The Good Guys!, Inc.

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The Good Guys!, Inc.

700 Marina Blvd.
Brisbane, California 94005-1840
U.S.A.
(415) 615-5000
Fax: (415) 615-6287

Public Company
Incorporated: 1973
Sales: $503.9 million
Employees: 2,474
Stock Exchanges: NASDAQ
SICs: 5731 Radio, TV & Electronics Stores

As one of the top consumer electronics retailers in the country, and a leading specialty electronics retailer in California, The Good Guys!, Inc., is a dominant force in an extremely competitive field. The company sells televisions, video equipment, laser discs, car and home stereo components, telephones, cellular phones and pagers, cameras, and personal computers. Despite challenges from such powerful competitors as Circuit City Stores Inc. and a recession that damaged many California businesses, The Good Guys! rallied and maintained its edge in the marketplace.

The company was founded in 1973 by Ronald A. Unkefer, who would ultimately become chairman of the board. Unkefer opened his modest television shop in San Francisco’s Marina district, a fashionable area frequented by tourists. At first, The Good Guys! was a one-man operation, which led a vendor to ask, “There’s only one of you, so how can you be The Good Guys?” The name did not derive from the number of employees, but from a catch phrase Unkefer borrowed from a favorite radio station. As he expanded his staff, he encouraged customers to think of his salespeople as “good guys” who could help them get the best deal on the latest equipment.

Initially, Unkefer did not have ambitions to become a major player in the field of consumer electronics. The Cleveland native had moved to California simply because he wanted to live in the state and run some sort of business. However, as time wore on and new technologies, such as VCRs and state-of-the-art stereo systems, were introduced, he began to see growth opportunities. “It certainly wasn’t a grand plan at the time to grow as big as we are now,” he reflected in an interview with the San Francisco Business Times in 1991, when there were 33 Good Guys! locations. “When I opened up the second store in 1976 I was almost talked into it by a very determined real estate developer.”

Unkefer decided to launch the second store to help pay his advertising bills at the San Francisco Chronicle. The Good Guys! was well positioned to take advantage of the growth in consumer demand for stereo components in the 1970s, and sales increased steadily each year. Unkefer maintained his low-key approach to business—by 1983, there were only four Good Guys! stores in San Francisco. The company continued to expand its product offerings, adding video cassette recorders for consumers eager to create their own home entertainment centers.

In 1985, the company reported net sales of about $71 million, and a pretax income of $2.25 million. A year later, Unkefer took his company public to fund further expansion beyond the existing eight stores. The Good Guys! had already opened stores outside San Francisco, and was targeting San Jose as the location for its next new store.

The formula for success at The Good Guys! was simple and straightforward from the outset. The company used a combination of extensive promotions and advertising, along with competitive pricing and a broad selection (offering 20 percent more models than rival stores). From the early days, customer service was a cornerstone of the company’s strategy. The motto at The Good Guys! was “Our name is our way of doing business.”

During the late 1980s, The Good Guys! kept up an aggressive program of growth and expansion. In 1987, the company made its first foray outside the Bay Area when it opened two stores in Sacramento. By this time, The Good Guys! was targeting a decidedly upscale consumer base. According to one retail specialist quoted in Sacramento’s Business Journal, “It’s the type of store in which you would find the owner of a BMW searching for an audio system for his car.”

However, even yuppie consumers did not prevent The Good Guys! from having a bad year in 1986. Earnings dropped by nearly 40 percent from the previous year, and the company’s net income fell from $2.2 million to $1.4 million. At one point, the stock plunged $3.125 per share. According to Unkefer, the soft market for durable goods—particularly VCRs—and stiff competition were to blame.

For the balance of the decade, The Good Guys! took several steps to boost sales. Feedback from customers revealed that the company’s practice of haggling over prices was unpopular and contributed to a “sleazy salesman” stereotype in the minds of consumers. So, in 1987, the company stopped negotiating prices and introduced a lowest-price guarantee. If a competitor offered the same piece of equipment at a lower price, The Good Guys! promised to beat that price. The company also instituted a 30-day, no-questions-asked return policy and upgraded its merchandise mix, focusing on higher-end brands.

