WEBVTT 00:00:00.000 --> 00:00:01.919 Okay, I want you to close your eyes for a second. 00:00:02.220 --> 00:00:04.839 We're going back to a Saturday afternoon. Let's 00:00:04.839 --> 00:00:08.599 say it's, I don't know, 1998, maybe 1999. You've 00:00:08.599 --> 00:00:11.619 just parked your car in a massive sprawling asphalt 00:00:11.619 --> 00:00:15.500 lot in some suburb, maybe outside Dallas or Atlanta 00:00:15.500 --> 00:00:18.800 or Chicago. You walk through a set of sliding 00:00:18.800 --> 00:00:22.199 glass doors and you are hit with this. this very 00:00:22.199 --> 00:00:25.239 specific wall of air. Oh, I know that air perfectly. 00:00:25.460 --> 00:00:28.379 It's conditioned to be freezing cold, regardless 00:00:28.379 --> 00:00:30.160 of the weather outside. It's almost a statement. 00:00:30.320 --> 00:00:32.659 It's freezing, yes. And it has a smell. Can you 00:00:32.659 --> 00:00:36.179 smell it? It's like ozone, static. Ozone, static 00:00:36.179 --> 00:00:38.799 electricity, and fresh shrink wrap. It's the 00:00:38.799 --> 00:00:41.460 smell of new plastic off -gassing from thousands 00:00:41.460 --> 00:00:43.579 of products at once. Yes, that shrink wrap smell. 00:00:43.659 --> 00:00:45.509 That's it, exactly. So you look to your left, 00:00:45.549 --> 00:00:47.670 and there is a pallet. I mean, a literal wooden 00:00:47.670 --> 00:00:49.710 shipping pallet stacked six feet high with boxes 00:00:49.710 --> 00:00:52.670 of copy paper. Always the paper. And to your 00:00:52.670 --> 00:00:54.490 right, there's a wall of beige towers, computer 00:00:54.490 --> 00:00:56.789 towers, and monitors that weigh, I don't know, 00:00:56.829 --> 00:01:00.270 50 pounds each. And the sound, it's this low 00:01:00.270 --> 00:01:03.390 -frequency hum of 100 cooling fans all spinning 00:01:03.390 --> 00:01:07.349 at once. You are painting a very, very vivid 00:01:07.349 --> 00:01:11.530 picture of a very specific era in American retail. 00:01:12.209 --> 00:01:15.109 This is the absolute peak of the category killer 00:01:15.109 --> 00:01:18.250 era. The big box store. And for a certain generation 00:01:18.250 --> 00:01:21.790 of nerds and geeks and, you know, early adopters, 00:01:21.930 --> 00:01:25.750 this wasn't just a store. It was, look, I don't 00:01:25.750 --> 00:01:27.769 want to overstate it, but it was almost a pilgrimage 00:01:27.769 --> 00:01:29.769 site. I don't think you are overstating it. You 00:01:29.769 --> 00:01:31.349 didn't just go there to buy a cable. You went 00:01:31.349 --> 00:01:32.989 there to see what the future looked like. It 00:01:32.989 --> 00:01:35.109 was a cathedral of commerce for the burgeoning 00:01:35.109 --> 00:01:37.590 digital age. And the temple you were describing 00:01:37.590 --> 00:01:42.469 is almost certainly. CompUSA. The king. The absolute 00:01:42.469 --> 00:01:44.310 heavyweight champion of the world. But here's 00:01:44.310 --> 00:01:46.170 the thing that triggered this whole deep dive 00:01:46.170 --> 00:01:48.090 for me. I was feeling nostalgic the other day. 00:01:48.150 --> 00:01:52.290 And I typed CompUSA .com into my browser just 00:01:52.290 --> 00:01:54.090 to see what was there. Okay. I expected maybe 00:01:54.090 --> 00:01:56.370 a redirect to a holding company or an investment 00:01:56.370 --> 00:01:59.090 firm or maybe a fan run memorial page. Something. 00:01:59.230 --> 00:02:02.310 What did you find? Nothing. A 404 error. Page 00:02:02.310 --> 00:02:04.450 not found. A digital ghost town. Didn't even 00:02:04.450 --> 00:02:07.370 redirect me to a history of page. It just didn't 00:02:07.370 --> 00:02:10.409 exist anymore. It's gone. Wow. That is such a 00:02:10.409 --> 00:02:14.250 stark contrast to where they were. At their peak, 00:02:14.349 --> 00:02:18.030 we are talking about a genuine empire, over 229 00:02:18.030 --> 00:02:21.689 locations, billions with a B in revenue. They 00:02:21.689 --> 00:02:23.449 were the gateway to the Internet for millions 00:02:23.449 --> 00:02:25.969 of Americans. So that's the mystery we're trying 00:02:25.969 --> 00:02:28.810 to solve today. How do you go from being the 00:02:28.810 --> 00:02:31.990 absolute center of the tech universe, the place 00:02:31.990 --> 00:02:34.150 where America literally learned how to use a 00:02:34.150 --> 00:02:37.069 computer, to an error message? Well, it's a classic 00:02:37.069 --> 00:02:38.900 corporate tragedy. I mean, it has everything. 00:02:39.300 --> 00:02:41.599 Hubris, some really questionable management, 00:02:41.819 --> 00:02:43.979 the Internet revolution, and some truly, truly 00:02:43.979 --> 00:02:46.199 bizarre business pivots. It sounds like it's 00:02:46.199 --> 00:02:48.300 a story about what happens when a company forgets 00:02:48.300 --> 00:02:50.120 what it is. That's a perfect way to put it. And 00:02:50.120 --> 00:02:52.280 we have a massive stack of sources today. We're 00:02:52.280 --> 00:02:54.979 looking at corporate timelines, financial reports 00:02:54.979 --> 00:02:58.360 from the 90s, liquidation documents, and even 00:02:58.360 --> 00:03:00.590 some old marketing archives we dug up. So what 00:03:00.590 --> 00:03:02.870 are the main threads we need to pull on? I think 00:03:02.870 --> 00:03:04.689 there are three. First, the whole category killer 00:03:04.689 --> 00:03:07.590 concept itself, what it was, why it worked so 00:03:07.590 --> 00:03:09.689 well, and then why it just stopped working. Second, 00:03:09.889 --> 00:03:13.050 the danger of what I'd call stagnant corporate 00:03:13.050 --> 00:03:16.210 oversight. Specifically, what happens when the 00:03:16.210 --> 00:03:18.090 people running the ships stop looking at the 00:03:18.090 --> 00:03:20.689 horizon and just look at the spreadsheets? And 00:03:20.689 --> 00:03:23.030 the third? The third is what I call zombie retail. 00:03:23.610 --> 00:03:27.110 It's the messy, complex afterlife of a corporate 00:03:27.110 --> 00:03:29.990 brand. Just because a company dies doesn't mean 00:03:29.990 --> 00:03:34.240 it stays dead. Not really. Zombie retail. I love 00:03:34.240 --> 00:03:36.039 that. Okay. But before we get to the zombies, 00:03:36.219 --> 00:03:38.240 we have to start with the birth of the beast. 00:03:38.400 --> 00:03:41.680 We have to go back to 1984. 1984, the year the 00:03:41.680 --> 00:03:43.840 Macintosh launched. Yes. The year of the famous 00:03:43.840 --> 00:03:46.759 Super Bowl ad. Exactly. The PC revolution is 00:03:46.759 --> 00:03:49.500 just kicking into gear. And in Addison, Texas, 00:03:49.699 --> 00:03:52.439 which is a suburb of Dallas, two guys named Errol 00:03:52.439 --> 00:03:54.680 Jacobson and Mike Henichovich decide to open 00:03:54.680 --> 00:03:57.300 a store. Now, they didn't call it CompUSA initially. 