Hooking Up America's Homes
By Lindsey Townsend
From batteries to a billion-dollar business in less than a century. When Radio Shack was born in 1921, it began as a mail order company catering to ham operators and electronics buffs. Less than 80 years later, it’s the nation’s largest consumer electronics chain, with more than 6,900 retail stores and dealer/franchise outlets nationwide and $4.7 billion in 1998 sales.
But those revenues may look like lunch money compared to the numbers the electronic giant may be posting by the end of next century. Through a series of key alliances, Tandy Corporation, RadioShack’s parent company, is extending its reach beyond the retail mall of yesterday into the exploding home connectivity business. “We want to be in a position to hook up 80 million homes and apartments to high-speed Internet services. To get there, we’ve been forming a number of strategic partnerships that began a couple of years ago with Sprint,” said Ron Trumbla, Tandy senior media relations manager.
That effort has already placed a number of Sprint communication products, including Sprint PCS wireless services, long distance, Sprint-branded phones, enhanced calling features, and Internet access, at point-of-sale in more than 6000 RadioShacks nationwide, where customers can touch, test, and ask questions to their heart’s content before buying. “We’ve got two major things going for us at the retail level: unparalleled distribution and a million customers that walk in our stores every day,” said Trumbla.
To truly position itself to bring digital to America’s doorstep, though, and set up accounts that earn residual income, Tandy had to figure out how to become a home installer of all the products that it sells. That problem appears to have been solved with the acquisition this year of Columbus,Ohio-based Amerilink Corporation, a profitable installer of cable, telephony and high-speed bandwidth products. Amerilink designs, installs, and maintains cabling systems for the transmission of video, voice and data, primarily for home use. The company currently completes 10,000-15,000 installations weekly, both residential and commercial.
“This acquisition possesses exceptional synergistic opportunities and profit growth for both Tandy/RadioShack and Amerilink…Amerilink’s experienced management expertise will help us test various approaches to installation, including franchising, as we bundle installation service with our powerful technology product and service offerings. Americans will now be able to get service and products like NorthPoint’s high speed bandwidth digital subscriber (DSL); RCA’s digital entertainment products, including cable modems and digital satellite systems; and Compac Computers as they become available in their neighborhood RadioShack store,” said Len Roberts, chairman and CEO of Tandy/Radio Shack.
Roberts, who joined Tandy in 1993 as president of RadioShack, is credited with reinventing the business as a consumer electronic service concept. Under his leadership, a successful re-imaging compaign was launched, and the company’s sales and profits took off. RadioShack today is a dominant retail player in the wireless phone market, the leader seller of cellular and PCS digital phones, the largest retail channel for Compaq home computers, and the biggest retailer of satellite TV systems. And Roberts’ game plan to find ways to increase residual income is working, to put it mildly. Last year, Tandy’s residual income was $34 million. Projections for 1999 are $60 million; for 2000, $100 million.
“Len Roberts has the ability to see around corners. He has done a great job of moving Tandy into the broadband data services market and the high-speed access to the internet industry, which is growing at an exponential rate,” said Matt Hutchins, president of I3S, a leading provider of broadband data services to residential communities. “They’re leveraging their good brand name to sell these new high-speed online services and have been shrewd about extending their retail reach into the home using their field technicians. They’ve got them giving out coupons and offering upgrades on software and peripherals as they install the equipment onsite. That’s smart, because surveys show that more than half of all people who subscribe to high-speed online service will upgrade their software or their peripheral equipment within six months,” he said.
RadioShack executives say that it only makes sense for the company to expand its presence into the home, since the company has always been the place that consumers turn to for information about new technologies. “We’re all about answers. When you go into a RadioShack to see a new product, you expect to find somebody who can show it to you and tell you how to hook it up, or hook it up for you,” said Tony Magoulas, RadioShack media relations manager.
Trumbla said that technology moves at such a rapid pace today that good customer service is more important than ever before, because people need help to keep up with the changes. “We’ve moved from a value cycle, in which customers were shopping for the largest selection at the cheapest prices, into a more wholistic cycle that encompasses the service aspect…It’s part of the impetus behind our “You’ve got questions, we’ve got answers” strategy,” he said.
Industry watchers, meanwhile, say that Tandy has dodged a major bullet by managing to avoid the cutthroat pricing tactics other companies in the retail industry are competing with. Had they not diversified in this way, RadioShack might very well be struggling today. “They could have been in the same situation as the “big box” companies like Comp USA that are getting killed out there today competing on price alone,” Hutchins said. “Tandy has done a wonderful job of transforming themselves from a pure electronic retail distribution and sales company into a broad-based provider of installation and support service that offers high-speed access into the residential market, working in partnership with other service providers,” he said.
Tandy’s ticket to tomorrow appears to be secure, as today’s sleepy suburb continues its metamorphosis into becoming Wiredville. A recent forecast by the Strategis Group predicted that by 2003, between 10 and 30% of United States residences will have high speed broadband access in their homes via either cable modems or digital subscriber line (DSL) technology. The current figure about 1 percent. And while cable modems currently have the most subscribers, DSLs, which let you surf the Internet and talk on the phone at the same time over ordinary copper phone wires, are catching up fast.
William J. Rich, president and CEO of VocalData, which provides voice service over IP networks, said that Tandy’s success is based in large part on its extraordinary ability to create sales and marketing alliances. “In the technology industry, there are two types of alliances. The first kind is when companies need pieces of technology that they can’t create, or that they can’t create rapidly enough to meet the demand. The other major type is the sales and marketing alliance, where one participant often has the distribution channel established and the other has the products the market wants. Tandy has been very good at establishing the latter type, making it possible for them to extend their reach from the retail outlet into the home and Internet areas,” he said.
One of Tandy’s other major goals in the future is to become the best company to work for in America. The Texas Governor’s Committee On People With Disabilities recently named the company Large Employer of the Year, and in the last several years, Tandy has experienced a positive culture change as a result of field surveys and feedback from the ground up. “Finding, training, and keeping the right people is a universal challenge for all companies. One reason we’ve been successful is that we have so many employee-driven initiatives for our field technicians and our sales people. It’s a common sense formula: provide the right incentives, and recruit and retain the best and the brightest,” Trumbla said.