After nearly a century, the once-ubiquitous RadioShack electronics retailer spiraled into bankruptcy protection in 2015.
Having put its assets on the auction block, the company’s fixed assets were acquired for $160 million by Standard General affiliate General Wireless (and its intellectual property—including the brand—for a further $26 million). Now, RadioShack’s new owners hope a new, more agile business model will help the retailer connect with a whole new generation of gadget-lovers and technophiles.
Nick Cannon sports the “NCredible Flips” headsets: a combination headphone-speaker design exclusively at RadioShack. (Photo courtesy of RadioShack.)
Following the acquisition, the new company’s store count was reduced by more than 50%, however the company maintains a widespread and diversified national footprint. It also reduced real estate leasing costs by double digits by sharing its retail space in 1,400 of its 1,550 company-owned stores with wireless carrier Sprint.
Positive Cash Flow
In April 2016, for the first time in decades, RadioShack had a positive cash flow and attributes much of its nascent growth to providing a different selling experience than typical chain retailers, which is true across its 1,550 company-operated stores and 425 independent dealers. The company uses a consultative selling model, which requires extensive training to help its sales staff understand what products it sells, how they’re configured, and why they are better than alternatives. RadioShack also compensates sales staff differently than most chain retailers. By providing its salespeople with a higher variable base, the company believes it has created a stronger incentive for salespeople to engage with customers, understand what they need, and be able to sell them more of the products that they need.
“We’ve just focused on reducing expenses and allocating our investment where it matters most—designing and offering the best-in-class products for our customers,” says RadioShack CEO Dene Rogers.
To help further reduce expenses and get closer to customers, RadioShack decided to “shut down our internal data center,” according to Dave Rawls, RadioShack vice president of IT.
For the last 15 years, the company ran its business systems by pulling in point-of-sale and transactional data from the stores to its mainframe computer located at its data center in Fort Worth, Texas, and then dispatching it into various databases before being fed into Oracle Retail and Oracle PeopleSoft Financials, both of which were also managed by corporate IT.
This setup required a lot of people to manage, expensive hardware to maintain, and complex, custom code that needed to be written just to get all of these systems talking to each other. That kind of overhead didn’t fit into RadioShack’s new business model.
Thinking Like a Startup
“Our new owners are startups, and they think like startups. They don't think like a 5,000-store legacy chain. They don't think about all the movement of data between all these various systems. They just want the ability to connect with a customer and sell a product,” says Rawls.
The new RadioShack is now trading in its mainframe and legacy applications for Oracle Infrastructure as a Service solutions and replacing its on-premises apps with Oracle Retail Cloud and Oracle Finance Cloud software as a service.
“The best part about moving our infrastructure to the cloud is not having to rewrite the integrations. These are all Oracle products so the integrations, security, and upgrades are already there,” says Rawls.
While there's still a few things left in the data center that need to be shut off, for the most part, the cloud is giving Rawls the ability to start retiring servers, sunsetting legacy apps and redirecting his staff away from maintaining the technology and focusing instead on creating new services to help the field sell products to customers.
“That's something that's needed to happen for probably a decade,” says Rawls.
In-House Data Center Gets the Boot in Favor of IaaS
By investing $2 million in capital expense to swap out its in-house data center and replace it with Oracle’s Infrastructure as a Service, the company expects to reduce operating costs by $4 million during the next three years, mostly by consolidating multiple servers and databases, renegotiating software license agreements, and leasing less office space. The company also plans to retire its mainframe computer, which would reduce operating costs by another $4 million during the same period by consuming less energy to maintain the data center, turning IT staff away from routine maintenance activities, and instead, having them spend their time creating new functionality and services that help manage the business more efficiently and support a mobile-enabled sales force.
Despite past money problems, the new RadioShack has no intention of holding onto these savings for some future rainy day. Rather, it plans to reinvest 50% of these savings into creating more efficiencies and newer products and services for customers.
“We’re not just cutting costs,” says RadioShack CFO Gordon Briscoe. “We’re refining our cost structure to make sure the business is set up to spend on innovation.”
To head up product innovation, last December the company named entertainer and America’s Got Talent host Nick Cannon as its chief creative officer. Earlier this year, Cannon and RadioShack relaunched the NCredible1 headphone line, which has moved into sixth position in the national market share for the headset category.
Cannon is also working with RadioShack to design an affordable mixer and microphone combination that offers aspiring disc jockeys a chance to start honing their skills without splurging on a lot of expensive gear. For the holidays, RadioShack has rolled out the NCredible Flips—a one-of-a-kind headphone where you “flip” the ear cup inside out and it turns into a speaker.
In addition to new product innovations, Cannon is representing RadioShack at maker events, on social media, and even at the White House. During the Obama administration, “Cannon was invited to meet with the president to discuss STEM (Science, Technology, Engineering, and Math) education and research as an ambassador of RadioShack,” says Rogers.
RadioShack organized its award winning Build-A-Drone event at the National New York Maker Faire in September 2016. (Photo courtesy of RadioShack.)
Helping to turn these conversations into actions, Bradford Tobin, RadioShack’s senior vice president and general counsel, who was brought in by Standard General to oversee RadioShack’s corporate restructuring, renegotiate its contractual agreements, and revise the company’s retail footprint, is working with Cannon and other company executives to get the RadioShack brand integrated into school STEM programs. Indeed, Tobin sees RadioShack extending its relationships with students by turning the stores themselves into something of an extended classroom—aligning with its consultative roots and made possible by its strategic brick and mortar footprint.
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