Utah's stable of big-chain computer and electronics retailers has narrowed twice this month, most recently driven by a double whammy of small profit margins and high operating costs.
Future Shop is holding liquidation sales at its stores in Salt Lake County, Orem and Layton after announcing last week it would withdraw from the Utah market. CompUSA, the nation's largest computer retailer, announced Sept. 1 it was buying out Tandy's chain of Computer City stores, which includes a location in Murray. CompUSA will now have three Utah stores.Tandy began selling off unprofitable Computer City stores several years ago, before deciding to dispose of the entire chain. Future Shop announced in April its companywide profits were down 20 percent over the previous year.
"There has been a lot of consolidation in the industry," said Eric Ommundsen, Future Shop's manager of corporate communications. "The competition wasn't a major factor for us moving out, it was more the infrastructure of our company."
Utah is just too far away from Future Shop's warehouse in Kent, Wash., he said, especially for a chain that has such a broad, warehousing-intensive product offering: everything from computer hardware and software and consumer electronics to major appliances, all in larger-footprint stores.
In its other remaining locations, Future Shop plans to shift the emphasis of its computer sales to its new virtual Internet stores and beef up the consumer electronics inventory in its brick-and-mortar locations.
In one respect, Future Shop discovered what Tandy has been learning the hard way in bits and pieces: Big stores require big inventories that require consistently high-volume sales to be profitable in an industry that often sees single-digit margins.
Tandy's Incredible Universe store in Sandy was the size of three football fields, large enough to make shoppers yearn for a golf cart and road map to get around. The McDonalds restaurant inside was almost lost amid the store's gargantuan features. The computer and electronics superstore had tremendous overhead, including a sales and support staff of 200. The gadget behemoth lasted a little over a year before Tandy closed or sold all 17 of its Incredible Universe stores in early 1997.
"They imploded under their own weight," said David Politis, president of Politis Communications in Draper and a long-time computer industry observer. "They tried to be too many things to too many people."
"We have had experience similar on a smaller scale," Ommundsen said. "When we came into the Utah market we had good locations, but they were very sizable. Some of our stores are around 40,000 square feet. In new markets, we're down to about 23,000 square feet just because we can run them more efficiently."
Politis said Future Shop likely found it difficult to compete with regional chains. RC Willey, though large, has groomed the Utah market and cultivating a loyal clientele as it expanded its product line beyond furniture and large appliances to home electronics and computers.
It has no McDonalds inside, but there are free hot dogs on Saturdays.
"And RC Willey didn't have to worry about long-distance transportation costs from a warehouse to the store because the warehouse was here," Politis said.
Office supply retailers like Office Max and Office Depot add to the mix of chain-store competition with their expanding offerings of computer products.
Ommundsen said Future Shop found Utah an amenable place to do business and hopes to return to the market sometime. For now, the company retreats from Utah with stereotypical liquidation-sale fanfare.