What happened to Tipton Appliances

Variously known as Tipton Electric Company, Tipton Appliances, Tipton Centers Inc., and Tipton Supercenters, Tipton was a St. Louis-based retail store specializing in home appliances and electronics. It had aspirations of going national the way Best Buy and Circuit City did in the late 1980s. But when its stock price faltered, it ended up merging with Silo, another now-defunct home appliance and electronics chain, on August 11, 1987.

Founded in 1947 by Eddie Tipton with a single 1,200-sqft location at 5852 Hampton in south St. Louis, Sylvan Kaplan purchased the company in 1953 after joining the store as a salesman. Slow and steady growth over three decades resulted in 18 locations by the early 1980s. It conducted an initial public offering in July 1986 at $15 per share, was traded on the NASDAQ under the symbol TIPT, and had big plans, including opening 18 more stores within two years and perhaps buying another company. But the stock didn’t perform well in spite of the firm’s profitability, especially after Best Buy opened three stores in the St. Louis market in June 1987. With Silo also seeking to enter the St. Louis market, Tipton pivoted to seeking a buyer instead. And they ended up merging with Silo.

That would seem like the end of the Tipton story. In a way it is, but Silo’s ultimate fate makes it easier to understand what might have happened to Tipton had it stayed independent. But then again, Tipton was more than just a chain of 24 stores that Silo acquired as part of its lofty expansion plans.

Tipton Electric Company on Hampton

Ed Tipton opened a small shop selling appliances, electronics like radios and TVs, and electrical goods on Hampton Avenue, a north-south artery in south St. Louis, in 1947. There were easily 30 other similar stores operating within the city limits of St. Louis at the time.

In 1949, Ed Tipton hired Sylvan (Syl) Kaplan as a salesman. Some accounts say Kaplan bought the store in 1951, but his obituary said 1953. At any rate, after Kaplan bought the store, he soon went about expanding the business. It started with opening a second location at 6725 West Florissant in the north St. Louis suburb of Jennings in 1955, and a short-lived third location at 1342 N Kingshighway in 1957. Then in 1958, he moved the original store a few doors down to 5840 Hampton, a slightly bigger midcentury style facility. The original location at 5852 continued operating as an exchange facility for a few years into the 1960s.

Kaplan outgrew the West Florissant location and in 1961 moved to a 2450-sqft location about three miles further north at 9988 Halls Ferry, just south of Chambers Road. Still-larger stores followed to the west and to the south. Kaplan opened a 4,000-sqft Tipton location in Kirkwood at 11215 Manchester in April 1966 and a 4,500-sqft store in Mehlville at 3542 Lemay Ferry in June 1969.

Hiring Allen Fishman, the voice of Tipton Appliances

In 1973, Kaplan hired Allen Fishman, an executive from May Department Stores who started out as an attorney in its legal department and moved into the executive suite. With Fishman on board, the chain continued to grow, opening a 122,000 square foot warehouse at McDonnell Blvd and I-270 in Bridgeton that included corporate offices and a storefront open to the public.

Kaplan utlized Fishman in a number of roles, including as an attorney, an executive, and a pitchman in its TV commercials. Tipton commercials tended to be more in-your-face than a Best Buy or Circuit City commercial. But they were much lower key than some other local appliance chains. Fishman wasn’t nearly as hyper on camera as competitor Steve Mizerany, for example.

Tipton Appliances in Crestwood Plaza and the ensuing legal drama

When Kroger, the grocery store chain, moved from its 23,500-sqft store in Crestwood Plaza built in 1957 to a new location across the street in Crestview Plaza in 1972, Tipton subleased the space and split the space with two other merchants selling home furnishings. The city of Crestwood refused to issue an occupancy permit, calling it blight and wanting the space divided into 10 boutiques instead. Kroger and Tipton both sued and eventually prevailed. After going to the Missouri Supreme Court, the largest Tipton location yet finally opened in Crestwood in 1975.

When the lease expired at Crestwood Plaza in 1983, Tipton moved to a new building next to Crestwood Plaza, at 9177 Watson Rd. When talking to the press about the new facility, Allen Fishman introduced himself as Tipton’s legal counsel, not as Tipton’s vice president. It seems they weren’t taking any chances in Crestwood.

Expanding Tipton Appliances beyond St. Louis

After reaching 10 stores in the St. Louis area by the early 1980s, Tipton was profitable and growing. The May 31, 1986 issue of the St. Louis-Post Dispatch reported that in fiscal 1982, Tipton sold $20.2 million worth of inventory and turned a profit of $144,000. Although we remember it as an appliance store, Tipton was selling more than appliances, especially in the 1970s and 80s. Tipton also sold plenty of televisions and audio equipment. It even called itself Tipton Audio Centers in some advertising.