00:03:57.759 --> 00:04:00.449 No. They give it a name that I think just perfectly 00:04:00.449 --> 00:04:02.669 encapsulates the era. It's so blunt. They called 00:04:02.669 --> 00:04:04.990 it Soft Warehouse. Soft Warehouse. It doesn't 00:04:04.990 --> 00:04:06.889 exactly roll off the tongue, does it? It sounds 00:04:06.889 --> 00:04:08.849 like a place where you'd buy pillows or, I don't 00:04:08.849 --> 00:04:12.169 know, mattresses. Right. It does sound a bit 00:04:12.169 --> 00:04:14.550 plush. But you have to understand the psychology 00:04:14.550 --> 00:04:18.209 of the computer market in 1984. There's a reason 00:04:18.209 --> 00:04:20.610 they chose that specific name. I'm assuming warehouse 00:04:20.610 --> 00:04:24.180 just implies cheap, right? Precisely. Computers 00:04:24.180 --> 00:04:26.500 in the early 80s were terrifyingly expensive. 00:04:26.839 --> 00:04:29.860 I mean, truly. If you went to a boot computer 00:04:29.860 --> 00:04:32.019 dealer, like a Computerland or something, you 00:04:32.019 --> 00:04:34.379 were paying thousands and thousands of dollars. 00:04:34.519 --> 00:04:36.079 And you felt like you were paying for the experience. 00:04:36.360 --> 00:04:39.060 The carpet, the salesman's fancy suit, all the 00:04:39.060 --> 00:04:42.199 overhead. It was an intimidating, high -friction 00:04:42.199 --> 00:04:44.439 purchase. Totally. So by calling it a warehouse, 00:04:44.800 --> 00:04:47.220 they were sending a signal, a very clear one. 00:04:47.300 --> 00:04:49.540 They were saying, no frills here, rock -bottom 00:04:49.540 --> 00:04:51.800 prices. We stack them deep and sell them cheap. 00:04:52.199 --> 00:04:54.879 It was a complete rejection of that IBM man in 00:04:54.879 --> 00:04:57.259 the Chris Blee suit. This was for the people, 00:04:57.360 --> 00:04:59.660 for the hobbyists. Exactly. And the soft part. 00:04:59.819 --> 00:05:01.620 Short for software, which is a really crucial 00:05:01.620 --> 00:05:04.620 distinction. Right. Because in 1984, hardware 00:05:04.620 --> 00:05:07.279 was the main event. But Jacobson and Hanachovitch, 00:05:07.399 --> 00:05:10.019 they realized that once you bought the box, you 00:05:10.019 --> 00:05:12.519 needed the programs to run on it. And software 00:05:12.519 --> 00:05:14.939 had incredibly high margins. They focused on 00:05:14.939 --> 00:05:18.240 volume. So it's a very industrial, very utilitarian 00:05:18.240 --> 00:05:20.740 vibe from the get -go. And that vibe just seemed 00:05:20.740 --> 00:05:24.269 to work. In 1986, just two years later, they 00:05:24.269 --> 00:05:26.829 opened their first superstore on Marsh Lane and 00:05:26.829 --> 00:05:29.449 Beltline Road in Addison. And when we say superstore 00:05:29.449 --> 00:05:31.769 in 1986, what are we really talking about? What's 00:05:31.769 --> 00:05:33.490 the scale? We're talking about a massive footprint. 00:05:34.269 --> 00:05:36.910 Most computer stores at the time were these tiny 00:05:36.910 --> 00:05:39.189 little storefronts in strip malls. You know, 00:05:39.250 --> 00:05:41.589 maybe a thousand square feet. This was different. 00:05:41.870 --> 00:05:43.689 They were taking the model of a grocery store 00:05:43.689 --> 00:05:46.720 or a big lumber yard. And applying it to floppy 00:05:46.720 --> 00:05:48.819 disks and dot matrix printers. And it caught 00:05:48.819 --> 00:05:51.660 on in a big way. By 1988, they're going national. 00:05:51.720 --> 00:05:54.680 They open a mega store in Atlanta, Georgia. The 00:05:54.680 --> 00:05:57.660 expansion is, it's aggressive. It is the beginning 00:05:57.660 --> 00:06:00.920 of the explosion. But the real shift, the moment 00:06:00.920 --> 00:06:03.120 they decided to stop being a local warehouse 00:06:03.120 --> 00:06:05.759 and start being a national brand, that happens 00:06:05.759 --> 00:06:08.480 in 1991. That's the rebrand. They finally drop 00:06:08.480 --> 00:06:11.079 soft warehouse. Probably a wise move in the long 00:06:11.079 --> 00:06:14.000 run. And they become CompUSA. And at the same 00:06:14.000 --> 00:06:16.680 time. They go public on the New York Stock Exchange. 00:06:17.019 --> 00:06:19.800 This is a massive pivot. The name change alone 00:06:19.800 --> 00:06:23.420 is so significant, isn't it? CompUSA sounds definitive. 00:06:24.189 --> 00:06:26.949 It sounds patriotic almost. It does. It signals 00:06:26.949 --> 00:06:29.209 that they want to be the American computer retailer. 00:06:29.449 --> 00:06:31.750 It's ambitious. They're consciously shedding 00:06:31.750 --> 00:06:35.089 that local industrial skin and putting on a proper 00:06:35.089 --> 00:06:37.170 corporate suit. And the man wearing that suit, 00:06:37.290 --> 00:06:39.910 metaphorically speaking, was the CEO at the time, 00:06:39.949 --> 00:06:43.310 Nathan P. Morton. Right. The Morton era is really 00:06:43.310 --> 00:06:45.310 considered the golden age by almost any metric. 00:06:45.529 --> 00:06:48.629 Under his leadership, revenues just skyrocketed. 00:06:48.649 --> 00:06:51.910 They hit over $2 billion. That's billion with 00:06:51.910 --> 00:06:54.600 a B. For the early 90s. in this very specialized 00:06:54.600 --> 00:06:58.120 retail sector, that is just astronomical growth. 00:06:58.420 --> 00:07:00.339 It's hard to overstate how dominant they were 00:07:00.339 --> 00:07:02.000 becoming. It wasn't just about the money, though. 00:07:02.079 --> 00:07:03.920 It was about how they talked to people. I was 00:07:03.920 --> 00:07:05.220 looking through the notes on their marketing 00:07:05.220 --> 00:07:06.980 from this era, and do you remember the character 00:07:06.980 --> 00:07:09.620 PC Modem? Oh, absolutely. The radio campaigns, 00:07:09.759 --> 00:07:13.519 yes. 1990, they hire actor Jack Riley to play 00:07:13.519 --> 00:07:16.639 this character, PC Modem, and it ran for years. 00:07:16.839 --> 00:07:19.550 Why do that? Why use a character? Well, it's 00:07:19.550 --> 00:07:21.750 a classic marketing strategy for what you'd call 00:07:21.750 --> 00:07:25.110 a high anxiety product. You have these complex, 00:07:25.170 --> 00:07:29.509 intimidating machines, personal computers. People 00:07:29.509 --> 00:07:31.389 are genuinely scared they're going to break them 00:07:31.389 --> 00:07:33.009 or they don't understand the jargon. You know, 00:07:33.050 --> 00:07:36.569 what is a bit? What is a byte? What's RAM? So 00:07:36.569 --> 00:07:38.810 what do you do? You humanize it. You create a 00:07:38.810 --> 00:07:43.100 character to make the technology feel... Approachable, 00:07:43.199 --> 00:07:45.399 maybe even a little funny. It lowers the barrier 00:07:45.399 --> 00:07:47.639 to entry. It's kind of like the Mac versus PC 00:07:47.639 --> 00:07:50.199 ads that came much, much later. But for the retail 00:07:50.199 --> 00:07:52.420 experience itself, it's saying it's OK if you 00:07:52.420 --> 00:07:53.920 don't know what you're doing. We're here to help 00:07:53.920 --> 00:07:57.009 you. Exactly. And it worked. They were democratizing 00:07:57.009 --> 00:07:59.129 the technology, making it feel like it was for 00:07:59.129 --> 00:08:02.490 everyone, not just for engineers. So Morton resigns 00:08:02.490 --> 00:08:05.149 in 1993, but the train is already moving at an 00:08:05.149 --> 00:08:08.029 incredible speed. We get to the mid -90s. The 00:08:08.029 --> 00:08:10.350 Internet is starting to bubble up into the mainstream 00:08:10.350 --> 00:08:12.870 consciousness. And this brings us to a really 00:08:12.870 --> 00:08:15.329 interesting contradiction in the source material 00:08:15.329 --> 00:08:18.350 about their online presence. Ah, yes. This is 00:08:18.350 --> 00:08:21.470 a classic, classic example of the innovator's 00:08:21.470 --> 00:08:23.980 dilemma. OK, let's unpack that, because when 00:08:23.980 --> 00:08:26.319 I look at the timeline, it says CompUSA launched 00:08:26.319 --> 00:08:30.660 retail sales on CompUSA .com way back in 1996. 