Speaker 1: Welcome to the Brink, a production of I Heart Radio's
Speaker 1: How Stuff Works. Radio Shack, a little low place where
Speaker 1: we could get electronics, went ham and became a hobbyist mecca.
Speaker 1: But that billion dollar company couldn't focus its interests and
Speaker 1: delved into many projects to try to stay cutting edge. This,
Speaker 1: along with a rotating door of C e O s,
Speaker 1: put a major kink in their cable, leading them to
Speaker 1: not one but two bankruptcies, sprinting to stay afloat find
Speaker 1: out how on Radio Shack on the Brink. Hey guys,
Speaker 1: I'm Jonathan and I'm Ariel, And I apologize that was
Speaker 1: a little bit of a weaker intro than I don't
Speaker 1: right when I saw that intro, I was just like, well,
Speaker 1: this is clearly love Shack. I'm going to have to
Speaker 1: our Fred Schneider. Was I just I didn't set myself
Speaker 1: up to continue the joke. Yeah, that's fair, that's fair. Uh.
Speaker 1: And also we are based out of Atlanta, so we
Speaker 1: have a particular affinity for B fifty two. Yes, yes,
Speaker 1: I was gonna be like, hey, I'm Radio, Well we
Speaker 1: are not talking about B fifty twos today. I wish
Speaker 1: we were, because that would be rock and roll. But
Speaker 1: we're talking about Radio Shack, a company I remember well
Speaker 1: because you know, I grew up in the nineteen eighties
Speaker 1: mall culture, and there was a radio Shack and just
Speaker 1: about every mall, and I have lots of memories of
Speaker 1: going into those places and looking around and thinking I
Speaker 1: should really want to buy stuff in here, but I
Speaker 1: can't find things I want to buy because it turned
Speaker 1: out I didn't have any needs for diodes or anything. Yeah,
Speaker 1: they had a niche market, and then they had a
Speaker 1: bizarre market, and then they had no market. And we'll
Speaker 1: get into that um, but before we do, I just
Speaker 1: want to say that this is another listener suggestion who
Speaker 1: asked for this Sarah Rosenbaum asked for this one an
Speaker 1: excellent So, Sarah, this is This is the story of
Speaker 1: Radio Shack, and we're gonna give you a quick down
Speaker 1: and dirty rundown of the history. So it was founded
Speaker 1: in nineteen in Boston, Boston. In fact, that's where it
Speaker 1: stayed for forty years. It was just in Boston. There
Speaker 1: were a couple of brothers, Theodore and Milton Deutschmann, who
Speaker 1: created the store, and they were you know, it's kind
Speaker 1: of they had come out of the catalog retail business. Yeah,
Speaker 1: they were. They were selling surplus items, largely radio pieces
Speaker 1: from they had gotten from the army, plus army pieces,
Speaker 1: so they were just a single store and then they
Speaker 1: started selling. They really didn't release their first official catalog
Speaker 1: till a while after they started, but they were still
Speaker 1: mail ordering and they were mostly focused on Ham radios,
Speaker 1: as the intro suggested, not like you know, your your
Speaker 1: standard transistor. Radio transistors weren't a thing yet in nineteen twenty,
Speaker 1: so these were the sort of radio sets you would
Speaker 1: set up at home and used to broadcast and receive
Speaker 1: from other Ham radio operators, a lot of amateur radio operators,
Speaker 1: so you know, to put this in perspective, Boston got
Speaker 1: its first commercial radio station in the same year that
Speaker 1: Radio Shack opened, so that so commercial radio was not
Speaker 1: really a thing yet. There had been some amateur radio
Speaker 1: enthusiast who had been broadcasting on limited licenses, but licensed
Speaker 1: commercial radio was just starting to become a thing, so
Speaker 1: different era. Yeah, and they were really focused towards those
Speaker 1: hobbyists and making this hobby more accessible to everyone, kind
Speaker 1: of like code acted with their cameras. But the thing is,
Speaker 1: at the time there weren't really many stores doing this.
Speaker 1: Not only were radio's cutting edge, but this whole electronics
Speaker 1: hobby thing was also kind of news. So they were
Speaker 1: a front runner in this business at the time. It
Speaker 1: was also kind of hard to sustain because you're talking
Speaker 1: about a niche market already, right Like, you're you're catering
Speaker 1: to by definition, a small group of people, So building
Speaker 1: and maintaining a business on top of that was challenging.
