Federated Group

Federated Group

File:Federated Group logo.svg
Company type	Subsidiary
Industry	Retail
Founded	1970 (1970) in Los Angeles, California, U.S.
Founder	Wilfred Schwartz
Defunct	Template:End date and age
Fate	Purchased by Silo
Headquarters	Sunnyvale, California , U.S.
Area served	Arizona, California, Kansas, and Texas
Key people	Wilfred Schwartz (Chairman) Shadoe Stevens (Spokesperson) Jack Tramiel (former President and CEO, Atari Corporation)
Products	Consumer electronics
Parent	Atari Corporation (1987–1989)

Federated Group operated as a U.S.-based chain specializing in consumer electronics retail, with 67 locations across California, Texas, Arizona, and Kansas. Founded in 1970 by Wilfred Schwartz, it pioneered the concept of the first deep discount consumer electronics "superstore" within the United States. By 1987, the company had grown to become the fourth-largest discount retailer in its sector nationally. Its headquarters were initially located in City of Commerce, California before relocating to Sunnyvale, California. Federated Group was acquired by Atari Corporation in 1987 and subsequently sold to Silo in 1989.

History

The inception of Federated Group dates back to 1970 when Wilfred Schwartz purchased a 25,000-square-foot warehouse in Los Angeles from an electronics firm and converted a portion into a retail outlet. In 1976, the company closed two existing stores to establish a larger 20,000-square-foot "superstore" in Westminster, California. Rapid growth followed, including a significant expansion into the Texas market beginning in December 1984. However, this move coincided with an economic downturn caused by the oil industry collapse in Texas, adversely affecting performance. Meanwhile, increased competition emerged in Federated Group's core Los Angeles market due to the entry of Circuit City in 1985.

Financial difficulties arose for Federated Group starting in August 1987, prompting Wilfred Schwartz to sell the business to Atari for $67.3 million.

Atari

Atari acquired Federated Group primarily to secure retail shelf presence, as numerous retailers had distanced themselves from Atari’s products following the downfall of its video game division. This acquisition was strategically beneficial for Atari because Federated Group's retail expertise was expected to enhance computer sales. However, in 1988, Atari initiated legal action alleging it was deceived out of US$43 million during the purchase of Federated Group. The lawsuit accused Wilfred Schwartz and other executives of intentionally misrepresenting the company's asset values.

By November 1989, after reporting a loss close to US$85 million earlier that year, Atari decided to sell 26 Federated Group locations in Los Angeles and San Diego to Silo. The remaining outlets began liquidation sales in December 1989 and were shuttered within four to five months.

Silo

Founded in 1976 with stores in San Diego, Silo had ambitions to penetrate the Los Angeles market. Following the acquisition, the 21 Federated Group stores in Los Angeles and Orange counties, along with five in San Diego, were rebranded as Silo stores in 1990.

In January 1994, Silo shut down nine former Federated Group outlets in Los Angeles amid escalating competition and economic challenges—the same year Best Buy entered the regional market. Ultimately, Silo filed for bankruptcy protection in December 1995 and ceased operations at all its locations.

Advertising

Starting in 1982, Shadoe Stevens portrayed the "Fred R. Rated" persona for Federated Group, ultimately featuring in over 1,000 advertisements. In a 1986 commercial, Stevens humorously claimed that aggressive frogs had devoured the company's warehouse, leading to direct savings passed on to customers. This campaign resulted in a 30 percent increase in sales, and Federated Group submitted itself for consideration in Adweek magazine's yearly "Bad Advertising" edition.

Following a decline in market share in Southern California due to competition from Circuit City in 1987, Federated Group began scaling back its Fred Rated promotions and sought to redefine its brand identity.