00:08:31.120 --> 00:08:34.500 1996? I mean, that is incredibly early. Amazon 00:08:34.500 --> 00:08:36.860 was barely selling books at that point. Most 00:08:36.860 --> 00:08:39.179 major retailers didn't even have a static web 00:08:39.179 --> 00:08:41.440 page, let alone a fully functional e -commerce 00:08:41.440 --> 00:08:43.379 site where you could put in a credit card number. 00:08:43.539 --> 00:08:46.019 So on paper, they were pioneers. They were ahead 00:08:46.019 --> 00:08:49.120 of the curve. Technically, yes, they were present. 00:08:49.580 --> 00:08:53.519 But here's the key. Being present and being effective 00:08:53.519 --> 00:08:56.460 are two very, very different things. And the 00:08:56.460 --> 00:08:59.600 sources later cite a failure to transition to 00:08:59.600 --> 00:09:02.220 online sales as one of the primary reasons for 00:09:02.220 --> 00:09:04.059 their collapse. Okay, so how is that possible 00:09:04.059 --> 00:09:06.120 if they were there in 96? If they were one of 00:09:06.120 --> 00:09:07.960 the first, shouldn't they have won that race? 00:09:08.200 --> 00:09:09.820 Not necessarily. You have to think about their 00:09:09.820 --> 00:09:12.360 core business model. They had these massive, 00:09:12.440 --> 00:09:15.659 expensive physical stores, those 229 locations 00:09:15.659 --> 00:09:17.700 we mentioned. They were paying enormous amounts 00:09:17.700 --> 00:09:20.139 in rent, electricity, and salaries for thousands 00:09:20.139 --> 00:09:22.720 and thousands of employees. So if you're the 00:09:22.720 --> 00:09:26.820 CEO and you push too hard online, If you make 00:09:26.820 --> 00:09:30.279 your website too good and too cheap, you cannibalize 00:09:30.279 --> 00:09:33.100 your own stores. You undercut your own store 00:09:33.100 --> 00:09:35.980 managers, who are probably a powerful force within 00:09:35.980 --> 00:09:38.419 the company. Exactly. Every single dollar spent 00:09:38.419 --> 00:09:40.919 on the website was a dollar not spent in the 00:09:40.919 --> 00:09:44.100 physical store. And the store managers, the regional 00:09:44.100 --> 00:09:46.860 managers, they would have absolutely viewed the 00:09:46.860 --> 00:09:49.820 website as a direct competitor. So they put up 00:09:49.820 --> 00:09:51.200 a website, but they didn't really want it to 00:09:51.200 --> 00:09:53.279 succeed too much. I think that's right. While 00:09:53.279 --> 00:09:55.740 they had the website, the corporate focus, the 00:09:55.740 --> 00:09:58.379 bonuses, the entire culture was likely still 00:09:58.379 --> 00:10:01.840 90 % focused on getting bodies into the physical 00:10:01.840 --> 00:10:05.379 big box. They treated the web as a side project, 00:10:05.639 --> 00:10:08.519 curiosity, rather than the future of their entire 00:10:08.519 --> 00:10:10.460 industry. They saw it as a supplement, not a 00:10:10.460 --> 00:10:12.179 replacement. Like, hey, check the prices here, 00:10:12.220 --> 00:10:14.019 then come on in and buy it from us. Right. Whereas 00:10:14.019 --> 00:10:16.120 a company like Amazon... They didn't have any 00:10:16.120 --> 00:10:17.700 stores to protect. They could burn the boats. 00:10:18.320 --> 00:10:20.340 CompUSA was desperately trying to protect the 00:10:20.340 --> 00:10:22.259 castle from the very revolution they were helping 00:10:22.259 --> 00:10:24.620 to arm. So while they were sort of struggling 00:10:24.620 --> 00:10:26.259 to figure out the web, they were making some 00:10:26.259 --> 00:10:28.919 massive moves in the physical world. I want to 00:10:28.919 --> 00:10:32.299 fast forward to 1997 because looking at the timeline, 00:10:32.559 --> 00:10:35.340 this feels like a moment where CompUSA actually 00:10:35.340 --> 00:10:38.200 made a truly brilliant move, even if it didn't 00:10:38.200 --> 00:10:39.700 save them in the end. You're talking about the 00:10:39.700 --> 00:10:42.539 Apple deal. The Apple deal. But we need to set 00:10:42.539 --> 00:10:45.340 the stage. The Apple of 1997 is not the Apple 00:10:45.340 --> 00:10:48.779 of 2024. Oh, goodness, no. Not even close. 1997, 00:10:49.220 --> 00:10:51.720 Apple was on death's door. Their stock was in 00:10:51.720 --> 00:10:54.019 the toilet. They were losing money hand over 00:10:54.019 --> 00:10:56.980 fist. Michael Dell had famously said that if 00:10:56.980 --> 00:10:59.240 he were running Apple, he'd shut it down and 00:10:59.240 --> 00:11:01.399 give the money back to the shareholders. So if 00:11:01.399 --> 00:11:03.759 you're a retailer at that time, stocking Macintoshes 00:11:03.759 --> 00:11:05.360 is a huge risk. They weren't selling. They were 00:11:05.360 --> 00:11:07.120 just collecting dust on the shelves. And most 00:11:07.120 --> 00:11:09.200 retailers were kicking them out. Circuit City, 00:11:09.399 --> 00:11:12.299 Best Buy. They were shrinking their Apple sections 00:11:12.299 --> 00:11:14.460 down to nothing or hiding them in a back corner. 00:11:14.659 --> 00:11:17.080 They wanted that precious shelf space for the 00:11:17.080 --> 00:11:20.059 Windows 95 machines, which were absolutely flying 00:11:20.059 --> 00:11:23.299 out the door. So into this chaos enters CompUSA. 00:11:23.519 --> 00:11:25.559 Well, Steve Jobs had just come back to Apple. 00:11:25.720 --> 00:11:28.200 He's trying to save the company. And he realizes 00:11:28.200 --> 00:11:31.000 he has a fundamental problem. He could build 00:11:31.000 --> 00:11:33.539 the greatest computer in the world. And the iMac 00:11:33.539 --> 00:11:36.039 was just around the corner. But if the 19 -year 00:11:36.039 --> 00:11:37.720 -old kid at the electronics store doesn't know 00:11:37.720 --> 00:11:41.080 how to sell it, or worse, is actively incentivized 00:11:41.080 --> 00:11:44.259 to push a Compaq or a Gateway instead, Apple 00:11:44.259 --> 00:11:47.279 was dead. So he needed a sanctuary for his products. 00:11:47.620 --> 00:11:49.860 He needed a controlled environment. And he went 00:11:49.860 --> 00:11:52.779 to CompUSA and he proposed this radical idea, 00:11:53.080 --> 00:11:55.919 the store within a store. What did that actually 00:11:55.919 --> 00:11:58.059 look like on the ground? It was amazing for the 00:11:58.059 --> 00:12:01.360 time. In the middle of this chaotic, noisy, beige 00:12:01.360 --> 00:12:03.840 warehouse we described earlier, they literally 00:12:03.840 --> 00:12:06.580 carved out a dedicated zone for Apple. It had 00:12:06.580 --> 00:12:08.720 different flooring, usually black carpet. It 00:12:08.720 --> 00:12:10.899 had different, more focused lighting. It was 00:12:10.899 --> 00:12:12.879 cleaner. It was quieter. It was like walking 00:12:12.879 --> 00:12:14.539 from one country into another right there in 00:12:14.539 --> 00:12:16.460 the middle of the store. And this is the crucial 00:12:16.460 --> 00:12:20.519 part. CompUSA let Apple train the staff in that 00:12:20.519 --> 00:12:23.299 section. This was the absolute precursor to the 00:12:23.299 --> 00:12:26.580 Genius Bar. You had a CompUSA employee wearing 00:12:26.580 --> 00:12:29.399 a CompUSA shirt, but they had been to what they 00:12:29.399 --> 00:12:31.679 called Apple Camp. They knew the product inside 00:12:31.679 --> 00:12:34.100 and out. They could actually explain why a Mac 00:12:34.100 --> 00:12:36.559 was better for graphic design or video editing. 