Tuesday, January 27, 2015

Pa. electronics retailer's competitor heads back to Jersey

Bob Cole, owner of Bob & Ron´s World Wide Stereo, strolls through his Montgomeryville store, which lost customers and employees after a competitor opened nearby.
Bob Cole, owner of Bob & Ron's World Wide Stereo, strolls through his Montgomeryville store, which lost customers and employees after a competitor opened nearby. SHARON GEKOSKI-KIMMEL / Staff Photographer
Bob Cole, owner of Bob & Ron´s World Wide Stereo, strolls through his Montgomeryville store, which lost customers and employees after a competitor opened nearby. Gallery: Pa. electronics retailer's competitor heads back to Jersey

It's time for a victory dance at Bob & Ron's World Wide Stereo, the $12-million-a-year custom retailer that got a big scare in May 2009.

That's when North Jersey-based Sixth Avenue Electronics, with $400 million in annual sales, made its Pennsylvania debut - right across the street from Bob & Ron's Montgomeryville flagship store.

In the electronics business for more than three decades, Bob Cole, one of the store's namesakes - "Ron" was among his first hires - had known many tests. But none quite as obnoxiously close as this one.

Cole's salespeople pressed their faces to the window and watched with dread as shoppers on Black Friday 2009 formed a line around the Sixth Avenue Electronics store, lured by megadeals such as 42-inch TVs selling for $300 less than Bob & Ron's best price.

Then came the defections of once-loyal customers. And then the layoffs - a half-dozen in a company consisting of two stores (the other is in Ardmore), one warehouse, and 65 employees.

"It was demoralizing," Cole recalled during an interview a week ago.

But without warning Jan. 31, black-and-white signs appeared on the glass doors of the 25,000-square-foot threat that loomed for 20 months on the other side of Route 309. They read: "We've closed this location."

So why aren't they all-out rejoicing at Bob & Ron's?

"There's a certain amount of joy that I survived," Cole acknowledged. "There was no joy that these guys went out of business. People lost their jobs."

To be clear, the 700-employee Sixth Avenue chain has not called it quits entirely, just in Cole's retail backyard - or front yard, in this case. Besides the Montgomeryville store, it closed outlets in Langhorne and Deptford.

Together, those three stores employed 60 people, 10 of whom were placed at other stores in the chain, said Tom Galanis, vice president of Sixth Avenue's operations. Two North Jersey stores that are redundant to existing locations will close at the end of the month. That will leave the 31-year-old family-owned enterprise with 14 stores in Delaware, New Jersey, and New York.

Especially in the latter two states, Sixth Avenue enjoys the type of familiarity and customer loyalty that Cole has cultivated since abandoning a career in psychology in 1979. That's when he opened his Montgomeryville store less than a mile from what was then a brand-new Montgomery Mall.

But getting the Sixth Avenue name known around Philadelphia was turning out to be an expensive and challenging proposition, Galanis said - in large part because of the region's fragmented media market, served by numerous newspapers and television and radio stations.

That meant a lot of advertising buys. Add to that the balance-sheet-busting reality that Sixth Avenue's business projections were off 25 percent to 30 percent, depending on the month.

And add to that the recent arrival in the market of another formidable competitor, hhgregg Inc. of Indiana, Galanis said. With its broad array of product, including appliances, hhgregg is more like Best Buy and Sixth Avenue than Bob & Ron's, whose in-store offerings are limited to audio and video systems.

After deliberating whether "to spend another three to four years developing a marketplace," Galanis said, Sixth Avenue executives concluded that "the numbers just don't add up," that there was "an error in judgment," and that the Pennsylvania stores should close.

As a company, "we stayed in business through two gulf wars, through 9/11," he said. "The way we've done that is we're very careful and cautious."

Rather than risk bringing down the rest of the company, Galanis said, that approach led to the decision to lose the millions of dollars in investment Sixth Avenue had made to buy and renovate its three Philadelphia-area stores.

From his high-def perch opposite the now-vacant Sixth Avenue location in Montgomeryville, Cole said he "admired their courage to make the hard, quick decision."

So, too, does Robert Ain, an industry consultant in Boston who called Sixth Avenue's departure from Pennsylvania and South Jersey "a very smart move" for retailers of its size, who have found expansion difficult "unless it's [in] their home market."

Not that Cole has gotten over the indignity of Sixth Avenue's in-his-face site selection. "It hurt my feelings," he said, especially since he knew Galanis personally. It also caused Cole to veer temporarily from his customer-service-based business approach into the price-centric sales gimmicks of big-box retailers.

"We bought a bunch of TVs real cheap just to get people in the door," he said. The TVs sold, but with margins on all TVs so low these days, Bob & Ron's made no money on the deals.

"So, in 2010, I went against all advisers and went back to branding," Cole said. "My advertising was about the better experience" at Bob & Ron's, emphasizing the expertise of the company's sales staff.

Now, with his across-the-road competitor gone, Cole is concentrating on building Bob & Ron's e-commerce side. He expects online sales to be twice as big as the rest of the business by the end of this year, though profits from them are substantially lower than those from the high-end store sales and custom-installation jobs that are the company's cornerstone.

Of course, Cole is also keeping one eye on the hhgregg store just to the south on Route 309, and an ear to rumblings that another electronics heavyweight, P.C. Richard & Son, might have expansion plans that could include Bob & Ron's turf. Currently, that chain's closest store is in Northeast Philadelphia.

Cole's strategy for handling any new rivals:

"I'm going to keep doing what I'm doing until I win the lottery."

 


Contact staff writer Diane Mastrull at 215-854-2466 or dmastrull@phillynews.com.

Diane Mastrull Inquirer Staff Writer
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