Speaker 1: I mean, they did well for a little while, but
Speaker 1: it was it was small. In fact, as I said before,
Speaker 1: they didn't issue their catalog for a while. It wasn't
Speaker 1: until their first official catalog came out and it over
Speaker 1: the next couple of decades they only grew their stores
Speaker 1: to like nine they only had nine stores, yeah, all
Speaker 1: in the Boston area, and they were opening up to
Speaker 1: other areas of electronics as they were coming onto the market. Yep,
Speaker 1: they added music as one of the things they were offering,
Speaker 1: which makes sense because this is right around the same
Speaker 1: time that you started getting things like not just the
Speaker 1: radio sets that were meant to just pick up the
Speaker 1: commercial radio stations, but also things like gramophones things like that,
Speaker 1: you know, things that could play recorded music trying to
Speaker 1: keep up with the change in the industry. Now in
Speaker 1: the fifties, radio shacks started selling private label products and
Speaker 1: this is something that they would toy with over the years,
Speaker 1: just creating their own versions of whatever the hot new
Speaker 1: tech item was, or pieces to make your own version
Speaker 1: of the hot new tech item. And by the early
Speaker 1: sixties they were a leader in the market. So they
Speaker 1: were a front runner, but they really made a niche
Speaker 1: for themselves. But then they made a mistake. And I
Speaker 1: can't even say that I would say looking at it
Speaker 1: that you you could know it was mistake. They offered
Speaker 1: credit in their store. So it was only a mistake
Speaker 1: in hindsight, as they offered credit at their stores, but
Speaker 1: then found it very difficult to collect upon debts to them.
Speaker 1: But Macy's did fine with credits. So yeah, so they
Speaker 1: were in deep financial trouble by the early nineteen sixties.
Speaker 1: And that's when a guy named Charles Tandy, the leader
Speaker 1: of the Tandy Corporation, sweeps in to purchase the company. Yeah,
Speaker 1: for a whole three hundred thousand dollars. Yeah, and this
Speaker 1: is still nine stores in Boston and the Tandy Corporation
Speaker 1: people who have were around in the eighties. Might think
Speaker 1: of Tandy Computers, that is in fact the same company,
Speaker 1: but I think of leather. That's exactly when she started off. Yeah,
Speaker 1: there were a leather company. So it's kind of one
Speaker 1: of those stories where you had a company that was
Speaker 1: specialized in a particular product and then diversified to almost
Speaker 1: a ludicrous degree. Charles Tandy was determined to really diversify
Speaker 1: the company's holdings. Radio Shack was just one of many purchases.
Speaker 1: He wanted to be the Disney of retail. It sounds like, yeah,
Speaker 1: and he ended up buying like Dillard's and Peer One
Speaker 1: and a couple of other types of stores as well
Speaker 1: during the same era. And he also wanted to really
Speaker 1: scale up, like he wanted to build Radio Shack well
Speaker 1: outside of the Boston area, and he did. They not
Speaker 1: only increase their numbers of stores drastically, which is something
Speaker 1: that would come back and bite Deo Shock in the
Speaker 1: proverbial butt later, but also in expanding what they offered,
Speaker 1: so still trying to stay current with the market and
Speaker 1: and catch whatever those trends coming down the line were right.
Speaker 1: So the Tandy Corporation ends up selling off all of
Speaker 1: its non electronics businesses, so they d diversify, but they
Speaker 1: focus on electronics. Yeah. Now this is the era where
Speaker 1: they would start to dip their toe in the brand new,
Speaker 1: in fact, not even established market of personal computers. I
Speaker 1: want to say a quick aside. They sold off all
Speaker 1: of their non electronic businesses. But I'll still go to
Speaker 1: Tandy Leather occasionally, so still out there. Yes, it is
Speaker 1: still there. Yes, sorry, I just had to put that aside.
Speaker 1: All right, back to radio show. Come on, we're not
Speaker 1: talking about Tandy in this kind of are a little
Speaker 1: bit all right. So, Yeah, and the A D S
Speaker 1: they developed personal computers, and they actually started a little
Speaker 1: early er than the eighties. They started in nine seven
Speaker 1: is when their first Peter came out. It was the
Speaker 1: t R S E D and it's sold better than
Speaker 1: the Apple computer of the time. It was just at
Speaker 1: the beginning of personal computers. Yeah, they were really pioneers
Speaker 1: in the space for personal computers. Before this, you had
Speaker 1: hobby kits that would be sold to hobbyists, but that
Speaker 1: that by definition really limited who could buy because there's
Speaker 1: only people who felt confident that they could wire one together. Yeah,
Speaker 1: but electronic hobbies was radio shacked niche, So it made
Speaker 1: sense that they would delve into well, if you want
Speaker 1: to build a computer, but you don't know how, here's
Speaker 1: a computer. Yeah, here's a fully assembled machine that you
Speaker 1: can purchase right now, and you can have your own
Speaker 1: personal computer. Uh. The t R S A D is
Speaker 1: affectionately called the trash a D despite selling over two
Speaker 1: hundred thousand of them. Yeah, there were issues with that computer,
Speaker 1: and there would also be issues with radio checks PC strategy,
Speaker 1: and we'll we'll touch on that now and again throughout
Speaker 1: this episode. Also by the A D S they were
Speaker 1: up to thousands of stores from the original nine. Uh.
