What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing today we're doing a video on the epic rise and fall of radio shack. Depending on how old you are, you might remember, shopping there for electronics, parts, cell phones or other various trinkets, but if you've ever shopped there, it is probably the better part of a decade ago. They were once the largest electronics parts retailer in the world with thousands of locations and billions of dollars in annual revenue, but by 2018 they had gone bankrupt, multiple times closed, almost all of their stores and were bought out by tai lopez's new company retail ecommerce ventures. In this video we'll explain the rise of radioshack.

What went wrong and how likely it is that tai lopez can stage a turnaround. Radio shack can trace its roots all the way back to 1921, when theodore and dalton deutschmann opened their first retail location in boston. They sold parts for so-called ham radios, which were primitive radios, individual enthusiasts built on their own. It was cutting edge technology at the time and is somewhat analogous to people building their own gaming pcs.

Today, over the next few decades, they had some success, but the growth was very slow. By 1960, they had opened a grand total of nine stores in or around boston, by this time, the ham, radio technology that they sold had become outdated and they found it increasingly difficult to turn profits in the early 1960s. A wealthy entrepreneur by the name of charles tandy saw potential in radio shack and purchased the company for 300 000 or about 2.7 million dollars in today's dollars. This was pittance even at the time, but radio shack was running out of cash and had no choice but to accept the offer charles merged radioshack, with his namesake tandy corporation, which manufactured and sold leather goods.

It might seem odd that a leather company would buy an electronics parts retailer, but charles tandy thought his experience in niche retailing could benefit radioshack throughout the 60s and 70s tandy completely reinvented the business he reduced the size of the stores and went from offering 40 000 Products to just 2 500. by reducing their inventory and rent expense, they were able to offer cheap prices for computer components and other electronic goods. They catered to nerds, who bought cheap goods and wanted to improve them on their own through modifications. In addition to selling electronics.

They also manufactured them. They partnered with companies, including panasonic and ast computer, to assemble their products in radio, shack facilities and sell them in radio shack stores. By the time charles tandy died in 1978, he had turned radio shack into one of the world's preeminent electronics. Retailers with thousands of locations across the globe by the early 80s, they had more than 4 000 company operated stores and more than 2 000 independent franchises starting in the 1990s, the company made a strategic ship to focus on mainstream consumer electronics and put less of an Emphasis on their original business of selling spare parts.

To this end, they started selling mobile telephones, personal computers and other things of that nature. They divested their own manufacturing business in favor of carrying the latest models produced by third-party manufacturers. They thought that this would help them stay competitive with other electronics retailers, but it ended up having the opposite effect without manufacturing their own products. They no longer had anything to differentiate themselves.

By this point, the mass market, consumer electronics, retail space was becoming fiercely competitive with big box stores, including walmart and best buy, taking market share with their hole in the wall stores. Radioshack couldn't compete on product selection, walmart and best buy could also offer lower prices to consumers because they got better bulk discounts from their wholesalers by the early 2000s. They shifted their focus almost entirely to selling cell phone plans on behalf of major phone carriers. At various times.

They had partnerships with verizon t-mobile at t and sprint. They would have a store within a store setup where they would sell phones from a specific carrier to customers who walked in the door. Radio radioshack would earn a commission on each of the phones that they sold. These commissions were quite high, as the lifetime value of a customer to a phone carrier could be thousands of dollars around the same time.

They also started an initiative where they interviewed the managers of each of their 5 000 stores. The bottom 1 500 managers based on performance were put on notice if they did not improve their stores results within 90 days, they'd be fired. More than 1 700 managers were either terminated or reassigned to lesser roles as sales associates. Importantly, the terminations were based on relative performance, not absolute performance if one manager improves that just means that another manager will replace them in the bottom.

