What the RadioShack bankruptcy really means

Every time a retailer files for bankruptcy I am reminded of a harshly appropriate comment Jay Leno made in a monologue years ago after an icon of American retailing succumbed to market forces.

Montgomery Ward (remember them?), a company with an illustrious history that had a tremendous influence on the evolution of the retail industry, filed for bankruptcy in 1997 and was later liquidated.

The company’s descent had been long and slow, and in a sign of how far the once dominant retailer had fallen from public consciousness, Leno quipped something to the effect of, “who knew they were even still in business.” Cue signature chuckling.

Millions of Americans knew RadioShack was still in business, but there just weren’t enough of them who needed or wanted the products the company was selling, or if they did, couldn’t obtain them at other stores or online in a way that was more convenient, less expensive or offered a better service experience. That’s always the case in the survival-of-the-fittest retail world, which makes the RadioShack bankruptcy something of a “so what?” moment in the industry since it was so long coming.

RadioShack was weak and dying by the time the company brought in former Walgreens/Duane Reade executive Joe Magnacca several years ago. The company had already tried many of the familiar tactics distressed companies try, but retailers are eternal optimists who can’t resist a challenge. Magnacca was game to give it a try and no doubt confident he could succeed even though others at RadioShack had failed, and turnarounds in the retail industry are notoriously difficult. Unfortunately for Magnacca, he took the helm when the iceberg was already in sight and avoiding disaster had become inevitable. Sam Walton couldn’t have turned around RadioShack.

So now the company is in bankruptcy and plans to close half its stores and co-brand the other half in a deal with Sprint. The arrangement is unconventional and, for the time being, preserves a physical presence for the RadioShack brand. Eventually, when the RadioShack name disappears from shopping malls and strip centers nationwide, the brand can look forward to online immortality thanks to a precedent set by Montgomery Ward, a company that even in decline proved to be innovative. Montgomery Ward stores were liquidated in 2000 but the brand name retained some equity and changed hands several times. Today, it is owned by Colony Brands, which operates the Web site www.Wards.com as a platform to market a wide range of home goods.

RadioShack will follow a similar path. There will be an investor, who for the right price, believes an acceptable rate of return can be generated by maintaining a virtual presence for RadioShack. In the process, RadioShack will prove Leno wrong and remain in business, just not in the way the late night host implied years ago with his snarky comment about Ward's many years ago.