Speaker 1: And in eighty one they got a new CEO. Yeah,
Speaker 1: the Tandy had passed away in the seventies and then
Speaker 1: their their interim CEO left and so in eighty one
Speaker 1: they get their new one. But this is also the
Speaker 1: time where they start hitting a stalling point because now
Speaker 1: their computer, which had issues but was still selling, was
Speaker 1: being outclassed by IBM and Dell. On the startup side,
Speaker 1: they had Apple to fight with and Dell, and then
Speaker 1: on the established side you had IBM. They were kind
Speaker 1: of caught in the middle, and they weren't innovative enough
Speaker 1: to stand out like Apple did, and they weren't established
Speaker 1: enough in the PC space or the computer space, I
Speaker 1: should say that they could really compete with IBM. IBM
Speaker 1: had sort of the business side like for all small
Speaker 1: and medium and large businesses that that's those the companies
Speaker 1: went to IBM for their computers, and then home users,
Speaker 1: more and more people were either going with Commodore or Apple.
Speaker 1: Man I had a Commodore At this time, they pushed
Speaker 1: their goals for computer sales down to less than of
Speaker 1: their sales. Yeah, they figured that the writing was on
Speaker 1: the wall and that if they dedicated too much of
Speaker 1: their effort toward trying to sell these computers, they would
Speaker 1: ultimately just be hurting their bottom line. So it was
Speaker 1: it was almost like, let's sell what we have left,
Speaker 1: but let's not focus on that as our primary revenue source.
Speaker 1: And and this led to a restructure to shift gears
Speaker 1: and and and to really try to go into more
Speaker 1: mainstream electronics for them. Now we'll talk more about how
Speaker 1: that effort actually turned out in just a moment, but
Speaker 1: first let's take a quick break. All right, let's backtrack
Speaker 1: just a bit. Areal we had just mentioned before the
Speaker 1: break that in the early nineties that would lead to
Speaker 1: a restructuring of their uh their businesses. But in for
Speaker 1: we have an example of Radio Shack getting into a
Speaker 1: specific area of electronics that would become both important to
Speaker 1: the company and ultimately down the road, kind of an
Speaker 1: albatross around the company's proverbial neck. Yeah, So in eighty
Speaker 1: four they sold their first home phone, so they went
Speaker 1: into the phone industry, figuring that would be a big trend.
Speaker 1: And they also the next year went into satellite TV.
Speaker 1: Both of these things they held onto for a really
Speaker 1: long time, and the phone, the phones in particular, would
Speaker 1: end up being kind of a weight around their neck,
Speaker 1: but they kept trying for it. And I don't know
Speaker 1: why really at this time, Radio Shack is so desperate,
Speaker 1: and I feel like it was maybe a little bit
Speaker 1: sooner than they needed to be, and maybe the reason
Speaker 1: that they declined so much, they were so desperate to
Speaker 1: stay relevant that they just spread their net far and
Speaker 1: wide as to what they needed to do to to
Speaker 1: make their company profitable and successful. So they moved into
Speaker 1: cell phones, they moved into satellite TV, opened up specialty
Speaker 1: stores like Computer City and Energy Express Plus, which sold
Speaker 1: batteries and Incredible Universe, which is basically Fries. And later
Speaker 1: on when they closed all those because that didn't work,
Speaker 1: they sold off Incredible Universe to Fries. Because when I
Speaker 1: was reading the description of what how an Incredible Universe
Speaker 1: was set up, it was it was made to compete
Speaker 1: with best Buy. Um, yeah, we used to have an
Speaker 1: Incredible Universe here in the Atlanta area. I take it
Speaker 1: you never went. I never went, but I've been to
Speaker 1: Fries and I was like, well, this is the same layout.
Speaker 1: So the Incredible Universe that was here in Atlanta not
Speaker 1: only did they sell electronics and stuff, but and this
Speaker 1: is a little side note, they had a recording booth
Speaker 1: where you could record yourself doing karaoke and they would
Speaker 1: actually burn it to uh desk or or they'd actually
Speaker 1: even recorded to cassette back in the day, and then
Speaker 1: you would have your own recording of you doing karaoke.
Speaker 1: And that's why somewhere floating around my house there's a
Speaker 1: recording of me doing I Fought the Law and the
Speaker 1: Law one that's French Schneider from Theft two. When I
Speaker 1: hear that, Um, so you know, I went a little
Speaker 1: bit into how they diversified all these stores and how
Speaker 1: they eventually closed off. On the cell phone side of it.
Speaker 1: They moved into cell phones in nine that caused a
Speaker 1: lot of problems because it tied up their employees in
Speaker 1: the registration process. If you've ever bought a cell phone,
Speaker 1: which I'm guessing most of our listeners have, it takes
Speaker 1: a while to set up for the first time where
Speaker 1: you're actually establishing your your phone number, you're establishing your account,
Speaker 1: which would be most people at that time. Yeah, back
Speaker 1: in the early ninees, that's when everyone's first doing. I
Speaker 1: mean I didn't get one until the late nineties for me,
Speaker 1: but but still, I mean I remember distinctly like that
Speaker 1: was a long and involved process. If you're talking about
Speaker 1: stores that typically were fairly small and had, you know,
Speaker 1: a relatively small staff, maybe three or four people working
Speaker 1: the store at any given time, tying them up in
Speaker 1: a forty five minute process was a bit of a hindrance.
