The Decline of Fry's Electronics...What Happened?

[Music] you hate to see this but on february 24 2021 fry's electronics announced that they made the difficult decision to shut down their operations and close their business permanently even the way they were that makes it sound so sad and definite there were so many people just emotionally affected by this news they had a strong following considering their size a few of them have closed even before this big announcement but at their peak they were only operating 34 locations half of which were in california so for the confused people watching this that maybe aren't even familiar with fry's let me try to explain what made them so special to put it simple they were like all the different kinds of electronic stores wrapped into one they were like best buy or circuit city and that they sold everyday electronics like tvs and stereo systems but then they were also like radio shack and that they sold all the electronic components like resistors and capacitors obviously to a much more narrow customer base but possibly the thing that they were most famous for was their computer parts in the past they were compared to comp usa whereas today the best comparison would probably be micro center so that is a pretty awesome store right they had the reputation of being a one-stop shop having just about everything that you would possibly need when it came to electronics in addition to all of these other cool aspects it varied between locations but they would commonly sell snacks and magazines and just make it a cool place to hang out for people who are interested in electronics oh and they had all of these elaborate themes i don't even know where else you would see this the one in las vegas was shaped like a giant slot machine the one in burbank had a giant ufo that crashed right into the front doors they had actually hired someone who worked at lucasfilm to design all of this stuff it made them stand out and it appears that the customers appreciated it now maybe you think that this is an open and shut case retail stores have been struggling already and then the pandemic came along and made everything worse that is what most of the reports are saying and that's almost exactly the reasons that they provided in their shutdown announcement and i'm not saying that's wrong it's just a little simplistic and there's more to it prize was struggling in an unusually weird way before 2020 even their most dedicated of followers will tell you that over the last few years fry's has lost their magic what used to be a fun experience has turned into a depressing one their selection had become so embarrassing that it was to a point where they actually had empty shelves all over the stores now i should point out that this has always been a private company operated by the frye family and the fry family has been notoriously secretive it has proven difficult for me or anyone really to gain certain information such as financial figures but i do have some supported theories as to what happened that i think come together nicely to tell a story and there's three major parts to it the first one being poor customer service which i know sounds like a common complaint but i think that it was a big factor here here let me back up for a second going all the way back to 1954 two brothers named donald and charles frye opened a new store near san francisco it wasn't prize electronics it was a supermarket named fry's food store by the 1970s that store had grown into a chain of more than 40 locations evenly split around san francisco and phoenix at that time there was another chain of supermarkets based in kansas called dillon's that was looking to expand by acquiring other regional supermarket chains so they bought fry's food stores for the price of 14 million dollars but the frey family continued to be involved charles stayed on as a manager and his son john even managed their computer systems after graduating with a math degree in 1978. well in 1982 all of dillon's including fry's food stores was sold to kroger and that's when the members of the frye family ended their involvement and kroger has kept the brand alive to this day in arizona so oddly enough there is a fry supermarket chain there that stems from the fry family but for decades has had nothing to do with them okay there's a lot here but i promise we're getting there when charles fry made that 14 million dollars it was reported that he gave one million dollars of it to each of his three sons including john the one i had just mentioned given his degree in math experience working with computers and knowledge of the supermarket business he thought it would be logical to open somewhat of an electronic supermarket he then convinced his two brothers randy and david to invest their million dollars into the business and in 1985 finally and they opened the first fry's electronics it was located in sunnyvale california right in the center of silicon valley an area populated with some of the most tech savvy people in the country their plan from the very beginning was to attract these intelligent industry professionals people who knew a lot about computers they were able to do it by creating the right atmosphere even selling food and integrating other supermarket aspects but mostly it was the low prices and a wide selection early on they were pricing things so low that they were losing money but they felt that it was worth it to build that customer base now this is where the customer service comes in if most of your customers are practically computer geniuses do you know how much money you would have to pay to hire someone even more qualified than they are plus given that the customers were so knowledgeable they never really needed much help anyway for those reasons it just made sense for them to make that sacrifice to hire less qualified people at a lower price and put those savings into the decorations or better selections or whatever else was more important to that very specific customer base in fact they became widely known for having bad customer service especially when it came to returns they were paying their employees bonuses if they were able to convince the customer to accept