more revenue means more money. Wireless sales account for 2/3 or revenue for Radio Shack and they have already seen a 15 percent increase in net income since the switch. Things are looking up for Radio Shack.

6 comments:

Smith said...

Why are Sam’s club customers less likely to buy Radio Shack electronics?

James said...

Interesting article and commentary. I don't shop very much at Sam's Club, so I'm not sure of its customer demographics. How does the average Target customer fit better with Radio Shack's business plan? Very interesting point about Radio Shack and Verizon with the iphone.

Alissa said...

To answer your question Mr. Smith, Sam's customers are less likely to spend that extra money on electronics because the prices at Sam's are originally low already so the demographics consist of people whose income may not be as high as a Target customer’s income. Also Sam’s customers usually come there for a particular item and are not as willing to spend extra money on things they may find unnecessary. Radio Shack's decision to team up with Target will benefit them greatly.

Alissa said...

First off, Target stores have a variety of items in their store and is not solely a grocery store. A Target customer fits better with Radio Shack’s business plan because that added spark of having electronics in the store draws a Target customer in. They are probably more likely to buy other items other than only food.

Alison said...

The problem with "selling the entire solution" is that a lot of people feel like they're being swindled that way. If Radio Shack is saying that selling multiple items is something that they're going to rely on, I would expect the salesmen to be very pushy. This works sometimes, but I've seen it make people uncomfortable and ultimately drive them away. They may need to come up with another solution to the problem.

Matthew said...

I do not see the direct correlation between the types of people who shop at Sam's and Target and their willingness to buy Electronics in regard to Target customers buying more. As a matter of fact being that Sam's has a annual membership fee I would see them as more likely to buy them. Weather they are business clients or home shoppers. With that membership fee comes lower prices, and if something costs 10 dollars at Target chances are it costs $8 at Sam's. So the shoppers would be more likely to buy stuff at Sam's. However with twice the amounts of kiosks located inside Targets which can have a higher volume of traffic, I see a room to expand yet not greatly. With Target I expect to see more of the lower dollar electronics being purchased. Not saying that people that shop at Sam's have more money or the ones that shop at Target are poor. People from all classes shop at both. Yet I don't think many people look at stores such as Target for have a good tech department. While when you walk into most Sam's Clubs directly at the entrance is usually a very large electronics section with products running slightly lower then other stores. Because of this I do see Radio Shack gaining profits but not even close to twice the amount off of Sam's Club.