Speaker 1: And on top of that, and I'll talk more about
Speaker 1: this later in the episode two. At radio Shack salespeople
Speaker 1: were given an incentive by earning a commission on sales
Speaker 1: if they reached a certain amount per per sale. So
Speaker 1: if you're tying up a salesperson for forty five minutes,
Speaker 1: and that person also is counting on commissions to make
Speaker 1: up part of their compensation. That's got to be a
Speaker 1: stressful environment too, because that's forty five minutes when you
Speaker 1: can't be selling other stuff to other people. Well, and
Speaker 1: then that's forty five minutes other people who want to
Speaker 1: buy other stuff don't have somebody to help them find it.
Speaker 1: Along with that, in two thousand and four, they tried
Speaker 1: remote kiosks to sell their phones or other people's phones,
Speaker 1: like in Sam's Club Target, and that didn't go very well.
Speaker 1: It started to and then it fell apart. And then
Speaker 1: in two thousand and fifteen, when they were really in
Speaker 1: the mire, they did a partnership with Sprint, and that
Speaker 1: also it didn't go well. So for over twenty years
Speaker 1: they tried to make cell phones work, figuring that would
Speaker 1: be where their big market was, and it never seemed
Speaker 1: to work. It makes me wonder why they stuck with
Speaker 1: it for so long. Yeah, well, and part of it
Speaker 1: might have just been this misguided desire to try and
Speaker 1: counteract that trend they had where they weren't focusing on
Speaker 1: stuff where they were taking that more you know, widespread,
Speaker 1: wide net approach where you're not giving any one part
Speaker 1: of your business a deep level of attention. It's just
Speaker 1: that they ended up picking perhaps the worst, the worst
Speaker 1: of their mini businesses to really focus on. Yeah. So
Speaker 1: after all of their spinoff stores had closed and they
Speaker 1: just had the original Radio Shacks, which we're doing okay, Yeah,
Speaker 1: they kind of hit their peak. It's the best year
Speaker 1: for Radio Shack. And they opened their website quite a
Speaker 1: few years after Amazon came on the scene. Yeah. Yeah,
Speaker 1: this is another one of those things that a lot
Speaker 1: of people point to, Like if you do a web
Speaker 1: search for why did Radio Shack go bankrupt? They're usually
Speaker 1: five or six points that are most of those articles
Speaker 1: really focus on. And we just talked about two of them.
Speaker 1: The cell phones are a big one, and then the
Speaker 1: late jump on the internet commerce side was another big one. Well,
Speaker 1: and even wasn't really commerce. You could you could read
Speaker 1: press releases and you could find a store, but you
Speaker 1: couldn't buy anything. Yeah. So even then they were like
Speaker 1: they were even further behind because it would take time
Speaker 1: before they would start to offer any sort of online sales. Yes,
Speaker 1: and then they got a new CEO. Yeah, and get
Speaker 1: used to get used to that sentence. Yeah. Yeah, Now
Speaker 1: the CEO did something good. He did the stores in
Speaker 1: the store model, so all the places you could buy
Speaker 1: use subscriptions had their own like little sections in Radio
Speaker 1: Shack your satellite TV, your self service, your Internet. He
Speaker 1: was one of the first to do this. Uh. And
Speaker 1: in two thousand, you know, things were going good, Tandy
Speaker 1: changed their name to the Radio Shot Corporation. Yeah. So
Speaker 1: Tandy at this point is taking the identity of one
Speaker 1: of its subsidiaries essentially. But Radio Shack was really facing
Speaker 1: stiff competition, not just online through Amazon, which was growing
Speaker 1: rapidly and starting to build upon its original business as
Speaker 1: an online bookstore by offering other stuff, but also with
Speaker 1: the big box stores that were dominating the market. It
Speaker 1: was also tough because the general perception was that the
Speaker 1: stuff you could buy at Radio Shack was not different
Speaker 1: than the stuff you could buy at a lot of
Speaker 1: other places, but also was more expensive. Yeah, they didn't.
Speaker 1: They couldn't make up the price elsewhere like Walmart could
Speaker 1: or like Best Buy could. Now they didn't have lost
Speaker 1: leaders like a lot of other stores did. So um,
Speaker 1: they they tried to compensate that for that by having
Speaker 1: knowledgeable employees who could help guide customers for stuff that
Speaker 1: they needed, but that wasn't quite enough to to counteract
Speaker 1: this problem. Yeah. Another another thing is because they were
Speaker 1: trying to compete with Best Buy, they ended up having
Speaker 1: this really weird mix of hobbyist pieces and periphery items
Speaker 1: and then weird obscure gadgets that nobody wanted to buy,
Speaker 1: Like the q CAT bar code reader came up quite
Speaker 1: a few times in my research as something that they
Speaker 1: stalked a lot of and nobody knew why they needed it,
Speaker 1: so nobody bought it. Let's skip ahead a little bit
Speaker 1: further to two thousand five. That's when David Edmondson, who
Speaker 1: had been in Radio Shack since the nineties they had
Speaker 1: held numerous positions, was the new CEO. He lasted for
Speaker 1: all of about a year at CEO. Because here's the problem.
