600 East Brokaw Road
San Jose, California 95112-1006
Telephone: (408) 487-4500
Toll Free: (877) 688-7678
Fax: (408) 487-4700
Web site: https://www.frys.com
Employees: 14,000 (est.)
Sales: $2.3 billion (2017 est.)
NAICS: 443142 Electronics Stores; 454110 Electronic Shopping and Mail-Order Houses; 517919 All Other Telecommunications
Fry's Electronics, Incorporated, sells assorted consumer electronics through a network of more than 30 big-box retail outlets in nine states. The company also operates Frys.com , an online retail platform. Known largely for its bargain prices and wide selection of goods, the company also attracts customers by constructing and decorating each store to reflect a specific theme, such as the U.S. space program, local history, tech history, and various fantasy motifs. Based in San Jose, California, Fry's is a closely held private firm whose owners include members of the founding Fry family and a few other stakeholders.
John, Randy, and Dave Fry's father was Charles Fry, a highly competitive person who was an all-state high school basketball player in Oklahoma. After earning a college degree in mathematics, he opened a supermarket in Contra Costa County, California, in 1954. Throughout the 1960s, he grew a chain of 41 Fry's Food Stores in the San Francisco and Phoenix, Arizona, markets. He sold the business in 1972 for approximately $14 million to Save Mart Supermarkets, based in Modesto, California, but he stayed on to manage the chain until 1983.
Fry's oldest son, John, took after him in a number of ways. He was also a star athlete, a quarterback with professional promise. He was recruited by Santa Clara University to play football but because of injuries was never able to realize his potential. Like his father, he also earned a math degree, graduating from Santa Clara in 1978. He then went to work for his father's supermarket chain, managing the computer system. Thus, he not only learned the techie mind-set but also the low-margin grocery business, which would later serve him well in selling electronics.
After selling his chain of supermarkets, Charles Fry reportedly gave each of his sons $1 million. John Fry then persuaded his younger brothers to pool their money and launch Fry's Electronics. Also joining as a partner was his girlfriend, Kathy Kolder, who would become an executive vice president. Dave Fry would take charge of the computer systems, while brother Randy handled day-to-day operations, freeing up the eldest brother to concentrate on the big picture.
True to his roots, John Fry conducted business supermarket style. The company opened its first electronics superstore in Sunnyvale, California. Once foot traffic was high enough, he began selling shelf space and charging a premium for the freestanding placements located at the end of aisles. The money was then used to buy newspaper advertisements, which, like supermarket ads, lured in customers with specials. Because Fry's sold snacks to its clientele of high-tech workers, it would even use the old supermarket ploy of loss leaders (for example, selling Coca-Cola at a loss) to get customers in the door. Once inside, they would face a shopping situation similar to that of a supermarket: should they buy the name-brand product or the cheaper no-name product sitting next to it offering more features? In the case of the latter, of course, Fry's stood to make a higher profit.
The Sunnyvale store became, in the words of U.S. News & World Report reporter Randall Stross, a “nerd paradise” where electronic components, computer peripherals, as well as television sets and stereos were sold along with candy bars, high-caffeine soft drinks, razors, toothpaste, and adult magazines. “Buses of tourists would come to gawk at shelves that seemed to have anticipated every electronic, caloric, and hormonal need of nerds who wanted to lay in fresh provisions with one-stop shopping.” High-tech-savvy customers were also attracted to Fry's because of its assortment of hard-to-find components and bargains. An entire computer could be pieced together cheaply from parts available at Fry's. In the early days, Fry's featured a “blow out” table from which items that needed a little fixing could be bought for pennies on the dollar.
Even as Fry's was becoming an institution among Silicon Valley techies, it was also establishing a personality that either did not bother its core customers or was something they were willing to overlook. Fry's hired people with little technological knowledge at rock-bottom wages, and, not surprisingly, they were not much help on the sales floor. Then again, there was simply no one the store could hire who could match the technical expertise of Fry's customers, so why bother?
Returning merchandise was also problematic, as customers found themselves bouncing from the cashier to the returns desk and back again. Receiving a refund instead of a credit slip required the persistence of the truly dedicated, as Fry's employees received a bonus based on their ability to get customers to take store credit. Even after a customer accepted the latter, weeks would pass before a customer received a credit slip in the mail. Insiders called this policy “the double H,” which stood for “hoops and hurdles.” One ex-employee told Ann Marsh and Scott Woolley of Forbes in 1997 that the point was to wear customers down until they gave up.
