Reuters story sounds like a large CPQ advertising campaign on the way.
DALLAS--Consumer electronics retailer Radio
Shack plans to aim at the home educational market
through its recent deal with Compaq Computer
(CPQ).
Parents buying desktop computers for their
school-age children will be the target of a major U.S.
advertising campaign that is scheduled to break in
early August, Leonard Roberts, president of Radio
Shack and its parent company, Tandy of Fort Worth,
Texas, said in a recent telephone interview.
In January, Radio Shack and Houston-based
Compaq announced an agreement that makes
Compaq the exclusive supplier of desktop computers
for the 6,800 Radio Shack stores in the United
States. Compaq's Presario line replaces the IBM
machines that Radio Shack had sold exclusively for
the past few years.
IBM's prices were too high for Radio Shack
customers, and IBM often was late providing
product due to manufacturing constraints, said
Michael Autry, a desktop PC analyst for market
research firm ARS of Irving, Texas. Presario
desktop computers sell for less than $1,000 up to
$2,000, depending on the model, and are aimed at
first-time, home-use buyers.
Similar to its agreement last fall with Sprint, Radio
Shack has designated a "store within a store" to
display the Presario product line. Roberts said that
instead of adding space to stores, which average
2,100 square feet, Radio Shack is reconfiguring
existing space.
By late July, some 4,000 outlets will have the new
Compaq display areas, with the remaining
reconfigurations to be complete by the end of the
year. Roberts said Compaq and Sprint both have
made a "significant investment" in their display
spaces within Radio Shack stores, but he declined to
say how much.
Compaq and Sprint, Roberts noted, now have nearly
7,000 retail outlets without investing in "bricks and
mortar." And Radio Shack can sell established
brands in major product categories without the risks
of manufacturing. Radio Shack is talking with other
companies about similar agreements, Roberts said.
The deal with Compaq is to sell not only the desktop
computers, but accessories along with service. "The
service business could become very significant for
Radio Shack," Sutton said.
Radio Shack is trying to take advantage of what
Roberts said is a changing model of retail
competition. Instead of slugging it out with
competitors, successful retailers of the near future
will forge alliances with manufacturers and own the
supply chain without owning all the associated risks.
"Radio Shack has better distribution than anyone in
terms of its store base," noted George Sutton, retail
analyst at Dallas brokerage Dain Rauscher. "They
decided to get paid for it" by inking deals with major
companies eager to tap distribution in smaller
markets that lack consumer electronics superstores.
Radio Shack's goal in aligning with companies such
as Compaq and Sprint is to enhance its relatively
new image as a service provider, Sutton continued.
He noted that as recently as five years ago, the
Radio Shack concept was outdated and the stores'
appearance was tired. It was struggling to compete
by selling primarily electronics parts, which had
become no-brand commodities.
Radio Shack, however, has prospered once more by
taking advantage of growing consumer confusion
over complex products, such as cellular phone
service and desktop computers, to remake itself into
a service provider, Sutton said.
Roberts said Radio Shack's research has shown that
it takes Computer City seven minutes to sell a
desktop computer, while the time required at Radio
Shack is an hour. "We hand-hold the customer
throughout the entire process," Robert said.
The service strategy is reflected in Radio Shack's
advertising tagline: "You've got questions. We've got
answers." Roberts said the new campaign will use
this theme and emphasize the unique, interactive
experience parents and school children will find at
the Compaq store inside Radio Shack.
New York agency Lord Group developed the
television creative for the Sprint campaign. Roberts
said Radio Shack is considering that shop along with
undisclosed other agencies for the Compaq
assignment, but has not made any decisions yet.
Radio Shack handles media buying in house.
Roberts declined to disclose the media budget for the
campaign, but the eight-week Sprint ad push last fall
was reported in trade publications at $20 million.
According to Competitive Media Reporting, Radio
Shack spent $122.6 million on measured media for
the first 11 months of 1997, compared with $94.3
million for all of 1996. That 30 percent
year-over-year increase does not include December,
which traditionally is a strong advertising month for
retailers. |