Speaker 1: When you become CEO, if in fact you haven't been
Speaker 1: completely upfront and honest about your background, you typically come
Speaker 1: under a lot of scrutiny when you're leading a company.
Speaker 1: And as it turned out, Edmondson had not been totally
Speaker 1: honest on his resume. No, he said he had a
Speaker 1: couple of college degrees when he had none of those. Yeah,
Speaker 1: And here's the thing is that this is not a
Speaker 1: story unique to Radio Shack. There actually are a few
Speaker 1: high profile stories of executives who rose to a level
Speaker 1: where such FIBs came back to haunt them. So someday,
Speaker 1: I think for the Brink we'll need to do an
Speaker 1: episode where we specifically cover that kind of thing and
Speaker 1: talk about some of the people who have infamously been
Speaker 1: either been forced to resign or chose to leave positions
Speaker 1: because it came to light that they were not entirely
Speaker 1: honest about their backgrounds. I agree. But now back to
Speaker 1: Radio Shack. Yes, So in two thousand six, Radio Shack
Speaker 1: finally started their buy online shipped to store feature. Yeah,
Speaker 1: still not really competing with Amazon because of Amazon, they
Speaker 1: shipped directly to the customers home. And now they're getting losses.
Speaker 1: So now they're also having to close doors to corporate
Speaker 1: layoffs and their stocks are starting to plumb it. Yeah,
Speaker 1: Edmondson was replaced by the interim CEO and that was
Speaker 1: just for a few months, and then Julian Dave replaced
Speaker 1: that interim CEO and became CEO after having been a
Speaker 1: part of kmart before. Yeah. A good track record of
Speaker 1: turning companies around. But yeah, he had this reputation that
Speaker 1: he was able to really, you know, save um companies
Speaker 1: that were struggling. But this was a particularly tough position
Speaker 1: to be in well, and I guess it's kind of
Speaker 1: foreshadowing because Kmart didn't end up doing too well either.
Speaker 1: Then two thousand nine comes around and Radio Shack pulls
Speaker 1: a stunt that would end up making it sort of
Speaker 1: the butt of jokes for about two years. And it
Speaker 1: was a rebranding effort. What was Radio Shack proposing it?
Speaker 1: Do you change their name to the Shack, which when
Speaker 1: I hear I think of the love shockto Ago, Yeah,
Speaker 1: back to the fifty two. Yeah, but not everyone immediately
Speaker 1: thought of a little spot down the Atlanta Highway. A
Speaker 1: lot of people thought that it just made it sound
Speaker 1: like it was kind of this shabby backwoods sort of
Speaker 1: business to call it the Shack. Uh. This was also,
Speaker 1: by the way, the same time that Pizza Hut was
Speaker 1: toying with the idea of just becoming the Hut like Jaba.
Speaker 1: So yeah, this ended up becoming, like I said, a
Speaker 1: punchline for a lot of different outlets. So if you do,
Speaker 1: if you do a search for Radio Shack and the Shack,
Speaker 1: you're gonna get a whole bunch of articles from two
Speaker 1: thousand nine that are just mercilessly making fun of the
Speaker 1: company for trying to be hip and cool and what
Speaker 1: is considered to be a misguided attempt. Yeah. So after
Speaker 1: that failed attempt at success, uh, they have yet more
Speaker 1: CEO turnover two thousand eleven. Two all had new CEOs.
Speaker 1: None of them were able to surmount the rising losses
Speaker 1: that Radio Shack was experiencing, which from two thousand twelve
Speaker 1: on that's all they experienced. They spent two points six
Speaker 1: billion since two thousand up until this time trying to
Speaker 1: purchase their own stock to bolster their share prices. We
Speaker 1: usually save lessons towards the end, but sometimes we might
Speaker 1: as well go ahead and insert them in the middle
Speaker 1: of an episode. And here is one that we've talked
Speaker 1: about numerous times, right the idea that if you have
Speaker 1: an unstable executive team, that spells really bad news for
Speaker 1: the rest of the company, and to not be able
Speaker 1: to establish a stable foundation for leadership, it's no surprise
Speaker 1: that the company was struggling. If you can't keep the
Speaker 1: same CEO for more than a year. Then, as each
Speaker 1: person comes in and attempts to shape the corporation according
Speaker 1: to their own you know, leadership style, You just all
Speaker 1: you have is just an unending period of trying to adjust,
Speaker 1: and just as you're getting close to aligning with the
Speaker 1: leader's vision, they're gone and you've got someone else in.
