Almost nine years ago I wrote about how Radio Shack had devolved from being a mecca for techies into a rather pathetic cell-phone store. I lamented how I missed the old Radio Shack and didn’t see how they could stay in business. Yesterday Radio Shack made it official. They declared bankruptcy and sold many of their stores to Sprint, who will operate them as…cell phone stores.
The remaining stores, around 1,600 of them, will close. Going out of business sales began a couple of weeks ago at the locations in The Charleston Town Center and in Nitro Marketplace, but the reasons weren’t made clear until yesterday. CNN and Forbes both report that the Radio Shack name will continue, but Radio Shack themselves won’t own any of the stores. Sprint will take on 1,750 stores and convert a third of the space in each store into Sprint “stores within a store.” It’s likely that without this deal, Radio Shack would cease to exist. A few hundred stores will exist outside of the Sprint umbrella, but it’s not clear how those stores will operate.
While this new reorganization will keep the company’s name around, it does not solve the problem that sank Radio Shack (and Circuit City and many other chain stores that have fallen by the wayside). That problem is a misguided corporate philosophy that cuts costs by eliminating experienced and knowledgeable salespeople and slashing inventory. People go to stores to buy things, and sometimes they need help choosing what to buy. Selling fewer things and getting rid of sales staff who might actually sell something is not cutting costs–it’s cutting your revenue stream.