00:12:36.879 --> 00:12:38.500 That seems incredibly forward thinking for a 00:12:38.500 --> 00:12:40.440 store that was basically built on the Stack 'em 00:12:40.440 --> 00:12:43.679 High warehouse model. By January 1998, they had 00:12:43.679 --> 00:12:46.500 built 57 of these things. If you were a Mac user 00:12:46.500 --> 00:12:49.659 in the late 90s, CompUSA wasn't just a store. 00:12:49.840 --> 00:12:52.539 It was the only place you could reliably go to 00:12:52.539 --> 00:12:55.259 see and touch the new hardware. It was a critical 00:12:55.259 --> 00:12:57.940 lifeline for Apple during its darkest days. OK, 00:12:58.000 --> 00:12:59.879 so this is the part I don't get. If they were 00:12:59.879 --> 00:13:01.919 bedfellows with the company that would become 00:13:01.919 --> 00:13:04.299 the most valuable company on Earth, how did they 00:13:04.299 --> 00:13:07.090 lose? How did that not save them? Well. You know, 00:13:07.090 --> 00:13:08.889 being the landlord to a genius doesn't make you 00:13:08.889 --> 00:13:10.490 a genius yourself. It just means you collect 00:13:10.490 --> 00:13:12.690 the rent for a while. Yeah. Eventually, Apple 00:13:12.690 --> 00:13:15.230 realized, hey, this dedicated retail concept 00:13:15.230 --> 00:13:17.750 works so well. Why don't we just build our own 00:13:17.750 --> 00:13:20.250 stores and keep all the profit? So CompUSA was 00:13:20.250 --> 00:13:22.710 basically the training wheels for the Apple store. 00:13:22.870 --> 00:13:25.629 That's the perfect analogy. And once Apple learned 00:13:25.629 --> 00:13:27.990 how to ride the bike, they didn't need the warehouse 00:13:27.990 --> 00:13:30.620 anymore. But at the time, it really showed that 00:13:30.620 --> 00:13:33.659 CompUSA was willing to experiment and try new 00:13:33.659 --> 00:13:36.100 things. And speaking of trying things, they didn't 00:13:36.100 --> 00:13:37.899 just partner with Apple. They started buying 00:13:37.899 --> 00:13:41.080 up their competitors. In 1998, they acquired 00:13:41.080 --> 00:13:43.960 Tandy's Computer City. Which is a pretty interesting 00:13:43.960 --> 00:13:46.220 detail because Nathan Morton, the former CompUSA 00:13:46.220 --> 00:13:49.080 CEO, actually helped facilitate that deal from 00:13:49.080 --> 00:13:51.000 the other side. It was a consolidation move. 00:13:51.220 --> 00:13:53.620 The market was getting crowded. You had Best 00:13:53.620 --> 00:13:56.740 Buy, Circuit City, Fry's Electronics, Micro Center. 00:13:57.000 --> 00:13:59.230 Right. CompUSA's strategy was pretty simple. 00:13:59.330 --> 00:14:01.649 Just eat the smaller fish, get bigger. They also 00:14:01.649 --> 00:14:04.149 tried to diversify into services. They started 00:14:04.149 --> 00:14:07.330 CompUSA Call Center Services in 1998. Right. 00:14:07.370 --> 00:14:09.590 The idea was to provide help desks and technical 00:14:09.590 --> 00:14:11.850 support for other companies like cellular providers 00:14:11.850 --> 00:14:14.809 or OEMs. It was a really smart idea on paper. 00:14:15.049 --> 00:14:17.129 You've got all this technical expertise in -house. 00:14:17.169 --> 00:14:20.429 Why not sell it as a B2B service? Exactly. And 00:14:20.429 --> 00:14:22.450 that division actually did okay. It was eventually 00:14:22.450 --> 00:14:24.549 spun off as a separate company called the Telvista 00:14:24.549 --> 00:14:27.960 Company in 2001. But it shows they were thinking 00:14:27.960 --> 00:14:30.179 at least a little bit about being more than just 00:14:30.179 --> 00:14:32.559 a box mover. So we're at the end of the 90s. 00:14:32.799 --> 00:14:35.639 CompUSA is the undisputed king. They've eaten 00:14:35.639 --> 00:14:37.860 Computer City. They're hosting Apple's comeback. 00:14:38.059 --> 00:14:40.659 They have a growing call center business. Life 00:14:40.659 --> 00:14:44.080 looks pretty good. But then the year 2000 hits 00:14:44.080 --> 00:14:46.740 and the entire structure of the company changes 00:14:46.740 --> 00:14:49.179 fundamentally. This is a really pivotal moment 00:14:49.179 --> 00:14:51.340 in the story. The company goes private. They 00:14:51.340 --> 00:14:53.289 get thawed out. They get bought out by Grupo 00:14:53.289 --> 00:14:56.070 Sanborns, which is a massive Mexican retail company. 00:14:56.250 --> 00:15:00.110 They purchased 85 % of CompUSA. Now, for those 00:15:00.110 --> 00:15:02.370 who don't follow international finance, Grupo 00:15:02.370 --> 00:15:04.529 Sanborns is associated with an even bigger entity, 00:15:04.830 --> 00:15:07.370 Grupo Carso, which is controlled by Carlos Slim. 00:15:07.529 --> 00:15:09.629 One of the wealthiest men in the world. Correct. 00:15:09.690 --> 00:15:12.429 So in one move, CompUSA goes from being a public 00:15:12.429 --> 00:15:14.809 U .S. company, answerable to shareholders on 00:15:14.809 --> 00:15:17.649 Wall Street, to being a subsidiary of a massive 00:15:17.649 --> 00:15:19.929 international conglomerate. How does that kind 00:15:19.929 --> 00:15:22.470 of change affect a company's day to day? Does 00:15:22.470 --> 00:15:24.450 it make them safer because they have deeper pockets 00:15:24.450 --> 00:15:26.690 backing them? You might think so. And in some 00:15:26.690 --> 00:15:29.590 ways it does. But it can really change the agility 00:15:29.590 --> 00:15:32.240 of a company. When you're a small division within 00:15:32.240 --> 00:15:34.659 a foreign conglomerate, the chain of command 00:15:34.659 --> 00:15:37.399 gets a lot longer. Decisions that used to be 00:15:37.399 --> 00:15:39.559 made in Dallas might now have to go through Mexico 00:15:39.559 --> 00:15:42.279 City. And those decisions might be made by people 00:15:42.279 --> 00:15:44.460 who aren't walking the floors of a store in Ohio 00:15:44.460 --> 00:15:47.500 or California. It can lead to a real disconnect 00:15:47.500 --> 00:15:50.120 between the ownership and the reality on the 00:15:50.120 --> 00:15:52.500 ground. And we start to see some of that potential 00:15:52.500 --> 00:15:55.379 disconnect with the next big acquisition. Let's 00:15:55.379 --> 00:15:57.480 move into what I'd call the era of the identity 00:15:57.480 --> 00:16:01.700 crisis. We're in 2003. CompUSA buys a company 00:16:01.700 --> 00:16:04.779 called Good Guys. This is a classic textbook 00:16:04.779 --> 00:16:07.820 case study in strategic adjacency gone horribly, 00:16:07.899 --> 00:16:10.539 horribly wrong. Strategic adjacency. That sounds 00:16:10.539 --> 00:16:13.159 like MBA speak for we thought these two things 00:16:13.159 --> 00:16:15.539 went together, but they really didn't. Laughs. 