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Tandy looks to blend old world with new

Nowhere is the changing face of electronics retailing more evident than at Tandy Corporation's Radio Shack stores.

LAS VEGAS--Nowhere is the changing face of electronics retailing more evident than at Tandy Corporation's Radio Shack stores.

Radio Shack used to represent the old world of retailing--a geographically diverse venture with small storefronts in towns across America and $3.2 billion in annual sales. It was becoming an increasingly bland venture, what with the rapid rise Leonard Roberts of online retailers such as Amazon.com. With their access to vast databases of products, customer purchase preferences and supposed operational efficiencies, investors have been betting that e-tailers will displace traditional retailers.

Online sales of electronics have caused tremendous upheaval for traditional stores, but the reality is that they need not go the way of the dinosaur. In fact, a blending of both online and storefront operations will be key for the survival of companies such as Tandy.

Under the direction of Len Roberts, Tandy Corporation's chief executive since January of 1999, Radio Shack has reshaped itself into a more modern retailer that is moving to blend the old face of retail with the Internet.

The company has made a number of key partnerships, including a highly publicized deal with Microsoft to promote high-speed Internet connections and Microsoft products in its stores. Microsoft invested $100 million in the venture and is building up the e-commerce infrastructure as a part of the deal. Also, the company is distributing RCA audio-video products at its stores in addition to Compaq PCs and Sprint wireless phone products.

Roberts talked with CNET News.com last week at the Consumer Electronics Show in Las Vegas about Radio Shack's online strategy, issues facing retailers today and why he thinks the company best known for its vast array of electronic parts will play a large part in the convergence of voice, video and data services into the home of tomorrow.

Q: Could you explain your online strategy, and how it compares to companies like Wal-Mart and Toys "R" Us, who partnered with venture capital firms to jump start their efforts, and Bestbuy.com and CompUSA's Cozone.com, which operate as independent subsidiaries?
Roberts: There are three reasons for going online which will change the dynamics of (Tandy's) business. One is that it allows us to extend our reach. We've got a lot of higher-end customers, women and young people who are surfing the Net and doing e-commerce that are not necessarily some of our stronger customers.

The second is that we have an opportunity to expand our (product) assortment. There are thousands of reasons why we have an advantage over our competitors because of our small store format, (but) one of our disadvantages is that we can't have a large assortment of goods in these small stores.

Third, we are going to use the Internet in terms of reinforcing our brand.

If you have any questions on consumer electronics, whether it involves a battery or a connector or if something's wrong with a tape recorder you bought 16 years ago we'll answer the questions. The coordination of our online (site) and our store is critical. The best of all worlds is that if we have a way to spin the (site) off and still be able to guarantee those three things--reach, assortment and brand--we'll do it, but to the extent that spinning off compromises those goals, we're not interested in doing that.

That stands in contrast to what CompUSA is doing with its online subsidiary, Cozone.com, where they are basically building a name from scratch and disassociating from its storefront operations.
If a bricks and mortar retailer does not figure out a way to increase the value-add they provide, they are going to be history. If a consumer sees no advantage, if they just have a lot of product on the shelf at low prices, you got the maximum amount of products at the lowest prices on the Internet, so they're going to be history if they don't adjust their strategy.

We have no interest in just selling product. We're in the business of acquiring and retaining customers for service. We're in a different ball game than everyone else is.

How do the Microsoft and Thomson relationships and all the products that they entail--from WebTV to satellite television to handheld devices to digital music players--fit in with the Amerilink acquisition?
It ties together in a very profound way. Microsoft and Thomson were looking for retailers that could do three things: demystify technology at store level, be able to integrate the various different products people are interested in into the home, making sure the handheld, WebTV and PC are communicating together, and they were looking for a sales channel that can also do the actual installation.

In terms of the aforementioned, which products are you particularly interested in selling?
Speed is going to be the precursor to everything. Once people have speed through any given instrument, whether it be through the PC, the TV, anything, then it becomes a situation where folks cannot live without it.

Broadband will allow the transmission of voice, video and data, (but until) we get speed in the house, you'll see a slow adoption rate of all these devices.

(To that end, Radio Shack will be offering demonstrations of DSL and cable modem technology in their stores.)

What is your view of the Internet sales tax issue? You have both an online store that is currently exempt from state and local sales taxes, and some 7,000 stores in communities spread across the U.S. that aren't?
Ultimately, the 6 percent is not going to kill us or help (online-only retailers), but I do think that it's a situation our government officials have to address because I do have a problem, whether you're an e-tailer, a pure-play bricks-and-mortar store, or not, because these are revenues that are being taken out of state that have to be made up somehow.

I think this is a public-policy issue. Who are the folks buying off the Internet? It's the upper end of society, so what you have is those tax dollars not being paid by the upper end of society, then a greater tax burden in a state is being placed on the lower end. Regardless of whether you're a Republican or a Democrat, there's something very regressive about that.