These fundamental changes produced the desired results. Net income for 1987 was back up, to $2.6 million. By the end of 1988, sales had increased 24 percent and net income was $3.3 million. The company had 17 stores and planned to open an 18th in Reno, Nevada. The company retained its impressive sales and income figures through the end of the decade, despite the appearance of arch rival Circuit City Stores Inc. in San Francisco in 1989. Circuit City opened a store two blocks from one Good Guys! location. The move worked for, rather than against, The Good Guys!, however. Company President Unkefer noted in the San Francisco Business Times that, “We do better where people can compare,” adding that his company offered more upscale merchandise and did not offer appliances.

The Good Guys! entered the 1990s flush and prosperous. The company had grown to 30 stores, and sales had increased 51 percent. Net income increased 86 percent over 1989, hitting $7.4 million. The company broke new ground by opening six stores in Los Angeles, a billion-dollar consumer electronics market that is one of the hottest and most competitive in the country. The move brought The Good Guys! toe-to-toe with a dozen major competitors, including Circuit City. Unkefer was confident that The Good Guys! could hold its own, however, noting that the company’s success rested on its dedication to customer service.

However, the consumer electronics market is generally among the first to suffer when recession hits, as it did in California in 1990 and 1991. Analysts predicted difficult times in the wake of a shocking 11 percent, industrywide decline in the sale of color televisions during the second quarter of 1990. The Good Guys! did not feel the effects of the recession immediately. Unkefer predicted sales growth of 25 percent per year for the next several years. By the end of 1991, the company had 33 stores and sales of more than $427 million. In addition to such basics as televisions and stereos, The Good Guys! now offered fax machines, video cameras, telephones, and answering machines. With the highest sales per square foot of any consumer electronics chain, it looked like the company might emerge relatively unscathed from the recession.

Sales and net income did continue to increase in the early 1990s, but the gains were more modest than they’d been in the past. In 1992, for example, same-store sales went up only two percent. “The company’s goals in this difficult retail climate are to continue to build market share and maintain our sales momentum,” Robert A. Gunst, the company’s president and new chief operating officer, said in an interview in early 1992.

A softer market didn’t curb expansion. The Good Guys! grew to number 44 stores by late 1993, the company’s 20th anniversary year. By this time, The Good Guys! was well established as one of the top consumer electronics retailers in the country. In keeping with its customer service credo, The Good Guys! stores featured special listening rooms for speakers and on-site installation of car stereos and speakers, cellular phones, and car alarms. The Good Guys! was consistently ranked as one of California’s top companies. In 1993, sales for the now 48-store chain were $552.4 million, a 10 percent increase over the previous year. Net income was $7.6 million.

In a move to further boost sales, reinvigorate growth, and meet consumer demand, the company began selling personal computers in 1993, concentrating on such name brands as IBM, Apple, Compaq, and Packard Bell. With the increase in home offices and advances in information technology, The Good Guys! hoped to catch a wave of demand, as it did in the 1980s with home video products. “We feel it is essential for consumer electronics to participate in the information superhighway, and we believe interactive technology is going to be a substantial part of consumer electronics,” said Tom Hannah, senior vice president of stores, in a 1993 interview with the San Francisco Business Times. The move was a daring one, given the vagaries of the computer industry and the lingering effects of the state’s worst economic problems since the Great Depression. One analyst predicted that the move would ultimately hurt The Good Guys! by diluting the company’s focus. After one month, however, The Good Guys! reported that computer sales had exceeded projections.

As The Good Guys! entered the mid-1990s, its future seemed to brighten further. The company opened three new stores in San Diego and repaid customer loyalty with a “90 Days Same as Cash” credit plan for holders of a “Preferred Customer Card.” To stimulate consumers to buy electronics, The Good Guys! stepped up its targeted direct mail campaign and offered cross-promotions with the California State Lottery and Tower Records, a regional chain.

The company was rewarded with record second-quarter earnings in 1994. Earnings rocketed up 691 percent over the same quarter for the previous year, and sales increased 37 percent. Cellular phones were a top-selling item, and computer sales were stronger than predicted. As the decade progressed, The Good Guys! remained committed to its aggressive policy of expansion, with plans to open stores in Las Vegas and the Pacific Northwest.