00:16:17.019 --> 00:16:19.299 That's pretty much exactly what it is. Good Guys 00:16:19.299 --> 00:16:22.139 was a high end consumer electronics retailer. 00:16:22.720 --> 00:16:25.440 Mostly. west coast based you're talking about 00:16:25.440 --> 00:16:27.899 you know five thousand dollar speakers mahogany 00:16:27.899 --> 00:16:30.879 finish amplifiers home theater setups that cost 00:16:30.879 --> 00:16:34.190 as much as a new car Okay. And CompUSA, at its 00:16:34.190 --> 00:16:36.769 core, sells hard drives, printer ink, and discount 00:16:36.769 --> 00:16:39.710 laptops stacked on pallets. Exactly. So the theory, 00:16:39.830 --> 00:16:42.429 the strategy was, hey, Best Buy is doing this 00:16:42.429 --> 00:16:44.190 with their Magnolia brand. They're putting these 00:16:44.190 --> 00:16:46.409 fancy home theater sections in their stores. 00:16:46.730 --> 00:16:49.049 We need to do that, too, to compete. It's a me 00:16:49.049 --> 00:16:51.429 -too strategy. They're copying their competitor. 00:16:51.789 --> 00:16:54.129 Yes. But just think about the culture clash for 00:16:54.129 --> 00:16:56.929 a second. Who is the typical CompUSA shopper 00:16:56.929 --> 00:16:59.669 in 2003? It's a guy looking for a new graphics 00:16:59.669 --> 00:17:01.850 card. He wants specs. He wants to know the clock 00:17:01.850 --> 00:17:03.950 speed, the amount of VRAM. He's reading the back 00:17:03.950 --> 00:17:05.609 of the box. He's probably wearing a T -shirt 00:17:05.609 --> 00:17:07.690 with some kind of nerdy reference on it. Correct. 00:17:07.849 --> 00:17:09.509 He's a utilitarian buyer. He's on a mission. 00:17:09.569 --> 00:17:12.259 Now, who is the good guy shopper? That's someone 00:17:12.259 --> 00:17:14.660 who wants to sit in a plush leather chair in 00:17:14.660 --> 00:17:17.339 a soundproofed room, close their eyes, and listen 00:17:17.339 --> 00:17:20.559 to a jazz record on a high fidelity system. They 00:17:20.559 --> 00:17:24.079 want an experience. It's a luxury purchase. Exactly. 00:17:24.220 --> 00:17:27.940 It is an emotional sale versus a technical specs 00:17:27.940 --> 00:17:30.980 -based sale. The two mindsets could not be more 00:17:30.980 --> 00:17:33.920 different. And CompUSA tried to jam these two 00:17:33.920 --> 00:17:35.799 worlds together. Oh, it was worse than that. 00:17:35.880 --> 00:17:38.400 They closed all 46 of the standalone Good Guys 00:17:38.400 --> 00:17:41.440 locations, destroying that brand's entire identity 00:17:41.440 --> 00:17:44.259 and moved all that high -end inventory inside 00:17:44.259 --> 00:17:47.220 the CompUSA warehouses. They even rebranded the 00:17:47.220 --> 00:17:50.619 stores CompUSA with Good Guys inside. That is 00:17:50.619 --> 00:17:52.799 a mouthful of a name. It doesn't exactly flow. 00:17:52.900 --> 00:17:54.980 It's just clunky branding. But physically, it 00:17:54.980 --> 00:17:57.380 was a disaster. Imagine you have these $10 ,000 00:17:57.380 --> 00:17:59.980 speakers sitting right next to a literal pallet 00:17:59.980 --> 00:18:02.640 of discount DVDs in a bargain bin, and you have 00:18:02.640 --> 00:18:04.420 the staff who are trained to explain the difference 00:18:04.420 --> 00:18:07.539 between DDR2 and DDR3 RAM suddenly being asked 00:18:07.539 --> 00:18:10.019 to sell the concepts of audio warmth and soundstage. 00:18:10.259 --> 00:18:12.099 So the customers didn't cross -pollinate, I'm 00:18:12.099 --> 00:18:14.400 guessing? Not at all. The computer guys didn't 00:18:14.400 --> 00:18:17.079 care about the expensive speakers, and the audiophiles 00:18:17.079 --> 00:18:18.940 certainly did not want to buy their luxury audio 00:18:18.940 --> 00:18:21.539 gear in a place that smelled like shrink wrap 00:18:21.539 --> 00:18:25.200 and ozone. It just diluted the CompUSA brand 00:18:25.200 --> 00:18:28.799 and alienated the old Good Guys customers. It 00:18:28.799 --> 00:18:31.660 confused everyone. So the cracks are really starting 00:18:31.660 --> 00:18:34.440 to show. The Good Guys integration is rocky at 00:18:34.440 --> 00:18:38.400 best. And then we get to 2005 and 2006, and we 00:18:38.400 --> 00:18:40.700 start to see signs of real internal distress. 00:18:41.380 --> 00:18:44.099 Let's talk about the loyalty program. Ah, yes, 00:18:44.279 --> 00:18:47.279 the CompUSA network. Launched in 2005, the deal 00:18:47.279 --> 00:18:50.349 was 13 points for every dollar spent. That sounds 00:18:50.349 --> 00:18:52.769 pretty generous, actually. That is a very, very 00:18:52.769 --> 00:18:55.190 aggressive reward rate. Yeah. It suggests they 00:18:55.190 --> 00:18:56.930 were pretty desperate to get people to sign up 00:18:56.930 --> 00:18:59.549 and swipe their cards. But then in 2006, just 00:18:59.549 --> 00:19:02.170 a year later, they completely suspend sales of 00:19:02.170 --> 00:19:04.509 the membership cards. The official reason from 00:19:04.509 --> 00:19:06.410 the source material says they needed to investigate 00:19:06.410 --> 00:19:09.509 program awareness among low visit customers and 00:19:09.509 --> 00:19:11.630 the effect on retention. Which is just the most 00:19:11.630 --> 00:19:14.240 beautiful piece of corporate speak for. We are 00:19:14.240 --> 00:19:16.480 losing a ton of money on this and we have no 00:19:16.480 --> 00:19:18.319 idea if it's actually working. And then they 00:19:18.319 --> 00:19:20.460 just they ended it. They killed the whole program. 00:19:20.599 --> 00:19:23.539 Tated completely. Yeah. Customers got some coupons 00:19:23.539 --> 00:19:25.940 or refunds for their membership fee. But think 00:19:25.940 --> 00:19:28.359 about what that signals to the market to your 00:19:28.359 --> 00:19:31.240 customers. A loyalty program is supposed to be 00:19:31.240 --> 00:19:33.299 the anchor of your retail strategy. It's the 00:19:33.299 --> 00:19:35.599 thing that keeps people coming back. Right. If 00:19:35.599 --> 00:19:37.880 you launch a big flashy loyalty program and then 00:19:37.880 --> 00:19:41.269 you abruptly cancel it a year later. It suggests 00:19:41.269 --> 00:19:43.890 total internal chaos. It suggests you don't have 00:19:43.890 --> 00:19:45.869 a long -term plan. You are just throwing spaghetti 00:19:45.869 --> 00:19:47.690 at the wall and seeing what sticks. And while 00:19:47.690 --> 00:19:49.769 this loyalty program is collapsing, the leadership 00:19:49.769 --> 00:19:52.269 at the top is just churning. This is a critical 00:19:52.269 --> 00:19:56.589 detail. In 2006, the CEO, a guy named Tony Weiss, 00:19:56.670 --> 00:19:59.549 leaves after only four months on the job. Four 00:19:59.549 --> 00:20:01.690 months. That's barely enough time to find the 00:20:01.690 --> 00:20:04.630 bathroom, let alone formulate and execute a corporate 00:20:04.630 --> 00:20:07.589 strategy. Exactly. And who do they bring in to 00:20:07.589 --> 00:20:11.250 replace him? A man named Roman Ross. OK. And 00:20:11.250 --> 00:20:14.190 here is where the story gets really, really interesting. 00:20:14.890 --> 00:20:18.869 Roman Ross was a former executive at Philip Morris. 