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Establishment of America's #1 Software Dealer

Near the end of 1979, New Jersey attorney Ray Jacobs bought an Atari 800 computer to become familiar with the technology because many of his clients were starting to add computer systems to their businesses. After  he went to a few computer shows in the area, he realized that computer owners were eager to find software programs that were available for their machines. The several computer store chains then existing, such as Computerland, kept their limited software in glass showcases and the salespeople seemed to enjoy intimidating their novice customers. 

Jacobs decided to open a retail store to sell software in a friendly environment that would make new computer owners feel comfortable. He enlisted his brother, Mitch, who enthusiastically embraced the concept, and they formed a corporation to open the store. The corporation, fortuitously named "America's #1 Software Dealer," filed a trade name certificate to operate as Software City. The trademark "Software City" was later registered in the United States Patent and Trademark office and in several other countries.

First store

The Jacobs brothers leased a small former motorcycle store in River Edge, NJ. They covered up the cracked walls with wood paneling, carpeted over the pitted floor and furnished the store with used greeting card racks to hold the software.  The store was operated on weekends during November and December 1980 until January, 1981, when their newly hired store manager became available for work.  Displaying software in open racks was unique at the time; customers could actually handle the packages instead of looking at them in locked glass showcases.  The store personnel came from retail sales backgrounds rather than with a high level of technical knowledge, relating well with customers who were still trying to discover what microcomputers were all about.

In the beginning, the programs sold by Software City were all on cassette tapes and available for the TRS-80, Commodore PET, Apple and Atari, with each type of computer software displayed on its own racks.  Many of the programs were developed by hobbyists, some of whom could only conduct business when they got home from school.  There were no wholesale distributors, so purchases were made direct from the "manufacturers."  Most of the packaging was primitive, with small plastic bags being the preferred design.

In addition to the open display of software, another feature unique at the time was the sale of computer programs at a discount.  Discounts ranged from 5% to 20%, depending on the total amount of the purchases made at one time.

The store quickly became a Saturday clubhouse for new computer owners who gathered there to compare notes and dispense advise to even newer owners.  Salespeople frequently referred customers' questions to other customers who were hanging around.

On August 12, 1981 the IBM-PC was released. The reputation of IBM for business computing, and the large number of compatible computers and third-party plug-compatible peripherals, allowed the PC and IBM PC compatibles to make substantial sales in business applications. 

Software City promptly added IBM software to its inventory of programs displayed in the store.

Company expansion

In view of the success of the first store, in 1982, a second store was opened in Pine Brook, New Jersey, and a third in Armonk, New York.  These additional stores also experienced active customer interest and sales similar to the original store.  As a result, the Jacobs brothers realized that their formula could be replicated through franchising.

Shep Altshuler, a franchising consultant, was hired to develop a franchising program. At about the same time, several other software retail stores were starting franchise programs that required large investments and the establishment of high end retail space.  In contrast, the Software City franchise fee was only $5,000 and franchisees were encouraged to start by furnishing their stores with used greeting card racks in low overhead locations.

The first franchised location opened in Montvale, New Jersey in 1983.  Other locations followed quickly.  When a national magazine wrote about the new franchised software store opportunities, it referred to Software City as "America's #1 Software Dealer."  In 1984, 34 new locations opened.  Software City stores opened in Canada, England and Puerto Rico.  By the end of the 1980s, Software City had 99 franchised locations.  The three company stores (the original River Edge store had relocated to Teaneck, New Jersey)  were sold to franchisees and the franchise support operations were run from corporate headquarters in Teaneck, New Jersey.

As more business software became available, the Software City stores started to cater to that market.  Some franchisees aggressively solicited large companies and governmental agencies with the lure of volume discounts, resulting in narrower profit margins.  It became evident that the original arrangement of five (5%) percent royalty payments by franchisees was no longer sustainable.  The company introduced a sliding scale of reduced royalty percentages due from franchisees as their sales volumes increased.

Software City collected funds from the franchisees for advertising.  Using these funds, radio and TV commercials were produced, advertising materials were made available for local advertising, and ads were placed in national media.  However, many franchisees felt they could do their own local advertising more effectively. As a result, near the end of the 1980s, the national advertising fund was discontinued.

Atari and Commodore were the only two major players left in the home computer market by 1984, and both were on shaky financial ground. Moreover, the systems' buyers found the actual usefulness of computers in homes to be somewhat limited. Aside from playing games, there were few uses that could support a market.

Company contraction

In the 1990s, the marketplace for software began to change.  While most of its competitors in the franchised software-only retail business had long since gone out of business for various reasons, the Software City model of low overhead operations appeared destined for continued success.  However, the stores could not survive as software retail outlets in light of changes that developed in the marketing and distribution of computer programs. 

Once a computer owner had a word processing program or spreadsheet, another one from a different company was not needed.  Manufacturers recognized this and came out with periodic improvements in their programs, taking advantage of registration card information to solicit Software City's customers in order to sell them upgrades of the programs they had purchased.  As the Internet developed, that became another convenient vehicle for Software City's customers to purchase their programs.

Many of the stores expanded their businesses to include computer sales, networking installations and repairs.  But these additional services were not enough to enable many stores to continue in business, and, one by one, they started to close.  With the loss of royalty revenues, Software City discontinued most of its support services and licensed its name to the remaining stores.  In 2000, the company made the decision to close its corporate office and sold the rights to the name to the few surviving stores for use in their market areas.  The trademark rights for Canada were later sold to a Canadian online reseller.

Today, Software City continues as an online seller of computer programs.