‘Good Guys’ Comes South : The Bay Area consumer electronics chain opens its first Los Angeles store Sunday. In the gizmo game, the tough competition gets tougher.

When Ron Unkefer first hung “The Good Guys” shingle on a consumer electronics store in San Francisco’s fashionable Marina District in 1973, a vendor jokingly threatened to turn him in for false advertising.

“There’s only one of you, so how can you be ‘the Good Guys’?” the vendor asked.

No one laughs anymore.

From its single-handed beginning, Bay Area-based Good Guys Inc. has evolved into a solid regional chain with 23 stores in Northern California and Reno, 1,300 employees and the potential for $275 million in sales this year.

Beginning Sunday, with the opening of Good Guys’ first store in hotly competitive Los Angeles, the chain plans to build on its base by tapping into the nation’s biggest market for consumer electronics.

Southern California customers stand to gain from the new blood injected by Good Guys, a specialist in mid- to high-end audio and video gear with an emphasis on customer service.

Since the demise last year of Federated Group, once the undisputed leader, the market has been dominated by Circuit City Stores Inc., a powerhouse retailer of appliances and electronic equipment with 151 locations nationwide and more than $2 billion in annual sales.

After 4 1/2 years in the Los Angeles area, where it now has 21 stores, Circuit City has commanded 25% to 30% of the market. No one else even comes close.

“It’s the most exciting market in the country,” said founder Unkefer, who has been president and chairman of Good Guys since 1976.

If Los Angeles is potentially lucrative because of its apparently insatiable appetite for gizmos, it is also one of the nation’s most fractious arenas.

Over the years, bruising competition there has punched out the woofers and tweeters of many a consumer electronics retailer, notably Federated, Pacific Stereo and Golden Bear Home & Sports Centers.

Moreover, the market has an abundance of discount andmass merchants, department and specialty stores and

warehouse clubs that also sell entertainment equipment. And later this year, Silo, a Philadelphia-based subsidiary of British retailing giant Dixons with 10 locations in San Diego, will begin opening stores in 16 former Federated outlets from Ventura to Mission Viejo.

Does all this faze Unkefer, who as owner of 33% of the company’s stock, has the most to lose if the costly expansion effort (at $3.5 million per store) stumbles? He claims not.

“We’re aimed differently” from Circuit City and other competitors, with less emphasis on commodity prices, he said.

Moreover, Good Guys has successfully weathered 2 1/2 years of hand-to-hand combat with Circuit City in the Bay Area.

“The Good Guys often opens up across the street or down the block from Circuit City in San Francisco, and it does well not by undercutting (prices) but by offering choice in more upscale products and service,” said Sharon Rappaport, a retailing analyst with Montgomery Securities, a San Francisco brokerage.

Sales gains at Good Guys stores open at least a year have been stellar, with sales rising 18% last year and 20% in the latest quarter.

Unkefer said Good Guys stores generally have two to three times the product choice of, say, a Sears or Montgomery Ward. In some product categories, 50% to 70% of the brands or models carried are different from Circuit City’s.

In an interview at the Burlingame headquarters, south of San Francisco, Unkefer said expansion into Southern California made the most sense. “Logistically, it’s the easiest market for us,” he said. “And there’s not another specialist to fill the void left by Federated.”

Come fall, the company plans to move its warehouse operation to a state-of-the-art facility across the bay in Hayward that, at 283,600 square feet, is more than twice as big as the current site. That move, Unkefer noted, will enable Good Guys to handle six-day-a-week distribution to both markets from the same spot.

Unkefer, an avid jogger who still lives in the Marina and has a weekend home in the Napa Valley, sees great potential in the state’s southern half, a market that he estimates at twice the size of the Northern California market. The company plans to have four stores in Southern California by year-end and to add six to eight more next year.

Four years ago, such talk might have been cause for derision. Good Guys went public in 1986 after a burst of expansion. At the time, the economy was slowing and sales of videocassette recorders, then a leading seller, had stopped growing. Business soured.

The next year, Circuit City’s entry forced Good Guys to make some fundamental changes. For one thing, focus group studies showed that customers had grown weary of haggling over prices, a standard practice.

Good Guys began focusing on higher-end merchandise rather than trying to cover the whole market. And Unkefer instituted a low-price guarantee and a strong sales training program.

“He figured out what was wrong and fixed it,” said Jonathan H. Ziegler, an analyst with Sutro & Co. in San Francisco.

Since then, sales and profits have grown steadily. In 1989, in an industry known for thin margins, Good Guys earned $4 million on $195 million in sales. Unkefer maintains that sales growth of 25% a year is sustainable for several years to come.

Shares in Good Guys, which trade over the counter, closed Friday at 21 1/2.

Good Guys’ first Los Angeles store is in the Beverly Connection, a mall at the congested corner of Third Street and La Cienega Boulevard across from the Beverly Center.

The two-level, 16,800-square-foot store, situated symbiotically next to a Wherehouse record store, features a high-tech look, with bright red logo, sound rooms and gray and black carpeting and fixtures.

On July 13, it will begin keeping its doors open 24 hours a day--becoming a curiosity that Unkefer hopes will distinguish it from the pack.

Stores in Tustin and Huntington Beach are slated to open the first week in September. With future locations, the company plans to focus on West Los Angeles, Orange County and the San Fernando Valley.

With Good Guys, customers will not see the television advertising blitz that preceded Circuit City’s entry into the market, with several locations opening at once. Good Guys initially will advertise in newspapers and mail brochures to about 100,000 upscale households.

Unkefer doesn’t expect to stay humble in Los Angeles for long. “Over a period of years, we could have 40 to 50 stores down there.”