Speaker 1: The whole process starts over again. Yes, well, in two
Speaker 1: thousand fourteen they got yet another CEO. At the time,
Speaker 1: they had ended two thousand thirteen with a loss of
Speaker 1: forty million dollars. The CEO came in, he wanted to
Speaker 1: do another restructure, improved the management, improved the marketing, change
Speaker 1: up the store design to make it edgier and cleaner
Speaker 1: and brighter, to expand the products offered, with a goal
Speaker 1: of becoming profitable again by two thousand fifteen, still holding
Speaker 1: onto those smartphones. And this was the seventh CEO in
Speaker 1: eight years. This turnaround cost more than he expected and
Speaker 1: they ended up having to take out loans. So they
Speaker 1: took out a five five million dollar line of credit
Speaker 1: from g Capital and then a two hundred and fifty
Speaker 1: million dollar term loan from Salis Capital. And you'd think
Speaker 1: that the bigger loan would be the problem. But it
Speaker 1: was actually the Salist capital loan because it meant that
Speaker 1: they couldn't close any more than two hundred stores in
Speaker 1: a year without getting permission. And they had a really
Speaker 1: bad holiday season and they needed to close stores. They
Speaker 1: needed to close about a thousand of them, and Salis
Speaker 1: was saying no, yikes. So they were they were between
Speaker 1: a rock and a hard place, as they say, And
Speaker 1: it would have been smart too close the stores because
Speaker 1: at the time they also had stores very close together,
Speaker 1: so they were competing with themselves. They were suffering from
Speaker 1: like a Starbucks syndrome. Yeah, I have a note later
Speaker 1: on that I might as well mention it here that
Speaker 1: in Sacramento, California, in a square mile area, they had
Speaker 1: twenty five stores, So that's a store for every square mile.
Speaker 1: That is a heavy concentration of radio shack stores. When
Speaker 1: you specifically think that this is a store that's still
Speaker 1: largely is marketed toward hobbyists. I mean, if you ever
Speaker 1: w into a radio shack, you were looking at a
Speaker 1: lot of tiny, little electronics parts. I mean they had
Speaker 1: fully assembled stuff too, but they were mostly known for
Speaker 1: selling components. It's more confusing than a home depot. In
Speaker 1: February two, they tried to bump up their marketing by
Speaker 1: doing a Super Bowl commercial and it cost him four
Speaker 1: million dollars. But they didn't really explain in the commercial
Speaker 1: all of the changes that they had been trying to
Speaker 1: put into place, so consumers didn't really know why do
Speaker 1: you give radio shack a chance? So it was a
Speaker 1: four million dollar expensive mistake. Yeah, they didn't have the
Speaker 1: same success as Old Spice yep. So by September two
Speaker 1: they enjoyed the great success of that Super Bowl commercial.
Speaker 1: And by that I'm being facetious because they had posted
Speaker 1: a quarterly loss, the tenth consecutive quarterly loss, but this
Speaker 1: one was nearly a hundred twenty million dollars and worse
Speaker 1: than that, they were running very low on off rating cash,
Speaker 1: to the point where it was quickly becoming evident that
Speaker 1: if something didn't change, they were not going to stay
Speaker 1: in business. Yeah, their stock was barely above a dollar,
Speaker 1: which as we know, is the threshold to stay on
Speaker 1: the nasdack, and Salas was still saying they couldn't close
Speaker 1: those stores to get any additional revenue in and this
Speaker 1: is what leads up to bankruptcy. But we'll talk about
Speaker 1: that right after this break. Two thousand fifteen, Radio Shack
Speaker 1: is in really awful shape. They have defaulted on loans,
Speaker 1: They had a couple of really poor years in general,
Speaker 1: and terrible holiday seasons in particular. They fall off the
Speaker 1: NASDAC because their stock price finally drops below the threshold,
Speaker 1: and then without any other real options, they file for
Speaker 1: Chapter eleven bankruptcy protection. Yeah, they had to close two thousand,
Speaker 1: four hundred stores, but then they were by one of
Speaker 1: their creditors, General Wireless Operations, Yes, and they took over
Speaker 1: running the remaining hundred stores. By this time, Radio Shack
Speaker 1: was only in the US and Mexico. They had become
Speaker 1: more of an international market, but they had to close
Speaker 1: those down as part of this this long decline. In
Speaker 1: two thousand and sixteen, it looked at first like things
Speaker 1: might be turning around, right Yeah, Yeah, General Wireless Operations
Speaker 1: seemed to be doing a good job. Their expenses drop,
Speaker 1: the profits were up. But they had made a partnership
Speaker 1: with Sprint in two thousand fifteen, as we had mentioned before,
Speaker 1: I believe in an effort to share store space and
Speaker 1: kind of share markets, and that was eating up their profits.
Speaker 1: It wasn't as profitable for them as they wanted, and
Speaker 1: they actually filed a lawsuit in two thousand seventeen against
Speaker 1: Sprint for five hundred million dollars in damages because they
Speaker 1: said Sprint was using confidential information they got in making
Speaker 1: that partnership to basically open competing stores. Wow, just cannibalizing
Speaker 1: this partnership that they had made with Radio Shack. Print
Speaker 1: fought that allegation. Um, I actually don't know how it
Speaker 1: turned out, guessing in sprince favor. They did end up
Speaker 1: buying a bunch of the store space. So Radio Shack
Speaker 1: had filed for Chapter eleven bankruptcy, emerged from bankruptcy after
Speaker 1: being bought by their creditor, and then in two thousand
Speaker 1: and seventeen they filed for it again, which is unusual
Speaker 1: because typically companies are not allowed to file for bankruptcy
Speaker 1: twice in such a short period. But there was an
Speaker 1: exception here. Yeah, usually you're supposed to wait seven to
Speaker 1: ten years, or you have to wait seven to ten years,
Speaker 1: I guess. But because they were filing bankruptcy this time
Speaker 1: under the name gw OH, they didn't have that restriction.
