An indicator of why Radio Shack ($RSHCQ) is hurting

I am not a big fan of Radio Shack [stckqut]RSHCQ[/stckqut] and have never invested in them in all my years as a profitable but personal investor. I saw this ad recently on another site and think it is a great example of how their business model struggled to evolve.

Every product on this Radio Shack advertisement has been replaced by today’s smartphones. Let’s take a quick look:

  • Stereo
  • Alarm clock
  • Headphones
  • Calculator
  • Intel 286 based computer (today’s iPhone’s are far more powerful)
  • Mobile cellular telephone (evidently this is the main reason for having a smartphone but don’t tell that to a teenager)
  • CD player (Okay, this one isn’t a direct replacement but instead an evolution of the music industry)
  • Radar detector (not on a standard smartphone but there are apps that will alert you to the presence of a police car on the side of the road)
  • Desktop scanner (via an app or the Internet)
  • CB (citizen’s band) radio (not directly but messaging has evolved)
  • Answering machine
  • Phone (this one is for a home, but many people are simply dropping their ‘home line’)
  • Tape recorder
  • Video recorder
  • Speakers

Obviously, Radio Shack was not selling a lot of these products recently, and the company evolved its business model. But did it evolve it quickly enough?

I am often asked why I don’t recommend young and hot companies, and I never suggest that a Confident Investor should invest in an IPO. It is simple; I want my investments to be in companies that have been around long enough to have survived multiple levels of competition. I want the company to be successful in the majority of a decade in order to prove that the management knows how to adapt to new technologies and new competition.

Radio Shack did fine for many years. However, they fell in love with their business model. They fell in love with the small store with smart people behind the counter. They fell in love with gadgets. The problem is that they loved their business model so much they didn’t throw it away when it was obvious that the model was hurting the company. They didn’t understand Amazon [stckqut]AMZN[/stckqut] and, ultimately, Amazon destroyed them.

tm14

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