Even in the midst of economic storms, whether or not the emergency variety, there are islands of extraordinary business activity.
On such place in recent weeks has been The Math Box, a chain of four area retail outlets and an associated computer division in Wheaton. As is suited to the season of good cheer, this is a story about an unusual business source at a time when the consensus economic forecast is one that could be written by Scrooge.
The Math Box was started in 1974 by Jerry Freed, then a 21-year-old University of Maryland student, in just 300 square feet of downtown College Park retail space (about the size of the citrus fruits section at a supermarket produce counter). Four months later, younger brother Steve joined in what became a 50-50 venture between them. They borrowed $5,000 from their father to build an inventory of the only merchandise they stocked, calculators.
Six months later, the $5,000 loan was repaid. And today, 6 1/2 years later, the Math Box has become one of the most distinctive businesses in what is certain to be a growing retail sector of the 1980s, that of serving the electronic communication needs of households and small businesses.
Although the expected return of the recession and the reality of record interest rates are persuading many consumers to cut back on spending, last weekend was the busiest in Math Box history. Washingtonians crowded the four retail stores in Wheaton, College Park, Fairfax and downtown D.C. to buy not only calculators (still the mainstay of the business) but also expensive home computer and entertainment systems.
According to Steve Freed, it's not unusual these days for a typical customer to spend $1,500 for an Atari home computer ans associated devices. And, for the first time at the Math Box, Mattell's advanced video game system, Intellivision, outsold Atari a weekend ago (current sale price, $239.95). Mattell plans to bring its own home computer to the market in 1981 and the game system now being sold will fit on top of the computer. All of these systems require a television screen; some customers use current TV sets and some buy a new one.
Overall sales of the four Math Box stores are now expected to exceed $5 million in 1981, and that doesn't count a separate computer division that is selling and servicing NEC computers manufactured in Japan, developing computers for educational institutions (Montgomery County Public Schools, initially).
"Consumers hear a lot about home computers but it is amazing how little they know," said Jerry Freed. "The big fear is that with a $1,000 investment, will it soon become obsolete?"
In reply to such questions, Freed said candidly that some systems indeedd will be obsolete while others will not become outdated quickly. For example, Freed noted that Atari (a division of Warner Communications) has designed its systems with cartridges so that the overall home computer should stand up for a decade with only changes in cartridges required to alter formats.
The Math Box owners tested the computers, calculators and other electronic devices they put on their shelves and "go with those that will be around for the long run," Jerry Freed stated. "Down the road, this will be a big business and we're just scratching the surface," he added.
Jerry has a technical bent and he loves to chart business performance. Brother Steve is oriented toward marketing, buying and running the stores. They divide the four stores in terms of daily management and overall businesss operations in such a way that differences of opinion surface only occasionally. oThey look forward to the next several years, when they said they think they will be able to franchise their type of business to other cities.
The Math Box and similar businesses have benefitted from one of the most productive sectors of the American economy, consumer electronics, which is causing prices as well as product size to be reduced as more and more technical advances are made.
"We can stay on top of the market," unlike department stores, they contended. One example they cited was Atari's "Space Invaders" game, which came on the market earlier this year and has become the most successful electronic game in history. The Math Box ordered in large quantity, because of the Freed's judgment that it would be popular, and they have sold 10,000 cartridges of the game so far in 1980. Many retailers who ordered in small numbers have been sold out.
Other popular items are electronic chess games, calculator watches, a Sony pocket stereo cassette player with earphones (can be used while skiing, or on airplane flights), tiny tape recorders, clocks that literally tell the time (electronic voices wake you up) and learning games that teach math and languages. Calculator prices range from $5 to $1,000 while computers range in price from $400 to $10,000. An average NEC business computer system costs between $30,000 and $40,000 and Freed said no business can survive in the future without its own small computer, just as typewriters were necessary in the past.
The Freeds (ages 28 and 24) have poured all of their money back into thee business and they are looking forward to growing with the computer era. Even their staff is young: Every employe is under 30 years old. Said Jerry Freed, looking back and forward: "I'm having lots of fun and I have no savings account -- it's all in the business."