February 28, 2016
Ultimate Electronics Inc., also known as SoundTrack in Denver, CO, plans to open new superstore formats for its audio electronics products. Ultimate operates several smaller-format stores in Colorado, but experienced phenomenal sales growth when it opened 19,000-sq. ft. superstores in Salt Lake City and Orem, UT. Sales have increased 90% to $58.2 million for the six months ending July 31, 1994. One Denver, CO, SoundTrack store will be converted to the superstore format and six new superstores in the Idaho, Nevada, Utah and New Mexico.
Amid the din of major players that has come to characterize the consumer electronics business in Colorado, the once-small, once-private, Denver-based independent, SoundTrack, continues to make its voice heard, and not only is it competing with the big boys, it’s on the verge of becoming one.
SoundTrack, known outside of Colorado as Ultimate Electronics Inc., had its beginnings in 1968 when Denver entrepreneur Bin Pearse opened a Team Electronics franchise store. In 1974, he put out the SoundTrack shingle and by 1993 he had nine stores: seven in metropolitan Denver, one in Fort Collins, one in Colorado Springs. Sales topped $62 million for die first time in 1992. Around him swirled a galaxy of big names: Fred Schmid, Silo, Video Concepts (then Tandy and McDuff) and Best Buy, but he stayed the course as the others began merging, closing stores and getting bought up.
Last fall began the experiment that has cast the die for the future and put Ultimate on course to join the majors. Ultimate opened stores in Salt Lake City and Orem, Utah – doubling the size of the retail space in previous stores. The two stores each sported retail space of about 19,000 square feet. The formula worked right away, and Ultimate realized that more and bigger stores would rely on the company’s ability to raise money. It went public with 2.3 million shares of common stock.
“Being relatively successful with the format in Utah, we saw opportunities in other markets as well,” said Alan Kessock, vice president of finance and administration and a member of the lean, four-man management team.
One Denver store already is scheduled for conversion to the new, large format, which Kessock described as “not a Disneyland approach” but something Denver hasn’t seen: cars on the sales floor with state-of-the art sound systems, two theaters and 35 big-screen televisions on display. Although the two Utah stores had been on fine for only two-and-a-half months, by Jan. 31, 1994 yearly company revenues will have topped $88 million. Sales for the six months ended July 31 were $58.2 million – up nearly 90 percent from the $30.8 million in the first six months of the prior year. The experiment was a success and the decision has been made to replicate it. In the next nine months, the firm will open two superstores in Las Vegas, two more in Utah, and one each in Albuquerque and Boise, Idaho. It all goes as planned; the firms will more than double its retail floor square footage in nine months.
“We’re not so expansion driven that we’re willing to grow at any cost. And our growth spurt by national comparisons might be quite boring. But for us, it’s definitely a mouthful. As a result, we’ve tripled our resources in training and recruiting,” said Dave Workman, the company’s president.
Workman said the firm has no plans to “go global” – or even national. “We’d like to maintain a geographical presence that enables us to distribute out of one central distribution facility.”
Other things, too, will remain unchanged as Ultimate makes the leap to 17 stores. “We’ll continue to specialize in just consumer electronics and provide a broad price spectrum. We start as low as Best Buy but we go up to the type of merchandise you’d find in a salon. And we have a very strong focus and emphasis on customer service.”
In fact, said Kessock, the customer-service philosophy can be summed up quite simply: “Got a problem? Call Dave or Bill. If it’s a customer call, either one of them will leave a meeting to take it. In fact, (he told a reporter), the customer will generally get through quicker than you would.”
Neither that nor the product mix is likely to change much when Ultimate takes its next step. Its bread and butter have always been audio-related. Insiders estimate that SoundTrack has 20 percent of the metropolitan market share – and 30 percent of car stereo trade.
Kessock listed Sony, Panasonic, Mitsubishi, JVC, Pioneer, RCA and Canon as dominant labels. Speaker lines include Infinity, KEF, Klipsch and Polk Audio. “Those are afl very high quality without being the high end,” he said.
In fiscal 1993, audio made up 27 percent of SoundTrack’s sales with car stereos and mobile electronics contributing another 15 percent. Television comprises 23 percent, video 14 percent and home office, available for only three years, 12 percent.
“We have no magic bullet in our arsenal. We try to do a thousand little things a little better than the next guy, said Workman.” Piper Jaffray analyst Saul Yaari said the strategy is working. He has studied the company in depth and has issued a “strong buy” rating.
“The company’s strategy is to appeal to a wide range of customers, but its primary focus is on the middle-to-upper-income consumer. Ultimate attempts to differentiate itself from its competition through comprehensive selection of name brand and limited distribution merchandise, excellent customer service, upscale store format, competitive pricing and focus on the home audio, television, video and automotive electronics categories.” He added, “The focus on such differentiating factors, while matching the lowest prices on |shared’ brands offered by competitors, makes Ultimate a very favorable alternative to appliance/electronics Superstores and other large format limited service retailers.” According to Kessock, SoundTrack’s Denver business shot up 25 percent in the year after Best Buy’s arrival in 1991. “With more advertising dollars being spent as a group, awareness is increased and everybody’s out shopping for these items.”
SoundTrack survived and prospered during the Fretters (now YES!) takeover of market leader Fred Schmid, and the later swallowing by that group of Denver’s Silo stores (most later closed). Now it’s looking at the first quarter 1995 opening of a Tandy Corp. Incredible Universe store and the more formidable challenge of Circuit City’s planned arrival in Denver in late 1995,
“They all have their formats and their ways of doing business,” said Kessock. “We just want to get our share of the business.”