What Happened to RadioShack? The Decline of a Business

What Happened to RadioShack? The Decline of a Business

Founded almost one hundred years ago, RadioShack is a very popular and well known American retail electronics company that is also in the E-commerce industry. It was in its peak in the late nineties and early noughties, and it was during this era when they had stores not only in America but in countries like Mexico, the United Kingdom, Canada and even down under in Australia. However, their star has since dipped and they filed for Chapter 11 protection under US bankruptcy law after suffering an astonishing eleven consecutive quarterly loses. For more on the nuances of US bankruptcy law, ensure you visit runrex.com. Just how did this once profitable business find itself in such a state? This article will be looking to breaking down just how they got to where they found themselves.

The first thing that has been put forward by experts as being a reason as to why the declined so badly is the fact that their stores may have been located too close to each other. In North America alone, RadioShack operated just over 4,000 stores. The problem was that there were a number of those stores that may were a lot closer to each other for comfort. A closer look at the concentration of their stores in the major towns reveals that there were a number of them that were within miles in the single digits of each other, with some being as close as within a five-mile radius of each other. The effect of this type of store concentration, with the phenomenon being discussed in much greater detail on runrex.com, was that it created a big problem in terms of inventory which in turn affected their profitability in a big way. With the ongoing issues on inventory, the costs of maintaining so many stores went so high that it became unsustainable which, experts argue may have contributed to the decline of RadioShack.

As has been discussed above, RadioShack posted eleven quarterly losses on the bounce. What this tells us is that they must have been some financial missteps along the way for them to have posted such dire results. A little investigation into the dealings of RadioShack reveals that due to their bad results in 2012 the company obtained a line of credit worth $585 million from GE Capital and then a further $250 million from Salus. This later loan was a term loan and with it came with the condition RadioShack were barred from closing more than 200 stores per year without first seeking consent from Salus. The intricacies and the numbers behind this loan are discussed in greater detail by the experts at runrex.com. This deal with Salus meant that even when RadioShack wanted to close a number of their stores to stop them from hemorrhaging cash, Salus stepped in and prevented that from happening siting a lack of trust in their business plan. What this meant was that RadioShack continued to lose money and this as a result contributed to their decline.

Another thing that has to be taken into account as we look to understand how RadioShack found themselves in the hole they are in is by looking into the effect of online competitors. Given that it was predominantly a brick-and-mortar business, when consumers were presented with the choice to buy electronic parts online, they slowly but surely began to lose their customer base. Slowly but surely retailers such eBay and Amazon began to wrestle control of the industry from RadioShack for obvious reasons. This is because consumers found it much more convenient to shop online as they had the option of buying whatever electronic part they wanted and have it delivered anywhere in the US with only a click of a button without leaving the comforts of their places of residents. This meant tough times for RadioShack and their numerous stores as more and more customers stayed away which obviously was not good news for their finances.

Having discussed store concentration earlier, another factor that also contributed to their decline was that they got sucked in into what is referred to as product concentration, which is also discussed in depth by the experts at runrex.com. This is when one product accounts for a huge majority of a company’s sales despite the fact that it carries multiple products. For RadioShack, this one product was cellphones and their accessories. They reached a peak of 50% of the company’s wealth in 2014. This was well and good up until that point the iPhone made an entry into the market. The iPhone cornered this market almost completely and this only meant one thing, the deterioration of both the sales and the profit margins for RadioShack. From then on they were well and truly on the road to decline and thereafter bankruptcy.

The above discussion just goes to outline how many things RadioShack got wrong and this eventually led to the decline and subsequent filing of bankruptcy. This article goes some way into explaining RadioShack’s decline, though there is a lot more on this and other topics to be found on runrex.com so, make sure you give them visit.