We are one month away from Black Friday, the first official shopping day of the 2019 holiday season. Fry’s Electronics is supposed to be stocking up on new inventory for the holidays and give longtime customers confidence that the 34-year-old retail chain will remain open in 2020. Based on recent entries to The Layoff, customers at many stores are finding the shelves more barren of inventory and salesclerks are still claiming that they’re switching vendors. Three new developments may explain why Fry’s will continue to be a zombie retailer.
One of the classic signs that a retail chain is going out of business is requiring vendors to provide inventory on consignment. If you’re not familiar with consignment, here’s a brief overview. Retailers buy inventory from the vendors and take all the risks in selling the inventory. If the inventory doesn’t sell, the retailer loses money. Consignment is where the vendors provide inventory to the retailers and take all the risks. If the inventory doesn’t sell, the vendors must take it back from the retailer. If a retailer is going out of business, the last thing they want is to get stuck with unsold inventory. Most vendors won’t provide inventory on a consignment, especially with consumer electronics that has low profit margins. Hence, empty shelves at Fry’s.
I read a comment from an anonymous poster last month that the family owners of the privately held corporation won’t shut down the stores because it would be too expensive. That comment didn’t make much sense to me at the time. Shutting down Fry’s Electronics is going to be expensive, whether voluntary by the owners or involuntary by a bankruptcy court. I read a comment by an anonymous poster this month that the only inventory that Fry’s does carry is high-price ticket items like appliances and televisions. The previous comment now makes sense. A lot of cash is tied up in those high-price–and high profit margin–ticket items. The owners are probably holding off until Black Friday to sell off all the appliances and televisions before shutting down the stores.
A South Korean company got a permanent court injunction in a Texas federal court to prevent Fry’s Electronics from selling Philips TVs and light bulbs. Seoul Semiconductor Company, Limited, is a South Korean research-and-development company that has patents Philips is infringing upon with their TVs and light bulbs. Fry’s is a distributor for Philips televisions and light bulbs in the United States. The Texas Eastern District federal court is a friendly haven for patent trolls because the judges routinely rule against corporations, and has jurisdiction because Fry’s has a store in Planos. Earlier this year, Apple closed two existing stores and consolidated them into the new Dallas store to avoid being sued by patent trolls in that court. Because of the court injunction, Fry’s has fewer inventory to sell this holiday season.