The CMO Interview

Rebranding Resuscitates 90-Year-Old Radio Shack

Move to Contemporize Retailer as 'The Shack' Pays Off as Consumers' Attitudes Shift, Sales Rise

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NEW YORK ( -- When Lee Applbaum joined RadioShack in September 2008, he had his work cut out for him. Circuit City had filed for bankruptcy, and retailers across the country found themselves enduring the worst holiday season on record.

Lee Applbaum, Radio Shack
Lee Applbaum, Radio Shack
A year and a half later, Mr. Applbaum, 39, an alumnus of Schottenstein Stores, Coca-Cola and David's Bridal, is presiding over what may well be the beginning of a massive turnaround for the staid brand that many consumers had long ago abandoned. The retailer, with the quaint word "radio" still a part of its name, had been viewed as a purveyor of parts, batteries and off brands. Today, it is doing its best to leave those trappings behind. It boasts a new creative platform and nickname in "The Shack," distribution deals with T-Mobile and iPhone, and a sponsorship of Lance Armstrong, who now competes for the newly formed Team RadioShack.

But while those efforts could have easily been chalked up to a flailing brand looking for relevance, RadioShack's sales have been improving. In fact, rumors have been circulating that private-equity firms are eyeing RadioShack, something Mr. Applbaum declined to comment on. Following two quarters of declining sales at stores open at least a year, the retailer posted a 6% jump in sales during the all-important fourth quarter, which includes the holiday season.

Though Mr. Applbaum demurs, citing improvements in merchandising and store operations, it's clear that marketing has played a heavy hand in bringing back consumers. In August, the retailer, which spent $107 million in measured media for 2009, according to WPP's Kantar Media, unveiled "The Shack" in an effort to make the brand more contemporary. Butler, Shine, Stern & Partners rolled out a series of quirky 15-second spots to promote the nickname and to reintroduce consumers to the brand and its offerings. There was an initial backlash to the name, but Mr. Applbaum says sentiment has "shifted from pessimism or skepticism to enthusiasm."

Reporting to Julian Day, chairman-CEO, Mr. Applbaum oversees all marketing and advertising functions for RadioShack, including creative, direct marketing, media, visual, sports and entertainment marketing, and brand strategy. He is also responsible for the e-commerce business and the innovation functions of the business.

In a recent interview with Ad Age, he shared his views on how to reinvigorate the brand.

Ad Age: Brand perception has been a big issue. How did consumers perceive the brand prior to the launch of The Shack platform?

1. Ensure brand perception and brand reality are aligned.

2. Before making a big change, get internal buy-in.

3. Take time to find out what creative is really resonating.

4. Look for noncommercial ways to connect with consumers.

5. Regularly review agency relationships.

Mr. Applbaum: The biggest disconnect was lack of consumer awareness around the realities of our business and the progress our business had made. For example, the company had in the last several years taken a strong stance and leadership position in mobility, and yet all of the brand work we'd done prior to the launch of The Shack suggested that consumer understanding of this was low. Same thing for innovative products -- consumers largely had an aged perception of us, one of legacy parts and pieces, wires and batteries, all things that we still carry, but not a really deep understanding of our role with innovative consumer electronics. The other disconnect was linked to legacy: [Consumers thought] this was a place that had private labels and off brands, when in fact we've got leading national brands across every one of our categories. So the goal from the outset was to close those gaps in brand perception and business reality.

Ad Age: There was some push-back at first to The Shack. Do you feel like consumers now understand what the branding is all about?

Mr. Applbaum: Yes. To me there were a couple buckets of skepticism. Some just didn't get it. That quickly went away when consumers understood that the store name wasn't changing, that it was a creative platform, an attitude, a contemporary way to talk about our brand. The second bucket was a bigger one, it might be classified as, [the question,] "Is this just a kitschy creative handle and nothing more, all sizzle and no steak?" The beauty is that after we launched The Shack we delivered on its promises. The Shack talked about mobility. Proof points: T-Mobile and iPhone. And certainly the Q4 results reflect that there is the steak for the sizzle. At the end of the day, as a publicly traded company, it's great if you reposition the brand, but only to the extent that it actually delivers business results, and we've proven we can do that as well. All of the information and feedback we're getting, whether it is through the brand tracking we do or just looking at blogs and commentary, the rate of adoption of The Shack as a handle has exceeded our expectations.

Ad Age: Are you where you want to be or is there still work to be done?

Mr. Applbaum:There's still work to be done. When you have a brand like ours, a 90-year-old brand trying to transform perceptions, to contemporize, [be] more relevant, it takes time. That said, certainly as a retailer, we expect short-term results. To that end, we are very pleased with our early results and our consumer insights. We do a monthly brand tracker where we look at key brand diagnostics. How is the brand being perceived? Is it on its way up? Is this the brand for me? We've been really pleased with our overall results against all of those key metrics.

Ad Age: Things really started to turn around for RadioShack in the fourth quarter. How much of that do you attribute to the rebranding and new creative?

Mr. Applbaum:It's impossible to say. Across all areas of our business we're always focused on continuous improvement, whether it's the merchant organization, finance organization or what we're doing in our stores. Turnover rates continue to improve. We're investing in our people, their training. Obviously, branding.

Ad Age:Those strong results were accompanied by a bigger fourth-quarter budget. For 2010, will it be necessary to increase your budget to continue being top-of-mind with consumers?

Mr. Applbaum:I can't answer that, it would be forward-looking. I would say we're always focused on, how do we optimize media mix, how do we maximize media investment? That may mean increases in some pieces of media and decreases in others.

Ad Age:You brought on a new creative agency last year and are now in the midst of looking for a new media agency. Any news to share? We'd expect the end of Q1, beginning of Q2 to be able to announce [the media agency]. It's part of a normal procurement process where you're going to look at material agreements with your partners. It's a good, healthy thing for the business.

Mr. Applbaum:How involved has procurement been in the review process? We wouldn't comment on who was involved. But suffice it to say it is a cross-functional team that's always involved in any of these processes.

Ad Age:Since Circuit City's bankruptcy there has been increased competition in the electronics category from Walmart, Amazon and Target, as well as smaller players such as HHGregg and CompUSA. Where do you see opportunities for RadioShack to take share?

Mr. Applbaum:This is at the very root of The Shack, ensuring that consumers really understand our brand better and that they understand who we are and the products and brands we carry. It's not a targeted strategy, one retailer or one dot-com, as much as it is figuring out what consumers are looking for, what their needs are, and in doing that, we're going to grow our business and take share.

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