00:20:18.950 --> 00:20:21.509 The tobacco company. The tobacco company. Yeah. 00:20:21.589 --> 00:20:25.269 Now, look, I want to be fair. Management skills 00:20:25.269 --> 00:20:27.490 can be transferable. If you can run a global 00:20:27.490 --> 00:20:30.089 supply chain for cigarettes, you understand logistics. 00:20:30.609 --> 00:20:33.410 But there is a very valid critique to be made 00:20:33.410 --> 00:20:36.400 here about. Corporate oversight being completely 00:20:36.400 --> 00:20:39.039 out of touch with the market realities. You're 00:20:39.039 --> 00:20:42.259 bringing in a tobacco executive to run a computer 00:20:42.259 --> 00:20:45.160 hardware retailer in the middle of the most disruptive 00:20:45.160 --> 00:20:48.099 digital revolution in human history. It really 00:20:48.099 --> 00:20:50.420 highlights the commoditization mindset of the 00:20:50.420 --> 00:20:53.059 ownership. If you sell cigarettes, the product 00:20:53.059 --> 00:20:54.940 is the product. It doesn't change much year to 00:20:54.940 --> 00:20:56.380 year. It's about marketing and distribution. 00:20:56.819 --> 00:20:59.380 But technology changes every six months. You 00:20:59.380 --> 00:21:01.180 need to understand the community. You need to 00:21:01.180 --> 00:21:03.720 understand why someone is passionate about buying 00:21:03.720 --> 00:21:07.150 a specific GPU. And under Ross, in November 2006, 00:21:07.410 --> 00:21:09.750 what's the big strategic push? They push this 00:21:09.750 --> 00:21:13.329 big home entertainment rollout. They put HDTVs 00:21:13.329 --> 00:21:15.869 and home theater equipment in 40 stores. Again, 00:21:15.950 --> 00:21:19.269 just look at the timing. November 2006, the iPod 00:21:19.269 --> 00:21:21.609 is completely dominant. The iPhone is just a 00:21:21.609 --> 00:21:23.670 few months away from being announced. It launched 00:21:23.670 --> 00:21:27.150 in early 2007. The entire world is moving toward 00:21:27.150 --> 00:21:29.869 mobile computing, toward digital services, toward 00:21:29.869 --> 00:21:32.869 lightweight laptops. And CompUSA's big pivot 00:21:32.869 --> 00:21:36.349 is to... Big, heavy televisions. Which is exactly 00:21:36.349 --> 00:21:39.329 what Best Buy and Walmart and Costco and their 00:21:39.329 --> 00:21:41.509 other big rival, Circuit City, were already doing. 00:21:41.690 --> 00:21:43.869 Exactly. They were late to enter an already saturated 00:21:43.869 --> 00:21:46.049 market where they had absolutely no competitive 00:21:46.049 --> 00:21:48.529 advantage. They were fighting a war on a front 00:21:48.529 --> 00:21:50.589 where they were already outnumbered and outgunned. 00:21:50.880 --> 00:21:53.380 And meanwhile, their core identity computers 00:21:53.380 --> 00:21:56.220 and components was rapidly shifting online to 00:21:56.220 --> 00:21:58.339 places like Newegg and Amazon. It was a pivot 00:21:58.339 --> 00:22:00.720 to the past, not a pivot to the future. It really 00:22:00.720 --> 00:22:02.980 was. And the market responded, or rather, it 00:22:02.980 --> 00:22:05.079 just stopped responding. And we finally reached 00:22:05.079 --> 00:22:08.480 2007 and the dam just breaks. The collapse. The 00:22:08.480 --> 00:22:10.799 soft warehouse finally runs out of runway. It 00:22:10.799 --> 00:22:13.180 starts in February 2007. The company announces 00:22:13.180 --> 00:22:15.259 they're closing 126 stores. That was more than 00:22:15.259 --> 00:22:16.900 half of their remaining locations at the time. 00:22:16.960 --> 00:22:20.519 A brutal cut. And look at who they hired to help 00:22:20.519 --> 00:22:23.460 them do this. They didn't hire a growth consultant. 00:22:23.680 --> 00:22:25.980 They didn't hire a famous turnaround specialist. 00:22:26.400 --> 00:22:29.519 They retained Gordon Brothers. Who are Gordon 00:22:29.519 --> 00:22:31.619 Brothers? They are asset recovery specialists. 00:22:32.890 --> 00:22:35.289 Liquidators. When you call Gordon Brothers, you 00:22:35.289 --> 00:22:37.809 are not trying to save the business. You are 00:22:37.809 --> 00:22:40.349 trying to sell the furniture, the fixtures, the 00:22:40.349 --> 00:22:43.549 inventory, everything for pennies on the dollar. 00:22:43.710 --> 00:22:45.990 They are the vultures you call when the animal 00:22:45.990 --> 00:22:47.670 is already down on the side of the road. That 00:22:47.670 --> 00:22:50.329 is such a grim realization for the thousands 00:22:50.329 --> 00:22:53.130 of employees. The moment that name gets mentioned, 00:22:53.269 --> 00:22:55.829 you know it's over. The criteria for closing 00:22:55.829 --> 00:22:58.539 the stores were just... brutal and clinical. 00:22:58.940 --> 00:23:02.240 Performance, profitability, and most importantly, 00:23:02.380 --> 00:23:05.420 proximity to competitors. They specifically listed 00:23:05.420 --> 00:23:08.660 Best Buy, Fry's, Micro Center, and Circuit City. 00:23:09.039 --> 00:23:11.680 Basically, if a CompuSA was near a competitor 00:23:11.680 --> 00:23:13.579 that was doing it better, they shut it down. 00:23:13.880 --> 00:23:15.920 And the sales, I remember these vividly, the 00:23:15.920 --> 00:23:18.000 giant yellow and red going out of business signs. 00:23:18.059 --> 00:23:19.839 People would just flock to the stores thinking 00:23:19.839 --> 00:23:21.500 they were getting the deal of a lifetime. But 00:23:21.500 --> 00:23:23.380 were they really? I have a suspicion you're going 00:23:23.380 --> 00:23:26.319 to tell me, no, not really. Well, the source 00:23:26.319 --> 00:23:28.779 material notes that the initial discounts were 00:23:28.779 --> 00:23:31.799 somewhere in the range of 5 % to 30 % off. But 00:23:31.799 --> 00:23:33.740 here's the trick that liquidators often use. 00:23:34.140 --> 00:23:36.119 The first thing they do is go through the store. 00:23:36.539 --> 00:23:39.660 and remove all the existing sale tax. They reset 00:23:39.660 --> 00:23:42.940 everything to the full MSRP, the manufacturer's 00:23:42.940 --> 00:23:45.900 suggested retail price. Which, in the real world 00:23:45.900 --> 00:23:48.460 of electronics retail, nobody ever actually pays. 00:23:48.599 --> 00:23:51.019 Right. So they jack the price up to the absolute 00:23:51.019 --> 00:23:53.400 maximum theoretical price, and then they take 00:23:53.400 --> 00:23:56.220 10 % or 20 % off. For the first few weeks of 00:23:56.220 --> 00:23:58.640 a liquidation sale, you are often paying more 00:23:58.640 --> 00:24:00.240 than you would have paid on a normal Tuesday 00:24:00.240 --> 00:24:03.980 a month earlier. That is just devious. It's capitalizing 00:24:03.980 --> 00:24:07.509 on the panic. that everything must go. Signage, 00:24:07.549 --> 00:24:09.890 it triggers a scarcity instinct in people. You 00:24:09.890 --> 00:24:12.609 saw people buying obviously broken open box cables 00:24:12.609 --> 00:24:14.750 and outdated software just because of that big 00:24:14.750 --> 00:24:16.789 yellow banner out front. And by the very end? 00:24:17.029 --> 00:24:21.670 By May of 2007, it was 90, 95 % off. By then, 00:24:21.670 --> 00:24:23.410 you were literally buying the shelving units. 