Why is CompUSA Going Out of Business?

Perhaps you’re as surprised as I am that CompUSA is going out of business, and perhaps, like me, you become less and less surprised the more you think about it. Here are some of the more obvious reasons:

1. Competition. Everything at CompUSA can be bought somewhere else, and probably for cheaper. Local computer stores, online stores, office stores (Office Depot, OfficeMax), electronics retailers (Best Buy), and warehouse stores (i.e. Costco, Sam’s Club, etc.) are all in on the game. Everything CompUSA sells is a commodity and therefore it’s all about price, putting CompUSA in a tough spot to begin with.

2. Poor Customer Service. Fill a computer store with a bunch of geeky-but-not-geeky-enough high-school students and you end up with a lot of frustrated customers. On average, I think CompUSA employees were able to answer about 10% of my questions. If I go to a computer store I want nerds who know more than just video games.

3. Massive Overhead. Those huge stores and droves of ineffective employees don’t come cheap.

4. Lack of Leadership. I couldn’t tell you who any of CompUSA’s CEOs has been, but when I read “The chain went through several CEOs and tried different turnaround strategies” I know there’s a leadership problem. I’m not necessarily talking about the CEOs either, the problem could lie with the board, but in all likelihood it’s a combination of CEOs who lack good ideas and the commitment and passion to make them happen.

What Could Have Saved CompUSA?

I’d gather none of the CEOs CompUSA ever hired had actually been customers of CompUSA. If they had been, they would have made some more dramatic changes. Think about it, why did you ever buy anything at CompUSA? For me, there was one reason–I needed it fast and CompUSA had it in stock. If I didn’t need it that day, then I generally bought it online because I could find it cheaper somewhere else. So here’s what I, somebody who’s never been the CEO of any major company and who has little retail management experience, would do to fix CompUSA.

1. Smaller, cheaper display areas. Show space is expense and people don’t care. That’s why people shop at Costco. Cut costs by shrinking the overall size of stores and by storing inventory more efficiently. CompUSA should be a small retail store with 3,000-5,000 sq ft. of space, not 20,000+, and they make poor use of overhead space.

2. Carry items people need immediately. What do people need and need fast when they need it? I don’t know the answer myself, but I know that’s why I go to CompUSA and if most customers are like me then it only makes sense for CompUSA to focus on those products that are hard to find anywhere else and which people generally need in a hurry.

3. Carry more products. My previous comment may give the impression I think CompUSA should cut their product mix down. Not at all. In fact, they should probably increase the number of products they carry.

4. Get rid of employees. Not all of them, just most of them. 2-3 employees who really know their stuff are 10 times better than 20 employees who have no clue. How do you get good employees? Give them half the money you were giving to the other 15 employees without a clue, then give them ongoing training and a track for graduation. Don’t expect a retail employee to make CompUSA their career, but make it an effective stepping-stone, such that it becomes part of a legitimate career path. If you can keep them around for 2-4 years then that should be more than good enough.

5. More stores. People who need things in a hurry don’t like to drive so far to get them. Instead of having two huge stores 40 miles apart, open stores 1/5 the size that are 10 miles apart. Sure, you may not have as much room for inventory, but if one store doesn’t have it the next store is just 10 minutes away. Someone could rush it over while the customer waits, or the customer can drive a few minutes to pick it up. But am I going to drive 40 minutes to pick something up from another store after I already drove 20 minutes to the first one? Maybe, if I really, really need it, but if it’s not absolutely necessary today then CompUSA just lost a sale.

Of course I’m not a genius CEO, but evidently the ones they’ve had weren’t either. They should have taken a chance on me. Things couldn’t have ended much worse, right? And I would have worked for a lot less, to boot.