store credit instead of cash which you know is not a pleasant experience for the customer in 1988 they opened their second store in fremont and two years later they opened their third one in palo alto that's all around the same area and it wasn't until 1997 when they made a big push outside of california it was that year that they purchased a similar chain of stores called incredible universe from radio shack acquiring six new locations in arizona texas and oregon and converting them into fries but obviously those areas don't have as high of a population of tech enthusiasts so i would imagine that's when the customer service became more of an issue going off of that another part of this would be their lack of locations i'm thinking that a good comparison to make here would be with ikea they only have around 50 us locations but they're big in area and provide a unique experience that has gained some strong followers that are willing to take a long trip just to get there i'm guessing that many of the people watching this have driven for over an hour to get to ikea and i would also guess that many of the tech enthusiasts watching this have done the same thing with fries what i'm saying here is for both of them an unusually high percentage of their sales must have come from people who live far away from the stores back when fries was expanding when picking new locations they would actively seek out cheaper more obscure areas because they knew people were willing to come to them well the reason the entire system started to break down is the third part of it the internet probably the biggest single reason behind their failure because there are many parts to this first off one of the biggest ways that they competed as i said was through selection it was something that made them different from the other stores but now with internet retailers like newegg and even amazon there are more convenient ways to access a wide selection it was a big issue when it came to radio shack and other specialty stores but potentially even more so for fries because as i said they were counting on people driving long distances to get there they tried offering this price matching thing but i don't think it helped much because the issue was more inconvenience rather than pricing it has always been inconvenient it's just that today there are not many people willing to drive an hour to get something that's easy enough to order from their home at the same price and really possibly one of the biggest advantages that physical retailers have over the internet ones is the human interaction and the customer service something that fries a sacrifice from the very beginning so do you see how they've been especially impacted by the internet i don't want to keep piling onto this but they could have been one of those internet retailers but they were not on top of it i mean you would think that their customer base would have been some of the first people buying things on the internet so the opportunity was there sadly they ignored it all together until 2001 when they made a few attempts at buying some failing retailers like egghead but ultimately ended up purchasing outpost.com in a 21 million dollar deal but even that was far too little too late they had branding issues and that people didn't even realize outpost.com was connected to fry's and it took them five more years before they simply called it fries.com again i wish i had figures to support it and better tell the story but here's where i'm guessing things went from there fry's continued to be a cool destination to hang out for anyone who loved computers and electronics but their reasons to go there became more personal and less practical what i mean there is if someone needed a specific computer part they could find it online or they could use it as an excuse to take a ride down to fry's but because they did lose that practical portion of their business their sales were likely going down i have to think that it became difficult for them to continue selling such a wide selection and supporting the lower profits that are associated with such a variety and in maintaining such a large building so their product selections became more and more limited and people no longer had that excuse to go there eventually they switched to a consignment model for their inventory which is not traditional basically instead of buying their inventory from the suppliers and reselling it to their customers they would obtain the inventory without actually buying it yet and the suppliers would only get paid after it sold to the customer it likely meant that they weren't able to pay their suppliers in the traditional way so then the store that was once known for having the best selection now had the worst selection the shelves were mostly empty or filled with undesirable items because everything that they sold was only coming from companies willing to agree to these untraditional usually less favorable sales terms that's getting pretty deep but in general the fun store that sold practically everything slowly transformed into a depressing store that sold almost nothing and by the way all of this was before the pandemics so maybe you could say that was a final nail in the coffin type thing but i don't believe it was among their biggest issues let me know in the comments what has been your experience with fry's electronics i realized that many of you just learned about them recently but for anyone who has been there and has watched the changes over the years what do you have to say about it did you expect it to happen or were you surprised obviously toward the end it was expected but i mean early on and do you agree with the reasons that i outlined here or do you think there's more to it maybe something to do with the frye family personally as i keep saying it is a very private company so there is a degree of speculation so any other theories or overall thoughts about fry's electronics leave them in the comments i'd like to hear what you have to say thank you for watching [Music] you

Channel: Company Man

Views: 912,045

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Id: to-osQMHxpE

Length: 10min 54sec (654 seconds)

Published: Fri Feb 26 2021