FOUNTAIN VALLEY — Fry's Electronics made George Margolin an offer he couldn't refuse.
An inventor and president of a local computer club, Margolin waited in line for 90 minutes to spend several hundred dollars to buy a computer chip during the computer and electronics "super-store's" recent grand opening sale.
"Their prices were so low, I could pay more wholesale for that chip," said Margolin of Newport Beach.
With the opening of Fry's Electronics in Fountain Valley and the presence of four other computer super-store chains, Orange County is fast becoming the ideal place to buy computer hardware and software at bargain prices.
"Orange County is the only place in the country where you have all of the super-store chains going head-to-head," said Seymour Merrin, president of Merrin Information Services, a market research firm in Palo Alto. "It should be great for the consumers of Orange County, and it will be an interesting test to see how many super-stores can fit in a given area."
Elsewhere, Computer City has added two stores in the county to complement its Garden Grove location. Dallas-based CompUSA--the nation's largest super-store chain, with 58 stores and $1 billion in sales--has a store in Fountain Valley, and its top executive said the retailer is looking for more sites in south Orange County. Last weekend, Columbus, Ohio-based Micro Center opened one of its massive "computer department stores" in a converted 45,000-square-foot former Builder's Emporium location in Tustin.
Consumers also are being wooed by warehouse clubs, department stores, office product super-stores, smaller consumer electronics stores and myriad mail order companies. The increased competition spells trouble for traditional computer retailers but is generating lower prices and better selection for shoppers.
"I would say that Orange County has become the single most competitive computer market in the country," said Alan Bush, president of Computer City, a division of Tandy Corp. in Ft. Worth.
Super-stores tend to have the best prices for hardware and software because their increased buying power provides greater volume discounts. And, like other "big box" retailers--so-called because of their size and shape--super-stores pride themselves on finely tuned purchasing and inventory regimes that pare costs to the bone. "This is an industry where the weak are killed and eaten," Bush said.
Computer super-stores--those with at least 20,000 square feet of retail floor space--accounted for 8.4% of the $32 billion in personal computer products sold by retailers in the United States last year, up from virtually nothing five years ago, according to Merrin Information Services. Traditional computer stores, corporate dealers and value-added resellers--stores that package their own software with the equipment they sell--now hold 63% of the market.
But super-stores are expected to capture 22% of the nation's estimated $61.5 billion in computer product sales by 1996, while the traditional retail outlets will fall to 41.1%.
Four years ago, CompUSA opened Orange County's first super-store in Fountain Valley. Computer City, then backed by Japan's Matsushita Electric and the Inacomp Computer chain, followed suit with its Garden Grove store.
Tandy acquired the Computer City chain in 1991 and began opening similar stores around the country. So far this year, Computer City has opened stores in Brea, Santa Ana and just over the county line in Cerritos.
Bush says the chain eventually will have eight stores in Southern California. And because of the attractive demographics of Orange County, Tandy will probably open an Incredible Universe, a mega-store covering 100,000 square feet of space, compared to 30,000 for a typical Computer City, which itself carries about 5,000 types of hardware, software and accessories.
Each Computer City location generates about $30 million in annual sales and can see 10,000 people pass through its doors on a given weekend, according to Bush.
Municipalities are anxiously courting these larger retailers because of the sales taxes they generate and jobs they create.
Computer City's Santa Ana store, which is expected to generate about $300,000 in annual sales tax, is one of the city's top 10 revenue sources, according to Mayor Daniel H. Young.
Tustin officials wooed Micro Center with promises of as much as $638,000 in economic assistance over the next 10 years.
The computer super-stores rely heavily upon proven sales strategies. They emphasize low prices, broad selections of brand name and discount products and heavy advertising campaigns.
When it comes to selling computers, "you treat them like toasters and TV sets," said T. James Vaughan, western divisional sales manager for Computer City, who honed his retail skills in the highly competitive warehouse club industry. "You give customers name brands, the best prices, good service."
Not everyone agrees.