Tipton pivoted in 1983 and started expanding into medium-sized midwest markets like Columbia, Missouri and Paducah, Kentucky, expecting to find less competition and lower overhead. Its growth trajectory was resembling Minneapolis-based Best Buy, although both companies were much smaller than Federated Group, Circuit City, or Silo. All of them were regional chains. But all of them aspired to be something more.

Aspirations of going national as Tipton Centers, Inc

Tipton conducted an initial public offering in July 1986 at $15 per share and had big plans, including opening 18 more stores within two years and perhaps buying another company.

It made it to 24 stores total, but its share price dropped nearly 2/3 after Best Buy announced plans to open three stores in St. Louis, Tipton’s home market.

Tipton was profitable. Allen Fishman, told the St. Louis Post-Dispatch in its Aug 14, 1987 issue that Tipton’s profits had risen seven years in a row. the May 31, 1986 issue of the Post-Dispatch reported the company made $2 million on $83 million in sales in its fiscal year ending March 31, up from $1.7 million on $48.2 million in sales in fiscal 1985. Consumer Electronics Monthly and People magazine named its chairman, Sylvan Kaplan, one of the top 10 retailers of the year in February 1987.

But its $83.6 million in sales wasn’t enough for it to crack the list of the 10 largest electronics retailers in the United States in 1986. Circuit City topped the list with $1 billion in sales. Silo, at #3, sold half a billion, and Best Buy, at #7, sold $240 million.

When investor nervousness kept its share price low, Tipton went looking for a buyer.

Tipton’s merger with Silo

It found a buyer in Dixons, a UK-based consumer electronics retailer on an acquisition spree. In May 1987, Dixons purchased Silo, a Philadelphia-based electronics retailer, for $210 million. Initially it looked like a good fit, because Dixons, Silo, and Tipton all had a similar strategy of opening small stores with low overhead and low prices. Dixons paid $9.90 per share, in August 1987, a total of $30.4 million.

At the time of the merger, Tipton had 500 employees and a total of 24 stores in Missouri, Tennessee, Indiana, Kentucky, and Iowa. Tipton stores historically employed between 12 and 20 people.

“It’s hard to open giant stores with massive overhead and compete with the lowest price,” Tipton president Allen Fishman said in the Aug 14, 1987 issue of the St. Louis Post-Dispatch. “Silo has larger stores than Tipton, but they’re not giant stores. No one has been able to match prices with Silo.”

But Best Buy was less impressed. In the July 11, 1987 issue of the Post-Dispatch, Best Buy CEO Richard Schulze said Tipton sought a buyer for months, and Best Buy had the opportunity to buy them but declined because the stores didn’t fit its strategy and it didn’t need the Tipton name. He said he saw the merger as a good thing for his company because it meant only having to compete with Silo, not with both Silo and Tipton in the St. Louis market.

Trouble in paradise with Silo

Initially, Tipton Centers was going to continue as a subsidiary, using Silo’s and Dixons’ buying power but retaining the Tipton brand. Sylvan Kaplan, Tipton’s chairman, retired after the sale closed, remaining available for consulting. Allen Fishman, its president, initially planned to remain but left the company in September 1987, only five weeks after the deal closed, to start his own business.

Under new management and ownership, Tipton styled itself as Tipton Supercenters, to counter its rival branding itself as Best Buy Superstores. But in June 1988, the Tipton name disappeared as Silo took over management of the 24 stores and renamed them Silo.

Best Buy and Silo took a similar approach to entering a market, advertising heavily and discounting even more heavily to win business. Silo initially did well in the St. Louis market, but Best Buy’s strategy of carrying more items and pricing aggressively made things difficult for Silo. Life as a category killer meant seeing who could survive longest on razor-thin margins.

And there was a third category killer who wanted in: Circuit City.

The Circuit City threat

Circuit City was the largest electronics retailer in the United States at the time. But in the process of going national, none of the chains entered every market at once. In 1990, Circuit City entered the St. Louis market, opening six stores in the St. Louis area. Writing in the September 12, 1990 issue of the Post-Dispatch, business columnist Susan Thomson predicted Circuit City’s entry would lead to Silo’s exit, noting that the three chains would have 22 stores between them.

By 1991, Silo was losing money and in trouble, but it wasn’t ready to give up yet. Time ran out in January 1993, and Silo closed 45 stores in the midwest, including all of its 10 St. Louis locations. The stores were typically around 10,000-15,000 square feet, while a Best Buy or Circuit City store was 30,000 square feet at the time. Initially, Silo and Tipton touted the smaller store format as an advantage, because the lower overhead could mean lower prices.

Why Silo and Tipton couldn’t compete with Circuit City and Best Buy

Best Buy and Circuit City located its stores in larger commercial districts, typically near shopping malls, regionalizing the consumer electronics market. Their higher overhead could mean they had to charge higher prices, but they also offered a larger selection. Best Buy stores carried 3,000 different items in the late 1980s. And the locations attracted shoppers in higher volume.