00:24:23.569 --> 00:24:25.710 You're buying the employee lockers from the break 00:24:25.710 --> 00:24:27.930 room. It's just the carcass of the business being 00:24:27.930 --> 00:24:32.309 picked clean. So by May 2007, that first big 00:24:32.309 --> 00:24:35.519 wave of closures is done. But the corporate body 00:24:35.519 --> 00:24:37.339 is still twitching a little bit. In December 00:24:37.339 --> 00:24:40.359 of 2007, the company itself is sold. It's sold 00:24:40.359 --> 00:24:42.960 to a company called Specialty Equity, which is 00:24:42.960 --> 00:24:45.180 an affiliate of Gordon Brothers. Wait, hold on. 00:24:45.240 --> 00:24:47.079 So the liquidators bought the company they were 00:24:47.079 --> 00:24:50.079 hired to liquidate? Essentially, yes. The company 00:24:50.079 --> 00:24:51.680 was bought by the very people who were hired 00:24:51.680 --> 00:24:54.160 to take it apart. It's the final, final stage 00:24:54.160 --> 00:24:56.700 of corporate hospice. They kept about 103 stores 00:24:56.700 --> 00:24:59.539 open for a little while longer, mostly to sell 00:24:59.539 --> 00:25:01.680 through the remaining inventory. But the writing 00:25:01.680 --> 00:25:04.160 was on the wall in giant... Flaming letters. 00:25:04.440 --> 00:25:06.400 So that's it. That's the death of the original 00:25:06.400 --> 00:25:09.099 CompUSA. The soft warehouse that was founded 00:25:09.099 --> 00:25:12.740 back in 1984 is officially gone. But the name, 00:25:12.819 --> 00:25:15.559 the brand itself, that didn't die. And this is 00:25:15.559 --> 00:25:17.839 where we enter the zombie phase. Because brands 00:25:17.839 --> 00:25:19.900 have value, even damaged ones. People recognize 00:25:19.900 --> 00:25:23.359 the name CompUSA. So in January 2008, another 00:25:23.359 --> 00:25:26.240 company, Systemax, steps in. Systemax. They were 00:25:26.240 --> 00:25:28.619 the parent company of Tiger Direct, right? Correct. 00:25:29.019 --> 00:25:31.900 And Tiger Direct was a huge catalog and online 00:25:31.900 --> 00:25:33.839 retailer for computer parts and electronics. 00:25:34.140 --> 00:25:36.079 They were very aggressive, very nerd -centric. 00:25:36.259 --> 00:25:39.099 They bought the CompUSA brand, the trademarks, 00:25:39.180 --> 00:25:42.400 and 16 of the remaining retail locations, mostly 00:25:42.400 --> 00:25:45.180 in Florida, Texas, and Puerto Rico. So the strategy 00:25:45.180 --> 00:25:48.900 was to use the CompUSA skin to fuel Tiger Direct's 00:25:48.900 --> 00:25:51.099 move into a physical retail presence. Exactly. 00:25:51.359 --> 00:25:52.940 It's cheaper than building a brand from scratch. 00:25:53.420 --> 00:25:55.440 They slapped the CompUSA name on their existing 00:25:55.440 --> 00:25:58.059 Tiger Direct stores. They tried to wear the skin 00:25:58.059 --> 00:25:59.960 of the fallen giant to give themselves instant 00:25:59.960 --> 00:26:02.259 recognition. And to their credit, they tried 00:26:02.259 --> 00:26:04.940 to innovate, too. In October 2008, they launched 00:26:04.940 --> 00:26:07.799 something they called Retail 2 .0. Oh, the irony 00:26:07.799 --> 00:26:11.119 of this is just painful. Retail 2 .0 was a strategy 00:26:11.119 --> 00:26:13.640 to deeply integrate Internet shopping into the 00:26:13.640 --> 00:26:15.599 physical stores. You could walk in, use these 00:26:15.599 --> 00:26:17.839 computer terminals to see the full online inventory. 00:26:18.000 --> 00:26:20.079 You could scan a product on the shelf and see 00:26:20.079 --> 00:26:22.359 online reviews right there. That sounds exactly 00:26:22.359 --> 00:26:25.059 like what CompUSA should have done in 1999 or 00:26:25.059 --> 00:26:28.579 2000. It was the perfect idea, executed nearly 00:26:28.579 --> 00:26:32.289 a decade too late. If the original CompUSA had 00:26:32.289 --> 00:26:34.269 done this when they were the undisputed market 00:26:34.269 --> 00:26:36.789 leader, they might have become Amazon before 00:26:36.789 --> 00:26:40.990 Amazon did. But doing it in 2008. under a zombie 00:26:40.990 --> 00:26:43.730 brand in the middle of a global financial crisis, 00:26:43.970 --> 00:26:46.509 it was completely doomed from the start. And 00:26:46.509 --> 00:26:48.470 the zombie eventually ran out of steam, too. 00:26:48.630 --> 00:26:51.529 In November 2012, System X announced they were 00:26:51.529 --> 00:26:54.150 dropping the names. They dropped both Compiose 00:26:54.150 --> 00:26:56.569 and Circuit City because, yeah, they had bought 00:26:56.569 --> 00:26:58.309 the Circuit City brand, too. They were like a 00:26:58.309 --> 00:27:00.789 collector of fallen retail giants. They decided 00:27:00.789 --> 00:27:02.769 to consolidate everything under their core brand, 00:27:03.009 --> 00:27:05.910 Tiger Direct. Customers got an email on November 00:27:05.910 --> 00:27:09.470 7, 2012, and just like that, the CompUSA name 00:27:09.470 --> 00:27:11.869 was stripped from the last few storefronts. But 00:27:11.869 --> 00:27:14.450 even that wasn't the final, final end. No, because 00:27:14.450 --> 00:27:16.509 intellectual property is like a hot potato. It 00:27:16.509 --> 00:27:18.309 just keeps getting passed around from one holding 00:27:18.309 --> 00:27:21.009 company to another. In December 2013, the IP 00:27:21.009 --> 00:27:23.849 was sold to a realty group, of all things, called 00:27:23.849 --> 00:27:28.150 Jassily 645 Realty. Then, in 2018, it was leased 00:27:28.150 --> 00:27:30.359 to a company called Deal Central. And I remember 00:27:30.359 --> 00:27:32.380 this vaguely. There's a press release and some 00:27:32.380 --> 00:27:35.440 minor news stories in 2018 about a grand relaunch 00:27:35.440 --> 00:27:39.119 of CompUSA .com. There was. A splash page went 00:27:39.119 --> 00:27:41.599 up. There was a press release full of buzzwords, 00:27:41.740 --> 00:27:44.980 a promise that the king would return to reclaim 00:27:44.980 --> 00:27:47.779 his throne. And what is the reality today as 00:27:47.779 --> 00:27:49.960 we're talking? The reality is an error page. 00:27:50.480 --> 00:27:53.119 As of right now, the domain redirects to absolutely 00:27:53.119 --> 00:27:56.019 nothing. It is the digital equivalent of an empty, 00:27:56.140 --> 00:27:58.839 weed -choked lot where a grand castle used to 00:27:58.839 --> 00:28:02.700 stand. The soft warehouse is finally, definitively, 00:28:02.700 --> 00:28:05.380 and completely closed for business. What a wild 00:28:05.380 --> 00:28:08.119 ride. From a single warehouse in Addison, Texas, 00:28:08.180 --> 00:28:10.880 to a multi -billion dollar empire, to a zombie 00:28:10.880 --> 00:28:13.779 brand, to a 404 error. It really is an incredible 00:28:13.779 --> 00:28:16.029 story. So let's try to wrap this up. What are 00:28:16.029 --> 00:28:17.549 the big takeaways here? If you're looking at 00:28:17.549 --> 00:28:19.490 this as a business case study, what did we learn 00:28:19.490 --> 00:28:22.009 from the fall of CompUSA? I think the first and 00:28:22.009 --> 00:28:23.789 most important lesson is about the life cycle 00:28:23.789 --> 00:28:26.430 of the category killer. That model building a 00:28:26.430 --> 00:28:28.450 massive store with absolutely everything in it. 00:28:28.509 --> 00:28:30.730 It worked beautifully in the 80s and 90s for 00:28:30.730 --> 00:28:33.829 one simple reason. Information was scarce. What 00:28:33.829 --> 00:28:36.369 do you mean by information being scarce? I mean 00:28:36.369 --> 00:28:39.170 that in 1992, if you wanted to know which printer 00:28:39.170 --> 00:28:41.269 was the best one to buy, you had to go to the 00:28:41.269 --> 00:28:44.089 store and ask the guy in the red shirt. Or... 00:28:44.349 --> 00:28:46.150 Maybe if you were dedicated, you'd read a print 00:28:46.150 --> 00:28:48.630 magazine. But for the most part, the retailer 00:28:48.630 --> 00:28:50.730 held all the knowledge. Right. They were the 00:28:50.730 --> 00:28:52.970 gatekeepers of the information. But the internet 00:28:52.970 --> 00:28:55.430 completely destroyed that monopoly on information. 