Why did Frys go out of business?

Dive Brief:

• Fry's Electronics announced on Tuesday that it ceased operations and commenced a wind-down process, according to a message on the company's website. 
• The consumer electronics retailer cited changes in the retail industry and "challenges posed by the Covid-19 pandemic" as reasons for its decision. 
• Fry's is closing its 31 stores across nine states and has shut down online operations. 

Dive Insight:

After nearly 36 years in business, Fry's Electronics is closing its operations permanently. 

The company, which is based in San Jose, California, was founded in the mid-80's as a Silicon Valley electronics store with the goal of providing a one-stop-shopping environment for high-tech professionals. 

The shut down "represents the end of an era and a sad day for its army of loyal shoppers," Neil Saunders, managing director of GlobalData, said in emailed comments. 

COVID-19 has been pointed to as the catalyst for many bankruptcies that have occurred in the past year, as retailers experienced the impact of changing consumer spending habits, hesitation with indoor shopping and temporarily closed stores last spring.

However, increased competition from Best Buy and Amazon coupled with large physical stores may have put Fry's on a precarious path prior to the pandemic. 

"[E]ven before the coronavirus hit, Fry's was struggling to make the economics of its business stack up. More and more customers were drifting off to rivals, including specialists like Best Buy and generalists like Target, as well as to online retailers," Saunders said. 

While electronics as a category was not hit as hard as other parts of the industry, it has taken a dip in sales, most recently posting a 4% loss according to January's monthly retail sales numbers from the U.S. Commerce Department. In December, electronics were down 15.7% year over year. 

Although competitor Best Buy reported a blockbuster Q3 with sales up 21% year over year and a digital sales increase of nearly 174%, it too is making operational shifts in response to a new consumer reality. The retailer has reportedly cut jobs and hours for some of its store workers as it leans more into a digital strategy. 

Fry's Electronics stated the retailer "will implement the shut down through an orderly wind down process that it believes will be in the best interests of the Company, its creditors, and other stakeholders." 

The post-economic fallout caused by the pandemic has claimed a West Coast icon.

Fry's Electronics announced on its website it has shut down operations and closed all 31 of its stores after 36 years, citing "changes in the retail industry and the challenges posed by the COVID-19 pandemic."

The company's full website has been pulled down, replaced only with a message detailing the chain's closure.

Fry's is reaching out to vendors and to customers who have ongoing repairs with the chain about next steps.

"The Company will implement the shut down through an orderly wind down process that it believes will be in the best interests of the Company, its creditors, and other stakeholders," reads an excerpt of the message on Fry's website.

Samsung deal:Want to try foldable devices the Z Flip 5G and Z Fold2 5G smartphones?

Social media:Trump wants back on Facebook and Instagram, appeals suspension

The electronics store chain operated 31 stores in nine states, mostly in California and Texas.

The company was founded in 1985 in Sunnyvale, California, by the three Fry Brothers – John, Randy, and Dave – and Kathy Kolder, according to a cached version of the Fry's website detailing its history.

Each store had its own theme, such as the Sunnyvale location detailing the history of Silicon Valley, and the Houston store paying tribute to the history of Texas oil.

Despite its smaller size compared to giants like Best Buy, Fry's was an icon in electronics retail, said Neil Saunders, managing director of consultancy GlobalData Retail. But even before the pandemic, big chains like Best Buy and Target had siphoned customers away from Fry's.

"That left the business increasingly reliant on its core electronics customers for sales," said Saunders. "However, even here, more and more technology enthusiasts were buying computer and electrical components from online suppliers."

Fry's is just the latest business hit hard by the COVID-19 pandemic, as Americans quarantined to limit the spread of the virus. Last year, several businesses filed for bankruptcy in the wake of the pandemic, including J.C. Penney, Neiman Marcus and Hertz.

Follow Brett Molina on Twitter: @brettmolina23.

Why did CompUSA go out of business?

Is Fry's Electronics still around?

What happened to Fry's Electronics merchandise?