Speaker 1: It was technically a different company because you had a
Speaker 1: different owner. So at this point it really got grim.
Speaker 1: You know, before they had closed all but fifteen hundred stores.
Speaker 1: This time they closed significantly more than that. Yeah, they
Speaker 1: ended up with only seventy two company stores by the
Speaker 1: end of this bankruptcy, which would be even less later
Speaker 1: on as they continue to try to fight this. Yeah,
Speaker 1: they did have relationships with stores that had essentially licensed
Speaker 1: the ability to operate as Radio Shack. These were dealers stores,
Speaker 1: or around five hundred of those, and some of them
Speaker 1: still exists. Yeah, but they didn't known those. Yeah, it's
Speaker 1: the radio shacks you see today. Those are the licensed
Speaker 1: entities that have essentially paid to operate under radio Shack.
Speaker 1: But here's a crazy thing. This seems like a drop
Speaker 1: you can't come back from. But radio Shack exited bankruptcy
Speaker 1: a second time in January, despite the fact that but
Speaker 1: half the people out there wouldn't be able to tell
Speaker 1: you what radio Shack is. Yeah, they're technically still around
Speaker 1: and technically out of bankruptcy. Now. They're owned by Kensington
Speaker 1: Capital Holdings and they're hoping to make a gross revenue
Speaker 1: of million dollars. So these days they're really focusing on
Speaker 1: online stores so they've got an online store, and then
Speaker 1: they have this relationship with the independent dealers who are
Speaker 1: operating under the Radio Shack name. But they are independent.
Speaker 1: It's not like it's not like the company owns those stores.
Speaker 1: They do have semi stores. Yeah, they have like they
Speaker 1: have like stores within other stores. Yeah, kind of the
Speaker 1: way that Toys r Us came back a little kiosks. Yes. Yeah,
Speaker 1: So looking back at some of the lessons, we've talked
Speaker 1: about a few of them, the idea that the company
Speaker 1: had a lack of focus and because it was trying
Speaker 1: so many different things, it wasn't doing any of them
Speaker 1: particularly well. And I feel like they jumped the shark
Speaker 1: on that, like they started freaking out before things really
Speaker 1: got that. I feel like they probably could have made
Speaker 1: a better run at the personal computer space, in particular,
Speaker 1: if they had a chance to really invest in that.
Speaker 1: But I think they saw where the competition was and
Speaker 1: decided that they didn't want to have to to fight
Speaker 1: in that same space because it was going to be
Speaker 1: really fierce fighting. The early Tandy computers did have a
Speaker 1: reputation for being somewhat let's say, quirky um, but people
Speaker 1: like quirky, Yeah, and well they could have come back
Speaker 1: from that. I know people who really genuinely loved the
Speaker 1: Tandy computer, but for a lot of people, it's like
Speaker 1: you're loving it despite its faults kind of thing. But
Speaker 1: they weren't able to stick around with it long enough
Speaker 1: to really make a huge dent in that. And then
Speaker 1: you know the fact that the business started off as
Speaker 1: something that focused on hobbyists ultimately limited itself. In fact,
Speaker 1: that's where you can find a lot of radio shack.
Speaker 1: Many stores are in hobbyists stores and hobby towns. I
Speaker 1: think they're called. Is primarily where which I had never
Speaker 1: heard of, hobby town No, yeah I have. I've been
Speaker 1: in hobby towns. Another problem, as we talked about, is
Speaker 1: how many stores I opened. So Tandy expanded the company,
Speaker 1: but he didn't really take into account regions. Yeah, it was.
Speaker 1: It was there was not enough strategy applied to the expansion.
Speaker 1: It was. We've seen this story multiple times right where
Speaker 1: we've seen stores, stories about how stores would open up
Speaker 1: and they would end up competing with themselves because you
Speaker 1: would have locations that were so close to each other
Speaker 1: that rather than add to the revenue you're generating in
Speaker 1: that region, you're really just adding to the cost of
Speaker 1: operation because you're not getting more customers. The customers are
Speaker 1: just going to one store or the other. So instead
Speaker 1: of doubling your customers, you have the same number, but
Speaker 1: you have twice the costs. And that was a real
Speaker 1: problem throughout many regions that radio shack was operating in,
Speaker 1: Like I mentioned Sacramento, but that was just one example. Yeah,
Speaker 1: and then the online sale thing. Yeah, the fact that
Speaker 1: they waited too long to get into that. I wrote
Speaker 1: in the notes that they got radio shackled. The thing
Speaker 1: is I wonder, I wonder if they had jumped on
Speaker 1: that bad Bandwigens sooner, if they had come out with
Speaker 1: a website. Because they're dealing with electronics, they should have
Speaker 1: been able to come out with a website that worked decently.
