What happened to Fry’s Electronics

For about three decades, Fry’s Electronics was the go to computer store for enthusiasts, almost an Ikea of computer stores. It was a big box store, larger than Comp USA, selling not just software and pre-built computers and peripherals, but also parts, and even discrete components. So what happened to Fry’s Electronics?

The chain peaked at 34 stores in nine states. So that means a significant part of the population never got to set foot in one. But it took on mythic status thanks to computer magazines and the internet. Byte columnist Jerry Pournelle would write about computers he built cheaply from parts he bought at Fry’s at “prices so low, they might as well have been giving it to me.”

The origin of Fry’s

what happened to Fry's Electronics
Fry’s Electronics was a large big-box store selling computer parts like a grocery store. But a series of factors led to its decline.

Fry’s Electronics was founded in 1985, with proceeds from the sale of Fry’s supermarkets, a supermarket chain owned and operated by its founders’ father. The three of them knew a lot about The grocery business, that had no interest in it. So instead, they decided to open a grocery store-like electronics store.

Initially the store even did sell groceries, in addition to electronics supplies and components, test equipment, and computer components. You could walk into the store and buy components to build your own PC, and this was in the 1980s.

The store proved popular and expanded to additional locations, each with a theme. Conceptually, the closest surviving competitor would be Micro Center, although Fry’s stores tended to be larger and had a cafe. Like IKEA, Fry’s aimed to be a destination.

Problems with Fry’s

The store had a reputation for huge selection and low prices, but also for lousy customer service, especially difficulty getting refunds. This didn’t have to be a showstopper. Some businesses seem to thrive on bad or rude customer service and it becomes part of the charm. But when things started going wrong, the poor customer service gave one more reason to shop elsewhere.

Online shopping certainly hurt Fry’s. Some people would still drive for hours to visit the store because of the experience. But when you could get the same thing delivered to you for less money and save the trip, that took away much of the appeal. There was something about wandering the aisles and seeing the merchandise and getting ideas, but convenience usually wins out over serendipity.

Fry’s was very slow to start selling online, not really starting until November 2001, and then doing so using the domain name outpost.com, with no clear connection to the parent company. It wasn’t until October 2006 that they were selling online at frys.com, with a clear connection between the online presence and the retail stores.

Newegg was founded in 2001, so arguably Fry’s could have caught up, but executing poorly for 5 years kept that from happening. Giving them a 5-year head start isn’t the recommended way of competing with Newegg.

Then again, Micro Center does fine in spite of online competition.

The embezzlement scandal

In 2008, Ausaf Umar Siddiqui, their vice president of merchandising, and operations was charged with embezzling money, creating a kickback scheme with the stores vendors. Essentially he sold placement in the stores in exchange for kickbacks that benefited him, rather than the company. It netted him $65 million before another executive saw his printouts on his desk, got suspicious, and investigated. Fry’s placed the damages to the company at closer to $87 million.

Siddiqui served six years in prison and filed for personal bankruptcy, owing the IRS more than $20 million.

The scheme led to lawsuits between Fry’s and vendors as well, as some vendors never got paid for equipment involved in the scandal.

It’s easy to blame the embezzlement for what happened to Fry’s Electronics, but the chain lasted 12 more years. It seems it set things in motion, but it’s overly simplistic to say the scandal was what doomed the chain.

What ultimately happened to Fry’s Electronics

It was likely a combination of all these things that did Fry’s in, or led to a series of conditions that did them in. There are some things we will never know, because it was a privately held company, and therefore, didn’t have to disclose as much as publicly held companies do. That makes their decline more difficult to study and analyze.

But the combination of factors led to Fry’s selling supplies on consignment, rather than more conventional retail models. And that made suppliers more reluctant to do business with them. They were taking on the risk, rather than the store. This led to less merchandise on the shelves, which is noticeable in large format stores. The last thing an oversized big box store wants to look like is empty. This was a problem that plagued Best Buy for several years.

Fry’s started closing stores in August 2019, closing a total of four stores in 2019 and 2020. This fueled rumors that the entire chain would soon follow. Whether the rumors were right or became a self-fulfilling prophecy, we may never know. But on February 24th, 2021, Fry’s closed its remaining 30 stores and its online store, blaming COVID-19. COVID no doubt played a part, but the store was already teetering before COVID hit.

What remained of the company assets were liquidated on April 2nd, 2021.

Not everyone misses Fry’s Electronics

Positive opinions of Fry’s are not universal. The store also had critics. Most of the criticism came around the service at the stores.

The employees were paid on commission, but they were not known for being knowledgeable. Nor were they known for being helpful. A tactic I have heard some former customers describe was hanging out near the checkout and intercepting customers at the checkout to get the commission. The customer figured out on their own what they were going to buy and then walked up to the checkout line, which was always long, but then the salesperson was latch on to the customer and pretend to have helped to get the commission on the sale. I have heard stories of aggressive salespeople taking items out of customer hands and bringing them to the counter, and even knocking customers over as they waited in line.

And of course stories about of the quality of merchandise being inconsistent, returns sometimes being sold as new, and returning merchandise was notoriously difficult.

So when they finally closed, there were some people who were sad, but there were also people who were happy to see it go.

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