RadioShack is an interesting sort of place. Much like your local CVS, Radio Shack sells a broad assortment of items at considerable markups, aiming at customers more interested in convenience than cost. “The Shack” has a pretty varied shelf, selling big ticket items like TVs and smartphones, as well as more mundane doodads like cables and chargers. Understandably, the business is rapidly shrinking, thanks to online behemoths like Amazon (which even has its own branded line of peripherals) and the reasonable variety of electronics now found in Costco, Walmart, and Target, wherein RadioShack operates the “Bullseye Mobile” counter.
Best Buy, an electronics retailer of a very different size, has also had its share of woes. Plagued by “showrooming” at the hands of bargain-hunting customers and massive storefronts that just aren’t earning their keep, the 1,400 store retailer is trading only slightly above its 52-week low. Best Buy’s chain of command recently reshuffled and Hubert Joly was appointed CEO; Richard Schulze, who founded the chain in 1966, has also offered to take the whole yellow-tagged enterprise private.
In an effort to stanch its quickly-eroding profits, Best Buy moved to place more emphasis on “Best Buy Mobile” stores – reduced-footprint outfits that concentrate on small, popular products – smartphones and tablets – with higher profit margins. The stores have all the advantages of Best Buy’s distribution chain and employee base, and none of the overhead of their bigger brother stores, albeit without the big screen TVs and refrigerators.
If Best Buy is to continue to compete with online retailers who offer proprietary goods – Amazon, Apple – or discounters who offer the convenience factor of picking up batteries alongside paper towels – Target, Costco – it must use its Goliath size to play David. Therefore, I might suggest that instead of pumping money into developing Best Buy Mobile stores, Best Buy should simply acquire Radio Shack, and leverage their own supply chain and volume buying with the smaller chain’s name recognition and existing retail outlets to undercut and out-convenience Amazon and Target. The purchase might well be worth the price. As of today’s close, Radio Shack’s market cap stands at a bit under $250 million. Best Buy, even near its nadir, has a market cap of $6 billion, and could likely, with the Schulze buyout, stretch its hand toward Radio Shack.
I’d love to hear your thoughts.