Speaker 1: If they had done that around the time that Amazon
Speaker 1: was getting its presence, maybe the loyal customers Radio shock
Speaker 1: had would have stayed with them because they'd be more
Speaker 1: convenient and by the time they could get the stuff
Speaker 1: on Amazon for cheaper, they'd already have their accounts set
Speaker 1: up on Radio Shocking would just be easier. It's possible.
Speaker 1: Uh we It's hard to say because between then and
Speaker 1: now we also had the dot com bubble burst. So granted,
Speaker 1: radio Shack would have been coming at this from an
Speaker 1: established company perspective, not from a startup that suddenly owed
Speaker 1: huge amount of money to in the bubble. Yeah, they
Speaker 1: were all right. They lasted through that time largely because
Speaker 1: they didn't they weren't in that space. I also mentioned
Speaker 1: the fact that salespeople were partly compensated on commission. This
Speaker 1: also earned Radio Shock a reputation for having pushy staff
Speaker 1: because they were trying to upsell customers and get like.
Speaker 1: They were only earning commissions if they're if the sales
Speaker 1: were hitting a certain amount per customer, So if it
Speaker 1: was under that threshold, you didn't get a commission for
Speaker 1: that sale. So there was an incentive to get people
Speaker 1: to buy more stuff so that you would hit those
Speaker 1: goals and you would get a commission on the sale.
Speaker 1: So if you never walked into a radio shack during
Speaker 1: those days, the experience was like this. You walk in.
Speaker 1: Immediately someone swoops in, can I help you? And you're like,
Speaker 1: I'm just looking thanks, and you're looking around for whatever,
Speaker 1: and then you take two steps someone else swoops it,
Speaker 1: can I help you? Because everyone wants to try and
Speaker 1: get the commission on that sale. Totally understandable, Like it
Speaker 1: was a strategy to motivate the salesforce, but it created
Speaker 1: an experience for the customer that was sub optimal. So
Speaker 1: while it motivated the salesforce to try and move more
Speaker 1: product and thus create more revenue, you were alienating the
Speaker 1: customer base. And that was a problem, especially as online
Speaker 1: was growing, because people are like, at the deal of
Speaker 1: that crap? If I go online, no one bugs me.
Speaker 1: I just I searched for it in the search bar
Speaker 1: and then I click a little link and I buy
Speaker 1: it then and I'm done. Yeah, and they didn't really
Speaker 1: have stable management to help push any brief at Lazation
Speaker 1: projects through. Yeah, there were a lot of starting stops
Speaker 1: because you'd have people with big ideas come in, but
Speaker 1: they wouldn't last long enough to actually see it all
Speaker 1: the way through, and then it would be back to
Speaker 1: the drawing board with the next person. So a lot
Speaker 1: of lessons to learn here. It's hard to talk about
Speaker 1: because they went in so many different different directions. You're like,
Speaker 1: where do I even start well, And it's also complicated
Speaker 1: because of the connection to Tandy, which is its own like,
Speaker 1: we can do another Brink episode about Tandy, which technically
Speaker 1: ties directly into Radio Shack I mean Tandy and Radio
Speaker 1: Shack or synonymous. By the end of it, you know,
Speaker 1: there are other parts of Tandy's journey that would tell
Speaker 1: us more stories that are more valuable lessons. So I
Speaker 1: do have one fun fact to end this episode, because
Speaker 1: it was a pretty long descent into the brink. They
Speaker 1: were they were on the brink and then they fell down,
Speaker 1: but it was they kept hitting stuff all the way down,
Speaker 1: so it took a while to hit the bottom. Do
Speaker 1: the goofy whoa? So what's your fun fact? Right? So there.
Speaker 1: Their item that was in production the longest was the
Speaker 1: Flavor radio. It was in production from through two thousand one,
Speaker 1: the same design, which is not a radio that if
Speaker 1: you look at it, tastes like different fruits go badly.
Speaker 1: The Snowsberry station tastes like snowsberries. When I read it,
Speaker 1: I was like, flavor radio radios and you eat them. No,
Speaker 1: they were just multicolored portable radios, kind of a precursor
Speaker 1: to the walkman or or the iPod. Okay, cool, somehow
Speaker 1: I never had heard of that, so that I learned
Speaker 1: something today the pocket sized transistor radios. Cool. Well, that
Speaker 1: wraps up this episode of The Brink. We look forward
Speaker 1: to hearing more from you guys. So if you have
Speaker 1: any suggestions for other show topics that we should cover,
Speaker 1: you should contact us. How would they do that? Areal?
Speaker 1: They would do that by emailing us at feedback at
Speaker 1: the Brink podcast dot show. Yep, and you can go
Speaker 1: to our website that's the Brink podcast dot show. You
Speaker 1: will find an archive of all of our episodes and
Speaker 1: more information about your beloved hosts. And that's it for
Speaker 1: this episode, so I guess until next time, I am
Speaker 1: Jonathan Strickland and I'm Ariel. Casting The Brink is a
Speaker 1: production of I Heart Radio and How Stuff Works. For
Speaker 1: more podcasts for my heart Radio, visit the I heart
Speaker 1: Radio app, Apple Podcasts, or wherever you listen to your
Speaker 1: favorite shows. H