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RadioShack failed to adapt and stay relevant when most electronics sales shifted online, and the retailer was stuck in brick-and-mortar locations only. The company frequently changed its management and direction for the turnaround. The company made a financial mistake by taking a loan from Salus Capital in that required the lender to close more than stores a year. In , RadioShack operated about 4, stores in North America. However, there were many stores that were located too close to each other.

5 Reasons Why RadioShack Went out of Business

For example, there were 25 stores near Sacramento, California, located within a mile radius, and seven stores within five miles around Brooklawn, New Jersey. With so many stores within close proximity to each other, RadioShack experienced a significant drop in profitability and inventory problems as the store traffic dried up. It became very costly to maintain so many stores with sometimes insufficient inventory in one area.

Relying solely on its brick-and-mortar sales network, RadioShack began experiencing significant profitability and sales pressure, as consumers were buying electronics parts and other gadgets from online retailers such as Amazon and eBay.

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For many consumers, RadioShack became irrelevant; any electronics part could be purchased cheaper with a click of a button and delivered anywhere within the United States. Moreover, consumers made numerous complaints that RadioShack lacked certain inventory , making it even less likely that shoppers would come back. In the early s, the company made a strategic shift towards selling cell phones and accessories that proved to be lucrative for some time. Things began changing rapidly after the introduction of iPhone in As the selling channels for cellphones began shifting towards buying phones through wireless operators, many carriers substantially reduced payments to RadioShack and similar resellers to mitigate the rising cost of subsidizing iPhones.

As a result, RadioShack's profit margins and sales deteriorated significantly, precipitating the company's bankruptcy. The constantly changing management did not help the company's efforts to turn itself around. From to , the company changed its chief executive officers seven times. The company set a goal of restoring profitability by with a significant store and product revamps, changes in compensation structure and aggressive marketing campaigns. However, as Magnacca's effort started rolling out, the results got worse due to rising costs, constantly shifting management orders on short notice and confusing commission structures.

The workers' morale and the company's profits slipped even further. Because RadioShack experienced negative earnings since , the company needed significant capital infusions to stay solvent.


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