483 - The Computer Store That Wouldn't Die - Part #3

In part I and II we discussed how The Computer Factory got started in 1995 and how we survived the great PC store shakeout in the early years of the new millennium. By 2003 we were on cruise control and life was good. Then “Disneyland for computer geeks” came to town. Of all the empty lots in North County, Fry’s had to land on the one only a three iron shot from our front door.

We knew that Fry’s was coming for more than a year before they finally opened their doors. We visited the store in San Diego and several other Fry’s stores in the LA area. We checked their product, pricing and service policies and procedures. We talked to independent PC store owners whose stores clustered around Fry’s. We concluded that Fry’s offered no threat to our business. Fry’s product pricing was pretty much the same as every one else’s. Their reputation as a low price competitor was based on full page ads which often featured spectacular prices on refurbs, rebates, limited quantities or otherwise distressed merchandise. Their prices and margins on normal stock items were pretty much standard. Fry’s service pricing was higher than ours because Fry’s wasn’t looking for computer service business. Their service department’s job was to install items sold in the store and process warranty and returns. We were happy to welcome them to the neighborhood.

Fry’s opened two weeks prior to their formal “Grand Opening.” on D-Day (June 6 2003). As a director of the San Marcos Chamber of Commerce I was among the VIP guests for the pre-opening breakfast and pep rally. John Fry, Fry’s CEO, confided in me at breakfast that our “mom and pop” computer store would do just fine next door to Fry’s but Comp USA, Staples and Best Buy would be in Fry’s cross hairs.

As the opening hour arrived thousands of customers formed a line that snaked throughout the parking lot. Fry’s had some great deals for opening day and the turn-out was tremendous. Fry’s senior executives, the press and VIP guests all crowded around the main entrance to see the “Grand Opening.” Security struggled to allow the first customer through the door while holding everyone else back. The idea was to allow the press to take pictures and interview Fry’s first “official” customer. A small Asian man squeezed through the door and the cameras started rolling. John Fry beamed as one of the reporters stuck a microphone in the startled man’s face and yelled “what are you buying today.” The Asian man raised his hand and shook a Fry’s bag in the reporters face. “I buy nothing, I’m returning this camera.” John Fry’s smiled faded as he turned and yelled to security “let another one in.”

Fry’s was a great neighbor. Their infamous “Great Quality” house brand of low end PCs provided a powerful counterpoint to our product quality. Selling components to the “do-it-yourself” crowd had always been a problem for us. Amateurs often misdiagnose their PCs problems or purchase the wrong components. Returned components must be retested and the necessary restocking charges often rankled customers. With Fry’s just across the street we were able to establish a policy of selling only components that we install. That way we warranty the parts and the installation. The “shade tree PC techs” could simply buy their parts at Fry’s. No one is better at taking parts back than Fry’s.

Tune in next week for part IV as Microsoft sticks it users with Vista and Apple, Dell, HP, Gateway and Packard Bell flee the country leaving “The Computer Store That Wouldn’t Die” alone to build PCs in America.