BOTHELL, WASH. -- At first, Victor Alhadeff says, software publishers didn't want to deal with any store that used "discount" as its middle name.
"They figured that all we'd do is put pressure on their prices," says Alhadeff, the aggressive 40-year-old marketer who founded Egghead Discount Software, now one of the software industry's leading retailers. "But I knew that if we wanted to succeed in this business, we'd have to be nuts about customer service and support, too."
Today, consumers flock to his burgeoning chain of software shops because of lower prices, large inventories and knowledgeable salespeople who invite comparison shopping.
Meanwhile, software companies have come to accept a man who has taken the concept of high-volume, low-overhead discounting and successfully applied it to the sometimes mysterious art of software retailing.
They can't afford not to.
In the three years since Alhadeff modestly opened his first three Egghead software-only stores in Los Angeles, Portland, Ore., and the Seattle suburb of Bellevue, the chain has become one of the nation's largest sellers of software, with more than 50 stores.
And by June, Alhadeff intends to invade the East Coast in his typically assertive style, opening five stores at once in metropolitan Washington, D.C.
"To make this business work, we have to have high volumes," he said one recent afternoon in his austere office. "That's why we advertise so much. We're the largest advertisers in software, and in every market we go into, we go in to be the biggest."
Egghead doesn't simply seek a share of the existing market. Software firms credit Egghead with helping to expand the base of software customers by helping consumers understand the advantages of various products and by taking the intimidation out of software purchases.
"Egghead is going out there and creating demand for software at a time when the hardware dealers are beginning to abandon us," said Fred Gibbons, founder of Software Publishing Inc., a Mountain View, Calif., software company. "They have proven that they are people who really care about selling software, and they've demonstrated a formula for success."
Alhadeff's emphasis on service, selection, customer satisfaction and aggressive pricing places him in contrast with an industry that has been criticized for an unwillingness to cater to customers.
In the past, manufacturers often refused to accept responsibility for defective products, and the long-running fight over copy protection -- the use of devices that prevent copying of software onto a blank disk -- alienated many computer users.
But Alhadeff, who was a shoe salesman at a Nordstrom department store during his college years, insists that discounting only will sell software if it is combined with a knowledgeable sales force that explains how products can be used and a store policy that encourages customers to try programs before buying them.
As a result, all Egghead stores are equipped with Apple and IBM personal computers so that customers can experiment with software in the same way some record stores allow customers to preview music.
Customers can return software within two weeks of purchase -- no questions asked -- even though, as Alhadeff readily admits, this raises the possibility of illegal copying of valuable programs.
"I learned from my days at Nordstrom that if 90 percent of the customers are honest, you don't write rules to protect yourself from the 10 percent who aren't," he said.
To help customers, Egghead employes are required to go to class each week to learn about new software coming into the market. "If someone is missing class, they get a message from me," Alhadeff said. "We keep track of those things in our computer reports from each store."
On other retailing issues, however, Alhadeff is a bottom-line-oriented manager. You won't find his stores in glitzy shopping malls and you won't find fancy furnishings.
"That's a very deliberate part of the strategy," Alhadeff said. "We have to keep rents low to keep the business profitable. But I believe people will trade amenities for price, especially on a branded item."
He may scrimp on the accoutrements, but Alhadeff knows that he needs a sizzling, high-profile marketing drive to keep his stores busy. His big-budget advertising campaigns, their cornball humor (most use wordplay involving puns like "Eggsciting" or "Eggstraordinary"), the in-store demonstrations of software programs -- even the sale of Egghead T-shirts -- are part of the company's successful strategy.
Consumers don't complain about discounting, and lately the publishers don't feel threatened by his success.
"He sells a lot of our product, and the consumers just love him," said Andre Peterson, director of personal computer marketing for Wordperfect Corp., the Utah publisher of a leading word processing program. "In some ways, he has turned this industry on its head by trying a different concept and making it work."
With a solid base of private funding and some venture capital, Alhadeff was able to hold his prices down even when he was unable to wrest volume discounts from software publishers and distributors.
Still another element in the company's growth was Alhadeff's determination to enter the marketplace region by region, blowing into each new city with splashy advertising and big media buys designed to create word-of-mouth attention and to wrest a big share of the market from the undercapitalized mom-and-pop software stores.
"They didn't go out and blanket the United States all at once," said Scott Okie, director of marketing for Microsoft Corp., the Seattle-based software publisher. "They went out to create instant regional dominance in whatever market they entered, and I think it's worked for them."
Industry observers say Egghead is profitable. However, because it is privately held and Alhadeff zealously guards sales and profit figures, it is impossible to guess how profitable.
"They're buying our Wordperfect for about $180 a box and reselling it for $249," said Wordperfect's Peterson. "Because they're selling about 1,000 packages a month at $70 profit, that's a tidy little sum."
Looking ahead, Alhadeff sees only one worrisome sign: the possible entry into software sales of huge retail chains such as K mart, Waldenbooks or B. Dalton bookstores.
"Obviously a billion-dollar company can give us a good fight," Alhadeff said. "But I think a company with a real entrepreneurial spirit and a commitment to customer satisfaction can beat a giant company any day."