00:28:56.329 --> 00:28:58.869 Suddenly, I could go online and read a hundred 00:28:58.869 --> 00:29:01.950 reviews on CNET. I could go to a forum and ask 00:29:01.950 --> 00:29:04.529 other users. I didn't need the guy in the red 00:29:04.529 --> 00:29:07.009 shirt to explain the specs to me anymore. In 00:29:07.009 --> 00:29:09.210 fact, pretty soon, I often knew more than he 00:29:09.210 --> 00:29:12.230 did. The value add, their main reason for existing, 00:29:12.390 --> 00:29:15.660 it just... Evaporated. It evaporated almost overnight. 00:29:15.920 --> 00:29:18.079 And the second big takeaway is about adaptability. 00:29:18.940 --> 00:29:21.400 CompUSA was crushed by competitors like Best 00:29:21.400 --> 00:29:23.599 Buy, who adapted faster to the home entertainment 00:29:23.599 --> 00:29:26.180 trend, and obviously by the very technology they 00:29:26.180 --> 00:29:28.440 sold the Internet. But I don't think its failure 00:29:28.440 --> 00:29:30.180 was inevitable. You don't think so? A lot of 00:29:30.180 --> 00:29:31.759 people say that big brick -and -mortar computer 00:29:31.759 --> 00:29:34.079 stores were just doomed no matter what they did. 00:29:34.259 --> 00:29:36.339 No, I don't think so. And the proof is Micro 00:29:36.339 --> 00:29:39.140 Center? Oh, that's a fantastic point. Micro Center's 00:29:39.140 --> 00:29:41.220 still around. I was just in one last week. Micro 00:29:41.220 --> 00:29:43.859 Center is not just around. In many ways, it's 00:29:43.859 --> 00:29:48.160 thriving. And why? Because they are arguably 00:29:48.160 --> 00:29:51.960 more nerdy than Concur USA ever was, even in 00:29:51.960 --> 00:29:55.000 its heyday. They leaned into the hobbyist market, 00:29:55.240 --> 00:29:57.839 the PC builder market. They have that massive 00:29:57.839 --> 00:29:59.839 build -your -own -PC section in the back of the 00:29:59.839 --> 00:30:02.119 store. They have 3D printers and Raspberry Pi 00:30:02.119 --> 00:30:04.539 kits. Correct. They didn't try to become a TV 00:30:04.539 --> 00:30:07.259 store or an appliance store. They doubled down 00:30:07.259 --> 00:30:10.130 on their core niche. Comp USA, with the good 00:30:10.130 --> 00:30:12.089 guys acquisition and the home entertainment push, 00:30:12.289 --> 00:30:14.869 they try to be everything to everyone. And in 00:30:14.869 --> 00:30:17.630 doing so, they lost their core identity. Micro 00:30:17.630 --> 00:30:19.809 Center kept theirs, and that's why they survived. 00:30:20.069 --> 00:30:22.069 And we can't forget the leadership aspect in 00:30:22.069 --> 00:30:25.250 all this. The tobacco executive factor. It really 00:30:25.250 --> 00:30:27.210 highlights the critical importance of having 00:30:27.210 --> 00:30:29.349 leadership that understands and is passionate 00:30:29.349 --> 00:30:30.970 about the product, not just the spreadsheet. 00:30:31.599 --> 00:30:33.460 When you start treating computers like they're 00:30:33.460 --> 00:30:35.940 cigarettes or bars of soap, you miss all the 00:30:35.940 --> 00:30:38.220 nuances of the community. Tech consumers are 00:30:38.220 --> 00:30:40.180 smart. They know when they're being pandered 00:30:40.180 --> 00:30:43.059 to. The good guys pivot and that abrupt cancellation 00:30:43.059 --> 00:30:46.079 of the loyalty program. It just showed a management 00:30:46.079 --> 00:30:48.680 team that was completely flailing and out of 00:30:48.680 --> 00:30:50.640 touch. It's a difference between a founder led 00:30:50.640 --> 00:30:53.759 vision and a conglomerate managed portfolio asset. 00:30:54.430 --> 00:30:56.690 It's a different mindset. So here's the provocative 00:30:56.690 --> 00:30:58.470 thought I want to leave everyone with today. 00:30:58.710 --> 00:31:01.490 We look back at CompUSA with this mixture of 00:31:01.490 --> 00:31:04.130 nostalgia and maybe a little bit of pity. But 00:31:04.130 --> 00:31:06.230 we are living in a time right now where retail 00:31:06.230 --> 00:31:08.710 is shifting again just as dramatically as it 00:31:08.710 --> 00:31:10.970 did in the late 90s. Absolutely. We are seeing 00:31:10.970 --> 00:31:13.390 the exact same patterns play out. We see other 00:31:13.390 --> 00:31:16.349 big retail giants struggling. We see the rise 00:31:16.349 --> 00:31:19.619 of AI and shopping and... instant delivery services. 00:31:19.940 --> 00:31:22.000 So looking at the current landscape, the Best 00:31:22.000 --> 00:31:24.680 Buys, the Game Stops, even the Tarnets of the 00:31:24.680 --> 00:31:27.299 world, who is the next CompUSA? That is the multi 00:31:27.299 --> 00:31:29.480 -billion dollar question, isn't it? Who right 00:31:29.480 --> 00:31:32.019 now is pivoting to home entertainment when they 00:31:32.019 --> 00:31:35.200 should be looking at whatever Retail 3 .0 is 00:31:35.200 --> 00:31:38.220 going to be? Who is about to cancel their loyalty 00:31:38.220 --> 00:31:39.880 program because they don't really know if it's 00:31:39.880 --> 00:31:41.880 working? It's a very scary question if you're 00:31:41.880 --> 00:31:44.140 a shareholder in one of those companies. History 00:31:44.140 --> 00:31:46.180 doesn't repeat itself, but it certainly rhymes. 00:31:46.619 --> 00:31:50.740 And somewhere... Right now, there is a new software 00:31:50.740 --> 00:31:53.900 house starting up. Maybe it's a website. Maybe 00:31:53.900 --> 00:31:56.220 it's an app. Maybe it's just a guy in a garage 00:31:56.220 --> 00:31:59.460 selling specialized AI servers. And they are 00:31:59.460 --> 00:32:01.859 going to eat everyone's lunch in the next 10 00:32:01.859 --> 00:32:03.940 years. And we will be here to do a deep dive 00:32:03.940 --> 00:32:06.119 on them when they do. Absolutely. Thank you for 00:32:06.119 --> 00:32:08.259 listening to this deep dive into the rise, fall, 00:32:08.380 --> 00:32:11.309 and strange afterlife of CompUSA. If you have 00:32:11.309 --> 00:32:14.210 any fond memories of buying a 50 -pound CRT monitor, 00:32:14.450 --> 00:32:16.809 or if you still have your old CompUSA rewards 00:32:16.809 --> 00:32:19.349 card in a junk drawer somewhere, take a moment 00:32:19.349 --> 00:32:21.549 to appreciate just how fast the world moves. 00:32:21.690 --> 00:32:24.650 And remember, adaptability is survival. We'll 00:32:24.650 --> 00:32:25.349 see you on the next dive.