Because the pay was low, employee turnover was high, but that did not matter to management as long as there was someone waiting to fill the position. Fry's instituted strict security measures, fearful that its employees or its customers might steal the merchandise, and with good reason. It was estimated that the computer electronics industry, which produced a lot of small expensive items that could be easily fenced, lost about 10 percent of revenues each year because of theft. Fry's employees were virtually frisked at the end of the day, while customers had to run a gauntlet of security guards before leaving the premises. Instead of stockrooms, inventory was stacked in the open, and the stores were laid out such that blind spots in which merchandise could be tucked away were eliminated. A multitude of security cameras, generally hidden from view, surveyed the floor. Eventually, even dumpsters were randomly sent to headquarters, where they were checked to make sure someone on the inside was not attempting to smuggle out merchandise.
From a customer's perspective, the positives outweighed the negatives at Fry's. After a bad experience, customers might vow to never shop again at Fry's, but the great prices or the vast selection would cause them to break down and return when they wanted a product Fry's sold. A second store was added in Fremont in 1988, followed by a Palo Alto location in 1990. Unlike other big-box retailers, Fry's sought less-expensive, out-of-the-way sites in office and industrial parks, rightly believing that its customers would be willing to go out of their way to shop at Fry's.
The company, however, was not parsimonious when it came to decor. Fry's began adding entertainment to the mix, hiring a former designer from Lucas Films to create fantasy settings. The Sunnyvale store's haphazard shelves of products were replaced with neat aisles and a presentation of the history of Silicon Valley. Fremont explored the origins of electricity the way it was presented at the World's Columbian Exhibition, better known as the Chicago World's Fair of 1893. Palo Alto offered a vision of Buffalo Bill's Wild West. Fry's would spend $1 million on each store, and as the number of stores mounted, so did the unusual nature of the motifs, from Alice in Wonderland to an Industrial Revolution–era factory, from the ruins of ancient Rome to the history of cattle ranching, from the lost city of Atlantis to the history of the Las Vegas strip.
Fry's moved outside the San Francisco Bay Area in 1992 with the opening of a store in the Los Angeles suburb of Manhattan Beach. A year later, Fry's returned to Northern California, where it opened a store in Campbell after the city came up with $2 million in tax concessions. Within three years, the chain would double in size, operating 10 stores located in Northern and Southern California, making Fry's the 13th-largest computer retailer in the United States. In 1997 Fry's expanded beyond the state by acquiring the six-store Incredible Universe electronics superstore chain from Tandy Corporation at the cost of $118 million.
Incredible Universe, launched in 1992, had attempted to emulate Fry's success by opening massive stores averaging 185,000 square feet. The idea was to make the spectacle of sheer size a drawing card and make shopping there a form of entertainment. Sales, however, were essentially the same as what could be expected at a smaller store, and Tandy struggled to find the right blend of computer products and white goods such as washers and dryers, stoves, and refrigerators. Unable to make the concept work, Tandy sold the operation to Fry's, which in addition to a store in Sacramento now added units in Texas, Arizona, and Oregon.
In one stroke, as a result of the acquisition, Fry's became a regional enterprise, but it also found itself moving into markets that might be less forgiving of its disregard to customer service. No longer could the chain depend on catering to professionals. In addition, more people were turning to direct marketers such as Dell and Gateway to buy their computers. In 1997, for the first time, direct marketers sold more computers than retailers. In addition, with an increasing number of people shopping on the internet, which Fry's traditional customer would be the first to exploit, the company faced a number of challenges. On the positive side, however, the general public was becoming increasingly knowledgeable about computer and electronic products and were willing to put up with Fry's double-H approach if it meant a vast array of choices and less-expensive prices.
The Fry's formula continued to work, as customers lined up hours before a new store opened and were willing to endure long lines and frustrating service. Throughout the rest of the 1990s the chain added just one store, a second location in the Phoenix area. In the early 1990s the company experienced a major growth spurt, opening another 11 stores, adding units in Texas and California, while also entering new states, Georgia, Illinois, Nevada, and Washington. Fry's was late to embrace the internet but finally became involved in online retailing. In November 2001 it paid $8 million to acquire Cyberian Outpost Inc., a struggling online software and electronics retailer based in Kent, Connecticut. Fry's renamed it Outpost.com .
By 2006, despite having 32 stores in operation, the company's revenues had begun to sag, as much of its traditional tech-enthusiast customer base migrated to online hardware shopping. Although Outpost.com had respectable sales, they lagged behind the online platforms of many of Fry's brick-and-mortar competitors, apparently because many online shoppers were simply unaware of the connection between Outpost and Fry's, depriving it of much of the brand-name recognition and goodwill that typically drove web surfers to individual sites. Fry's had owned the Frys.com internet domain name for almost a decade but had unaccountably chosen to continue using the Outpost brand instead. Finally, in the fall of 2006, the company launched Frys.com , an overhauled and expanded web retail platform designed to operate in tandem with the brick-and-mortar stores and fully exploit the company's established branding.
