With RadioShack (NYSE:RSH) shares already down 15% from their 52-week-high in October, the last thing shareholders needed to hear was that the company’s profit had fallen 30%.
The retailer faces a number of problems, but the one segment of the company’s business in dire need of rehabilitation is consumer electronics.
Revenue in that segment, which accounts for around 20% of Radioshack’s annual revenue, was down almost 15% for the quarter.
Best Buy (NYSE:BBY) had the exact same problem throughout the beginning of 2011. When it announced its quarterly earnings last week, the company said that the strength of mobile products was not enough to offset wan TV sales, a trend that’s forcing the company to switch from its big-box model to one where it opens smaller stores.
Even online retailers like Amazon.com (NASDAQ:AMZN), whose Kindle e-reader continues to perform well, have reported declining consumer electronics sales.
What’s the solution? Will home electronics sales continue to dwindle away while consumers increasingly spend on phones and tablets rather than other devices? Here are three ways RadioShack, Best Buy and the rest can help heal the selling of consumer electronics.
Tie everything to tablets
Consumers have shown they’re not interested in 3-D televisions, uninformed about Internet-connected televisions, and more interested in streaming video through Netflix (NASDAQ:NFLX) than in purchasing a new Blu-ray disc player. The only way to generate some interest in these products is to heavily promote the way they interact with the products that are selling. Retailers need to build promotions around how iPad apps can be used to stream video to a new TV or how digital versions of movies included with Blu-ray movies can be activated and viewed on portable devices. They should then offer promotional prices on consumer electronics with the purchase of mobile devices.
Credits for new mobile customers
There is an opportunity to improve consumer electronics sales by offering heavy discounts to new mobile subscribers. When a new Verizon (NYSE:VZ) customer signs up at Best Buy, or a new Sprint (NYSE:S) customer signs up at RadioShack, those retailers should offer heavy discounts on electronics and even credit toward certain products, from TVs to digital cameras. These incentives should also be useable anywhere across the business, both online and in stores. Amazon has had great success offering credits toward future purchases when customers buy certain products. If the mobile segment is performing well, retailers might as well capitalize on it to heal the weaker products.
App-based reward programs
Rewards programs are a dicey business in that they can alienate customers as much as entice them to purchase new products. One more way to capitalize on the strength of mobile sales, however, is make an app for smartphones and tablets that lets the retailer turn purchases into a competition. One purchase builds virtual currency for the customer that can be used to get a discount on future purchases. Buy a TV at Best Buy? Get 3,000 points on the Best Buy app that can be used to purchase a fancy new universal remote free of charge. This sort of “game-ification” of business has been much covered in the press lately, and its effectiveness as a revenue-growing tool at retail is still largely unproven, but it represents one more way to capitalize on mobile to improve consumer electronics sales.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.
