Tandy's Roach takes the offensive - Tandy's Chairman John Roach repositions the Incredible Universe and Computer City chains

Discount Store News, June 3, 1996 by Pete Hisey

FORT WORTH, TEXAS--You can't accuse John Roach of letting grass grow under his feet. Faced with substandard results from the Incredible Universe and Computer City chains, Tandy's chairman has moved aggressively to stem losses and reposition both retailers.

Incredible Universe will close two underperforming units re-merchandise and re-market the chain, add Computer City units within the store to expand its computing products offerings and scale back expansion drastically.

Computer City, which recently replaced founding president Alan Bush with Sears veteran Matt Howard, will radically improve its service to corporate and governmental clients, shift its in-store sales staff from hourly pay to commission to improve customer service, guarantee lowest prices, debut its first outlet store, improve its in-stock position on most-wanted items and broaden its selection.

In addition, Roach told shareholders at the company's annual meeting last month, Tandy will launch a new retail concept later this year or in early '97. He provided no details.

Tandy took a $25 million charge in its second quarter results to cover the costs of closing two almost--new units, in Charlotte, N.C., and in the Potomac Mills mall outside Washington D.C. The charge covers future real estate costs inventory markdowns, deposition of fixed assets and employee termination plans. Both stores premiered in 1995.

The Incredible Universe unit at the Supermall of the Great Northwest outside Seattle will be the first, sometime this month, to receive a full-size Computer City outlet within the store, replacing the computer department. Eventually, Computer City will operate within most or all Incredible Universe units.

According to the company, the Computer City unit will be close in size, about 25,000 sq. ft., to a typical superstore (Incredible Universe gigastores average 185,000 sq. ft.), but it will stock a wider selection of computing products, including set-top players like Sony's PlayStation, than does the average Computer City.

IU will also institute a new 110% price protection guarantee and launch a new advertising program based on a "worth the drive" theme telling consumers why they should bypass more convenient competitors to visit Incredible Universe.

Computer City, which after repelling a buyout offer from rival CompUSA reported its first profitable first quarter in its four-year history and followed up with a 10% same store sales increase in April, is also re-shaping its business. Apart from the tie-in with sister company Incredible Universe, Computer City plans to open its first outlet store in August, boost its instock and customer service positions and concentrate on better serving its growing corporate customer base.

The company's strategic alliance with EDS, a major information service provider, will deliver three key benefits to Computer City, senior vp, finance Bill Albers told DSN. The first is a sophisticated software system that allows Computer City's corporate sales staff to instantly access the warehouses of major suppliers, ascertain the availability of even hard-to-find products, then guarantee delivery. "EDS's system is much more sophisticated than ours," Albers said. Particularly in the case of constrained (short-supply) items, like IBM's ThinkPad earlier this year, the system is of great value because it can instantly check inventory levels at IBM and major distributors like Ingram and TechData, reserve enough pieces to fill the order and confirm it, all in a minute or two, Albers said.

However, he noted, the other two elements of the strategic alliance are even more important. Right now, EDS reluctantly sells direct to a large group of corporate customers. Under the agreement, EDS will turn over its customers to Computer City while taking over Computer City's hardware procurement functions.

Albers said that the injection of these new Fortune 500 customers into Computer City's corporate sales division will add at least $100 million to $200 million in sales this year and at least $1 billion over the next five years.

At the same time, EDS's more efficient procurement system will make Computer City more profitable and better able to remain in-stock on the hottest and newest products.

The company has also redoubled its effort to remain in-stock on a more general basis. The company has identified 250 core top sellers on which it feels it must remain in-stock to remain competitive. Since the program's inception, in-stock percentages have risen from "the 50s in constrained goods to the 90s, and from the 60s in unconstrained goods to the high 90s," Albers said.

A cross-docking facility at Tandy headquarters will allow the chain to distribute goods, particularly those in short supply, on an as-needed basis, checking inventories at all stores just before shipment, then adjusting quantities at the last minute to better balance stock around the chain.

At the same time, the switch from hourly to hourly-plus-commission pay schemes for floor-level employees cut customer complaints by 50% in 90 days, Albers noted. "Too often, we were getting people who just wanted to play with computers working in the stores," he said. "Now we have a customer service orientation."