Tops touts subdued attitude - Tops Appliance City

Discount Store News, Oct 16, 1995 by Richard Halverson

EDISON, N.J. -- Faced with plunging, comp store sales--and new competition in its New York, metro market -- Tops Appliance City has brought in a new ceo from outside the consumer electronics industry to present a kinder, gentler face to consumers.

* Gone is the haggling over price that often left consumers wondering whether they got a fair deal.

* Gone are aggressive sales tactics that pressured customers into switching to higher-margin goods from low-end ad specials, and then tried to tack on an extended warranty contract.

* Gone is the Topsy ad campaign featuring a cartoon character wearing a propeller beanie who growled in a gravely Brooklyn voice about killing the competition.

* Gone is the salesman tactic of latching onto customers and never letting them browse. Instead, a greeter at the door now says hello and offers a free cup of coffee.

Under its new ceo Rob Gross, previously president and coo of Eye Care Centers of America, Tops has substituted fixed prices for the artificial prices that customers were expected to bargain down to the appropriate level, if they were brassy and skilled enough to do so.

In his first moves since taking over as ceo and vice chairman in June, Gross hired an outside company to shop the competition and fix prices so that Tops won't be embarrassed about the prices, now printed via computer, instead of hand-printed.

Gross declines to call them everyday low prices, but instead the "correct prices" at which goods normally sell. An item that previously would be posted at $499 typically would sell for $459 after a round of haggling that would pit the salesman against the customer.

Women especially dislike haggling, Gross said, and seldom would shop in Tops alone, even though they now make 50% to 60% of buying decisions in CE.

And women intensely disliked the old Topsy campaign, Gross said. A marketing survey said it turned off 80% of women, he added.

Customers now trust that they are paying a fair price and not paying $50 more than the other guy, said Peter Huber, vp of stores. "They are relieved at not having to haggle."

Even salesmen came to dislike the old system of haggling over prices. That is a hallmark of the way CE chains in the New York market did business, and it worked well in the '70s and '80s, Huber said.

But today's customers don't have the time to haggle, and Tops changed with the customers of the '90s, he said.

Out of a typical transaction that took 40 minutes, 15 minutes were spent in negotiating the price, or almost 40%. The fixed price system makes salesmen more efficient, Huber said, so it shouldn't cut into their earnings.

At the same time, one salesman said, "change is tough," although no one in his computer department has quit because of the changeover.

The Wiz, one of Tops' key competitors, changed to fixed prices three years ago.

Merchandising will remain the same except for the addition of two gondolas of computer software and peripherals, such as printers. To make room, Tops is pushing some TVs off the floor and up onto the side wall of its stores. Computers now account for 5% to 6% of sales, including white goods.

In an open letter to Tops customers, posted on the doors and advertised in newspapers, Gross promoted the new policies, including a price rollback.

In addition, Tops instituted a 45-day lowest-price guarantee, the longest in its market, promising that the products it advertised would be in stock, offering either a rain check or a product upgrade if not, and introducing the new associate name tag slogan, "The Customer is TOPS," to replace the previous one, "Business is Good at Tops."

In a new mission statement for employees, Gross spelled out TOPS in terms of company values: T for teamwork, O for outstanding and friendly service, P for pride in performance and S for sell with integrity.

All products now bear a computer-printed fact tag with the fixed price and product feature information, along with a bar code.

The reasons behind the change in corporate culture are obvious: Best Buy and Circuit City are coming to the New York metro market and Tandy's The Incredible Universe debuted its first megastore on Long Island last month and plans to open a second unit next year in nearby Elizabeth, N.J.

Moreover, Tops' vital signs are down. Comp store sales fell 15% in '94, 17.3% in the first half of '95 and are continuing downward in the third quarter. It posted a $2 million net loss in the first half, sales of lucrative extended sales contracts dipped, despite aggressive selling, and gross margins slipped 0.9 of a point in the first half, even though Tops shaved 0.7 of a point off S&GA expenses by instituting a $30 delivery and set up charge for major appliances in place of free delivery.

Tops wasn't creating a new customer base, Gross said.

"The trend certainly wasn't healthy, he added. "If the company were winning, I wouldn't have been brought in. The aggressiveness of the sales force didn't always deliver."

The changes are a huge departure in the Tops corporate culture, Gross conceded.