The Rise and Fall of Tweeter

How executives built a specialty store concept into nearly 200 stores and almost $1B revenues -- and then squandered it.

The Rise and Fall of Tweeter
"What you see in those last few years is the handiwork of those experienced executives running the company right into the ground." -- Paul Shindler, former Tweeter vice president
Tom LeBlanc · March 3, 2009

On the morning of December 2, 2008, Tweeter store managers were told to immediately lock the doors and get out. Tweeter sales associates, many of whom were driving to work, were terminated over the phone.

With that, the well-known specialty electronics chain—that once had 180 stores and 3,700 employees, but was embroiled in bankruptcy proceedings—ceased to exist.

What followed was weeks, even months, of employees’ frantic efforts to uncover their missing wages and their bonuses. Customers wondered what would become of their warranties and whether they could pick up their already-paid-for products.

Online outrage was directed at George Schultze—the owner of Schultze Asset Management, which purchased Tweeter in 2007 after its first Chapter 11 filing.

It’s not that Tweeter employees didn’t know it was coming. On Halloween, Schultze had handed the reins over to a liquidation company, and all of the retailer’s critical distribution centers had been closed.

The point, though, is that it didn’t have to go down like it did.

“To the employees and customers of Tweeter, George J. Schultze is no different than Bernie Madoff,” says Jim Kamerzel, an operations manager for Tweeter (1998–2008).

“They are angry and frustrated over how much they have lost due to the unethical behavior of this man.”

This may become Tweeter’s legacy. It’s unfortunate because, for a long time, Tweeter really had something going. It built a powerful brand. Then it squandered it.

Despite Schultze’s final execution of the company, Tweeter’s problems started well before he bought Tweeter for $38 million, displacing Tweeter co-founder Sandy Bloomberg.

There are plenty of theories about where and how Tweeter went wrong. Here are some popular ones:

Tweeter got greedy. Its vision of expansion, taking the specialty electronics hybrid model nationwide, led to a loss of focus on its core values. Quantity became a higher priority than quality.

Wall Street was the problem. After Tweeter went public on NASDAQ in 1998, then president Jeff Stone became bogged down with satisfying investors’ demand for growth and wasn’t able to oversee a steady, strategic expansion.

Tweeter was too slow. It took too long to roll out a workable custom process that would allow it to make money on installation as opposed to on ever-shrinking product margins.

Meanwhile, it didn’t roll out quickly enough its store concept of demonstrating system vignettes instead of products.

The Sound Advice acquisition didn’t work. Tweeter, a company roughly three times the size of well-respected Sound Advice, brought in many of the Florida company’s executives.

Factions developed, pitting Sound Advice and Tweeter veterans against each other. The dysfunction was never resolved.

Big-box executives are to blame. Bringing in a consulting group led by former Best Buy executives to advise a specialty chain wasn’t a good fit. Hiring other big-box retailer executives with no consumer electronics experience was even worse.

Resultant changes, particularly to sales associates’ pay scale and merchandising, led to mass exodus and deterioration of Tweeter’s specialty brand.

Of course, it’s never as simple as one of those theories. None of the factors can be completely to blame or completely void of blame for the fall of Tweeter.

To get a better picture, CE Pro spoke to many former Tweeter employees, although most chose not to go on the record. Many Tweeter veterans went on to hold key industry positions with manufacturers, retailers or custom integrators.

Many of these sources expressed concern over of the idea of “burning bridges.”

One overwhelming sentiment from former employees, however, is that Tweeter was a very good company with an excellent staff. That’s why its collapse matters.

Another overwhelming sentiment: In order to figure out what Tweeter did wrong, one must also see what it did right.

  About the Author

Tom has been covering consumer electronics for six years. Before that, he wrote for the sports department of the Boston Herald. Migrating to magazines, he was a staff editor for a golf publication and an outdoor sports publication. Now, as senior writer/technology editor of CE Pro magazine since 2003, he dabbles in all departments and offers expertise in marketing. Have a suggestion or a topic you want to read more about? Email Tom at [email protected]

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  Article Topics

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