In south St. Louis County, Best Buy and Circuit City placed its stores across the street from a shopping mall. Silo’s nearest store, a converted Tipton built in 1985, was a mile and a half away, across the street from a high school.

Dixons gave up on the US market and what was left of Silo later in 1993 to Fretter, a Detroit-based electronics chain. Fretter took the same small-store approach, but also had many of the same problems Silo had, and was unable to turn the chain around. The remaining Silo stores closed by the end of 1995, and by May 1996, Fretter was out of business as well.

Best Buy and Circuit City’s tactics were hard for a smaller store format to compete with. But after eliminiating the smaller competition, the large stores became something of a liability. Circuit City went bankrupt in 2008. Best Buy has survived, but retail analysts have suggested it would do better with a smaller store format. Ironically, now that it’s beaten Silo and Tipton, it needs to become more like Silo or Tipton. But it doesn’t really have the money to do it.

What happened to Tipton Appliances’ people

The Tipton Centers IPO made paper millionaires of Sylvan Kaplan and Allen Fishman. They owned enough stock between them to keep a takeover by a corporate raider from happening. But potentially an activist investor could cause some problems if they decided to get frisky. Selling at $9.90 a share clinched it for both of them.

Sylvan Kaplan was 62 at the time of the sale, old enough to retire. He bought a winter home in Longboat Key, Florida and split time between Florida and St. Louis until he died in 2006 at the age of 81. He spent his time volunteering for charitable causes in retirement.

Allen Fishman initially planned to stay on to run the Tipton subsidiary but left the company after five weeks. The only statement he or Silo ever made was that he was going to start his own retail venture, where he would have sole ownership. What became of that retail venture is unclear but in 1990 he founded The Alternative Board, a consultancy for business owners that provides coaching based on methods he learned at May and Tipton. He also wrote 10 business books.

Fishman’s writing as a columnist gives some insight into how he ran Tipton after being promoted to president. He argued that the best people don’t wait for you to have a job opening, so sometimes you have to create a position so you don’t miss an opportunity to hire talent. He also instituted a wellness program for Tipton employees, after having seen companies overseas use them.

Could Tipton Appliances have won against Best Buy?

It’s fun to imagine Tipton, a St. Louis-based underdog, taking on Circuit City and Best Buy and prevailing. Arguably, Tipton had the better long-term business model, with smaller stores and lower overhead.

The problem is Tipton was built for after the price war ended, but Circuit City and Best Buy were built to engage in a price war. They were built to bleed competitors like Silo and Tipton and outlast them. Then they’d try to figure out what they were going to do afterward.

Part of the advantage Tipton had was being small and local. People who worked there and shopped there lived nearby, so they saw each other as something other than out of town corporate mercenaries. If Tipton was going to transform itself into a national supercenter chain, it would probably lose some of that vibe.

But maybe not all of it. Allen Fishman seemed to have a somewhat different mindset than then-Best Buy CEO Richard Schulze.

The head start

Best Buy and Circuit City had a head start on Tipton. Circuit City and Best Buy went public in 1984 and 1985, respectively. Their IPOs were for smaller amounts, but their head start closed off opportunities for Tipton even though they entered the game with more money.

Tipton had the right idea in 1973 when they took over a vacant Kroger supermarket. When Best Buy and Circuit City invaded St. Louis, they used the same strategy. The store Kroger built in 1972, at 9270 Watson Road, became a Circuit City in 1990, while Best Buy opened a store in a former A&P supermarket less than a mile away at 8563 Watson Road that was built in 1970.

If Tipton had entered new markets using a similar formula and expanded its existing stores as it had the opportunity, maybe they could have fought off Silo and held their own against Best Buy and Circuit City. Ultimately, Tipton’s problem was they were afraid of Silo when they were smaller and nimbler and better able to adjust.

A model for success: REX Stores

Trying to go head-to-head by opening several stores in a rival’s home market would have been risky. And finding another St. Louis-sized market that wasn’t saturated with out-of-town competition yet may have been easier said than done. Tipton’s best bet probably would have been to continue down the path of getting into smaller markets and establishing a foothold before the larger stores got there. Dayton, Ohio-based Audio-Video Affiliates, also known as REX Stores, took that approach and grew to 142 stores in 35 states. It had some hiccups along the way, having to close or sell some stores during tough economic times, and never was as big as Silo, Circuit City, or Best Buy. But REX survived until 2009, when it decided to exit retail and become an energy company.

There may have been room for Tipton to succeed using that same model. And we know now they would have had opportunities to buy off parts of Federated Group, Silo, Fretters, and other competitors as they faltered. But to be fair, that’s not something that was clear in 1987.

Instead, Tipton is a gone-but-not-forgotten onetime St. Louis pillar, a little like Central Hardware. Kaplan and Fishman undoubtedly considered all of these options and more. Selling at the time they did, while the boom was just getting under way, was the safest of their options.