Despite speculation that national expansion would force the company to adjust its policies and improve its customer service, complaints continued. During a 2007 Black Friday sale at the Renton, Washington, outlet, customers reported that store personnel had offered them the chance to move to the front of the long line in exchange for fees of $100 to $200. After being taken to task in the local media, the company blamed the matter on rogue employees and offered refunds to anyone who had paid the fees. Fry's made headlines again in 2008 when Ausaf Umar “Omar” Siddiqui, the company's vice president of merchandising and operations, was indicted for embezzling around $65 million to $87 million by secretly and illegally charging vendors exorbitant kickback fees. Siddiqui signed a plea deal and was sentenced to six years in prison in 2011.
Meanwhile, Fry's was struggling along with the rest of the retail sector to contend with a global recession that had descended in late 2007 and slowed consumer spending considerably. As always, the company kept its financial results strictly confidential, but Kolder, in a rare interview with Patrick May in the San Jose Mercury News in May 2010, related, “We've been very lucky. Our traffic has stayed very close to flat through the recession…. Consumers are right-sizing, buying to fit their restrained budgets. But we've seen light at the end of the tunnel and over the past few months we've seen an increase in sales.”
Besides the recession, the company had to contend with more negative publicity during this period when the U.S. Equal Employment Opportunity Commission (EEOC) filed a federal suit contending that a manager at the Renton store had sexually harassed one employee for several years and fired another employee who complained on her behalf. Furthermore, the EEOC alleged, the company had then destroyed evidence and stonewalled the agency's investigation of the complaints. In 2012 Fry's agreed to pay $2.3 million to settle the suit without admitting wrongdoing and agreed to review and improve its sexual discrimination policies. The following year, the company agreed to settle a multimillion lawsuit filed by a shoplifter, who claimed he had suffered brain damage at the hands of a Fry's security guard, for an undisclosed amount.
Although Fry's appeared to have survived the recession and other challenges with its store network intact, it also seemed to enter a holding pattern in the second decade of the 21st century, maintaining its portfolio of 34 outlets but announcing no immediate plans for new stores. The company was also facing increasingly aggressive competition in cyberspace from Amazon and other online retailers who had lowered prices and reduced delivery times in a bid to pull in customers. In 2017 Frys.com began offering same-day delivery for about 90 percent of its catalog, including free same-day delivery on about 500 items, in several California markets. As electronics shoppers moved away from big-box stores and onto the internet, the company hoped this latest innovation would help it maintain its market position.
Updated, Chris Herzog
Amazon.com Inc.; Best Buy Co., Inc.; Micro Electronics Inc.; Office Depot, Inc.
Fernandez, Lisa. “Fry's Exec Accused of $65 Million Fraud to Pay Off Gambling Debts.” San Jose (CA) Mercury News, December 22, 2008.
Hsu, Tiffany. “Fry's Electronics to Pay $2.3 Million in Sexual Harassment Case.” Los Angeles Times, August 31, 2012.
Lanberg, Mike, and Larry Slonaker. “Expansion Will Test Fry's Spotty Customer Service Record.” San Jose (CA) Mercury News, September 3, 1997.
Madans, Hannah. “Ordering Online from Fry's Electronics? They Just Launched Same-Day Delivery in Orange, LA Counties.” Orange County Register (Anaheim, CA), July 19, 2017.
Mangalindan, J. P. “Fry's Electronics: How This Tech Retailer Has Survived the Fall of Brick-and-Mortar.” Yahoo Finance, March 7, 2017. Accessed July 13, 2018. https://finance.yahoo.com/news/frys-electronics-how-this-tech-retailer-hassurvived-the-fall-of-brick-and-mortar-145540323.html
Marsh, Ann, and Scott Woolley. “The Customer Is Always Right? Not at Fry's.” Forbes, November 3, 1997.
May, Patrick. “A Chat with Fry's Electronics Co-founder Kathy Kolder.” San Jose (CA) Mercury News, May 13, 2010.
Quinn, Michelle. “Fry's Electronics Finally Unveils Branded Web Site.” Contra Costa Times (Walnut Creek, CA), October 26, 2006.
Slonaker, Larry. “Founder of Fry's Electronics Plays Hardball and Is Driven to Succeed.” San Jose (CA) Mercury News, August 25, 1997.
Stross, Randall. “A Nerd's Paradise.” U.S. News & World Report, January 13, 1997.