What’s in a name? RadioShack rebranding to “The Shack”

RadioShack is undergoing a major rebranding that will change the company’s forward-facing name to “The Shack.” The name change may hint at a new direction for the company, venturing into the general home electronics space thus far occupied by general technology retailer Best Buy. How will the move impact RadioShack and will it be a success?

Here’s the game plan: RadioShack stores will reflect the new name in displays this week, while store-front signs will be replaced by the end of the year. Only the corporate infranstructure will retain the old RadioShack name, however.

Financials

Financially, RadioShack stands on solid ground. The company posted an after-tax net income of just over $48 million in the second quarter of 2009. That’s a $5 million increase from the previous quarter and is attributed to cost-cutting throughout the company (overall revenue is down over $37 million from 1Q 2009). Compared to the year-ago quarter ended 6/30/2008, the retailer has posted an after-tax increase in net income of 17 percent. That’s a lot better than the giant electronics retailer Best Buy has fared in the down economy, which has posted a sharp 73 percent decrease in after-tax net income in Q2 2009 from the previous quarter. Perhaps the RadioShack executive team is predicting a change in market perception and/or shopping habits and is basing its re-branding decision on this forecast, caring to be proactive going forward with the company’s 4,453 company-operated stores.

Target market

Dating back to its roots, RadioShack is known for its supply of unique electronics and tech gear: adapters, cables, electricity converters – all these items are usually not available at a big-box retailer such as Best Buy or the now-defunct CircuitCity. In that regard, the company caters to the true tech geek. However, many see the name change as a sign of the retailer’s plans to make a greater push into the general electronics space. If that is the case, a move to rebrand the company is one thing, but if the name change will also bring with it a tidal shift to the type of products sold in the store (read: eliminating its unique product lines), The Shack faces the risk of alienating its most loyal customers. In fact, a commenter on this blog post went so far as to say that “The day I can’t walk in [Radio Shack] and buy a diode and some molex power connectors is the day I stop shopping there.” As with any unique product, RadioShack has built a small (yet powerful) cult-like following of hands-on tech fanatics. Therefore, I hope that if The Shack is planning on carrying more mainstream technology in its stores, it does not do so at the expense of the uber hands-on customer.

Hut or Shack?

Taking the word “Radio” out of “RadioShack” may have valid reasons. Radios today may be perceived old, outdated, and simply not hip, especially for generations X, Y, and Z. After the word”Radio” has been cut out, though, we are left with just The Shack. And here is where it may get a little shaky from a psychological interpretation perspective. When we speak about “living in a shack,” we usually refer to an environment that is not in pristine condition. Put simply, the word carries some negative connotations. So it looks like the branding folks at RadioShack were stuck between a rock and a hard place: radio is an outdated word and shack carries many not-so-positive associations. So they decided to put the word “The” in front of “Shack” to make this not just any kind of shack, but the most definitive shack in the world! Not sure about you, but without prior knowledge of RadioShack, I don’t think many would want to buy a 50 inch flat screen at a place that others call “The Shack.”

In June, Pizza Hut pulled a similar rebranding, slicing the name “Pizza” from the name to end up with “The Hut.” The move was held in conjunction with the chain adding pasta to its menu. Media and advertising trade publication MediaWeek characterized the name change as an attempt to transform its stores into hip hangouts. Is “hut” a little more positive than shack? You be the judge! At least there isn’t a “shed” – yet.

Concluding Thoughts

I see the rebranding as a way to make what otherwise is a hardcore geek haven a cool place for teens and tech fans to hang out: more traffic and more time spent in the store are surefire ways increase sales and customer interaction. To attract teens – many of whom are into gaming – The Shack would need to improve its gaming selection, perhaps adding functioning gaming consoles connected TVs. This would fall in line with the general consensus that changing the name to “The Shack” is part of an overall push into the general electronics space. As long as that doesn’t mean a pull away from its unique items such as diodes and molex power connectors, I think the plan has a good chance of success. Add to that the growing foray into wireless sales (T-Mobile will be joining AT&T, Sprint Nextel, and Alltel on The Shack’s shelves) and you’ve got yourself a recipe to keep those profits growing.

The company will hold launch events August 6-8 in New York City (Times Square) and San Francisco (Justin Herman Plaza) called the The Shack Summer Netogether and has launched a website dedicated to the event. Great name!

Image courtesy of lesjones.com

Posted in Business, Decisions, Marketing, Numbers, RadioShack, Ratailing, Rebranding