Fifteen hundred this led to a crabs in a bucket mentality at the company and did long-term damage to their corporate culture and for a while it worked out pretty well for them. Their revenue peaked in 2005 at five billion dollars, but they only made 267 million dollars of net profit for a five percent net margin as a reseller of phones. They didn't have anything to differentiate themselves, so they can only compete by taking razor thin margins. The problem with their strategy of selling phones is they had no differentiation, they weren't, even the ones selling the phones.

They were just earning commissions from the carriers, that meant they had little control of pricing and with the rise of e-commerce, there became less and less reason to shop at radio shack. You could go directly to the cell phone carriers website and get a better deal as they don't have to pay radio, shack and commission. The basic problem was that there is no reason for radioshack to exist. They didn't offer any project or service that you couldn't buy for cheaper elsewhere.

From 2005 onward, there was a clear downtrend in their revenue and profitability to combat their losses. Radioshack wanted to close their unprofitable stores. While this would reduce their revenue, it would also decrease their cost base and alleviate their net losses. However, they had a loan from an asset manager called sales capital partners.

The terms of this loan stipulated that radio shack could close no more than 200 stores per year. With over 5 000 stores, that was less than five percent of their total store count by this point, radio shack's share price was free, falling, their net losses were piling up and there is increasing speculation about an imminent bankruptcy at first. It might seem odd that one of radioshack's debt holders would want them to keep unprofitable stores open. They should want them to survive, so they can pay their interest in principal payments as it turns out.

Many of their creditors knew that there is a high probability of the company going bankrupt. They invested in their debt anyway, so they could seize control of radio shack's real estate during the eventual bankruptcy proceedings. By this point, the real estate was worth a lot more than the company itself. Closing more stores would help radioshack reduce losses and stay in business for a few years longer, but it would also reduce the valuable real estate that they held on their balance sheet, which is what the creditors really cared about, unable to close more than 200 stores per Year, radioshack reduced the opening hours of their underperforming stores and reduce staff levels to the bare minimum.

By 2012, their net losses had exploded to hundreds of millions of dollars per year. In 2015, their shares were delisted from the new york stock exchange. After the company's market cap fell below the minimum threshold of 50 million dollars. They were bought out of bankruptcy for 160 million dollars by a company called standard general as part of the bankruptcy proceedings.

The vast majority of their stores were closed, leaving only 1700 standard general entered into a partnership with sprint whereby they would be co-branded as sprint stores. By this point, radio shack barely existed as its own entity. They were basically just sprint stores that sold a few other electronic peripherals on the side. The sprint co-branding did nothing to stem the fundamental decline of the business in 2017, just two years after its previous bankruptcy process, they went through a second bankruptcy proceeding whereby they liquidated all but a handful of their stores.

By this point, the remaining workforce had incredibly low morale, an employee or employees at one closing location in reynoldsburg, ohio posted a message on facebook telling customers to go f themselves and saying that they had always hated the customers. Radio shack's corporate office denied having any involvement with the post, but it goes to show what type of culture that they were cultivating at their stores. They operate. An e-commerce website called radioshack.com where you can buy headphones batteries, radios, electronic parts and even radio shack branded apparel.

But for most of their products you can find cheaper alternatives on amazon or at walmart. In november of 2020 tai lopez's company retail ecommerce ventures or rev bought radio shacks brand named in e-commerce operations. The purchase price wasn't disclosed, but was probably only in the millions or tens of millions of dollars range. Given how much the business has declined.

They bought radio shack, along with other failing brands such as pier 1 imports, dress, barn, linens and things and others he plans to revitalize them by improving their e-commerce offerings. They started cross-promoting rev's, other e-commerce websites, as well as tai lopez's mentor box program on the radio shack website. The product offerings on the website don't seem to have changed much since tai lopez bought the company and since rav is not publicly traded, we don't know their revenue or profitability, but given how far behind their logistics network is behind amazon and even walmart, it's hard to See how lopez can make a turnaround, alright, guys that wraps it up for this video? What do you think about radio shack? Do you think tai lopez can make a turn around? Let us know in the comments section below, as always. Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.