Saying it misjudged customer buying practices, Pacific Telesis' computer-retailing subsidiary announced Tuesday that it will close 15 of its 24 stores and focus instead on direct marketing to medium and large businesses.
Pacific Telesis formed the subsidiary, PacTel InfoSystems, about three years ago to sell computer and telecommunications systems to businesses through a network of so-called customer demonstration centers. But that strategy failed.
Most prospective customers, the company discovered, preferred to buy computer and telecommunications equipment separately. They also preferred to try the equipment at their own offices rather than in a store, said Gary Hawthorne, marketing director for PacTel InfoSystems' computer division.
"We made a mistake in opening so many stores," Hawthorne said in an interview. "We're really reorganizing our marketing to suit our market."
Seven of the stores to be closed are in Los Angeles and Orange counties, where in the summer of 1986, PacTel InfoSystems launched an aggressive expansion. The company also will shut two stores in Oregon, one in Washington and one each in Sacramento, San Francisco, San Jose, San Mateo and Walnut Creek, where PacTel InfoSystems is headquartered.
PacTel InfoSystems last summer scrapped its original concept of selling computers and communications equipment as integrated systems. Instead, it formed separate divisions for computers and telecommunications.
"The medium and large companies that are our main customers are used to being called on" by sales agents, Hawthorne said. "In a million years, they wouldn't dream of walking into a retail store to buy a computer--oh, maybe at Christmas for themselves, but certainly not for the company."
Consequently, the stores have become costly mistakes, occupying prime retail space in high-rent areas. The store closings will reduce costs without reducing sales, Hawthorne maintained. He also said that this year's sales, which the company would not disclose, are ahead of company projections for the fourth quarter.
Robert B. Morris III, an analyst with Prudential-Bache Securities, praised Pacific Telesis for "at least admitting its error." The firm, he said, "is getting out of something Wall Street questioned from day one."
Hawthorne said no layoffs are expected because of the closings and that the company is recruiting additional sales personnel in certain markets. Current sales personnel will work out of regional and branch offices, continuing to serve the same geographic areas.