Nonfoods Talk: Troubling times for top retailers

Grocers need to look at RadioShack or Toys“R”Us to see the dangers of falling behind the times.

I would like to say that I spent some quality time in a RadioShack store in recent months, buying the latest technology designed to help me get through my hectic life. I also would SethNEW10-10like to say that Toys”R”Us is on my must-visit list of retailers, even if it is only during the hectic holiday period when I am rushing around looking for the latest and greatest toys for my kids.

But I would be lying. I have not found a need to visit a RadioShack or Toys“R”Us in close to a decade.

Frankly, I know that I am not alone and, unfortunately, it comes across in these companies’ financial ledgers. Both chains announced in early March that because of declining sales and profits and a horrendous Christmas season, they are closing a significant percentage of their stores over the next few months and dismissing many workers.

Both chains serve as poster children for the go-go 1980s when many retailers overwhelmed the existing marketplace with a variety of store formats designed to cater to every need of a more discerning consumer, who, by the way, seemed to have greater and greater amounts of disposable income.

While times have changed over the last 20 or 30 years, it appears that the marketing strategies of these two retail dinosaurs did not. Have you ever noticed that RadioShack’s look has not changed in more than 30 years? Now, as they say, the chickens are coming home to roost.

Back in the day, Wayne, N.J.-based Toys“R”Us completely dominated the retail toy business by offering a massive assortment of products at very low price points. It backed that up by giving consumers another great reason to visit the store: disposable diapers priced at below market price points.

But three things happened that ruined the company’s business model. First, like all public companies, Toys“R”Us had to show Wall Street that it had a good growth strategy in place. It introduced the Baby“R”Us format as a way to placate the financial wizards, but at the same time, gave customers one very good reason not to visit its toy stores. Why go to Toys“R”Us for diapers, when they could go to Babies“R”Us for all of their baby care needs.

Second, women are simply not having as many babies as they once did. With the birth rate at historic lows, the demand for toys is falling fast. The fact that kids are not really interested in traditional toys anymore does not help either.

RadioShack has a different story. With more than 5,000 units (does anyone really need 5,000 stores) blanketing the country, the Fort Worth, Texas-based company has long relied on consumer electronic geeks and the uninformed for the bulk of its business. But with technology getting to the point that even someone as klutzy as me can set up a computer or surround-sound system, the need for RadioShack has pretty much diminished. I mean how many fuses, metal detectors and radio-controlled helicopters can a retailer sell in a year?

The final blow for the chain has been the lack of profits in the cell phone business, a segment that RadioShack seemed to have a solid share of for the last decade or so.

The trials and tribulations of these retailers should help motivate other merchants to always stay on their toes, pay close attention to consumer demographics and understand that the shopper always has alternatives—today more than ever—to go elsewhere for their needs.

This applies to the grocery industry, where so many think they are immune to these trends because they sell food and basic nonfood products. At the end of the day, no one is safe, especially retailers that do not change with the times.

This entry was posted in 2014 04 Article Archives, Columns, Nonfoods for Profit and tagged , . Bookmark the permalink.

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