February 12, 2007
Circuit City Seeks Spark
Performance is off, stores are closing and executives are being shown the door at Circuit City.
Analysts contacted by The Buffalo News have said the consumer electronics retailer has simply been too slow in reacting to market changes to keep up with its main rival Best Buy.
“Best Buy is the clear leader,” said Brady Lemos, a retail analyst at Morningstar. “I don’t think Circuit City will put a scare into them for quite some time, if ever.”
Mr. Lemos and others have pointed out that while Best Buy focused on customer-centricity initiatives and moved into services such its Geek Squad computer repair and training team, Circuit City has been operating in a business as usual mode.
Best Buy has also been more aggressive in its product and service marketing. The company is currently offering discounts on televisions for customers upgrading to hi-def and using the company’s installation services. For $100, Best Buy will visit a consumer’s home before the installation to discuss where the system will work best.
Circuit City seems to have been caught off-guard by the steep price drops in big screen TVs. While Best Buy and others such as Wal-Mart, Target and Costco were dropping prices quickly, Circuit City was not.
Discussion Questions: What is your assessment of the current consumer electronics marketplace? What players will emerge stronger or weaker? Where do you see Circuit City going in light of current conditions?
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I agree with Bernie. Just had a very similar experience myself. There’s no question Best Buy (and I haven’t always been a fan) is leading service in its sector. That said, it’s a sector with generally poor service, so Circuit City still might be able to turn things around. But, the longer things go the way they are going, the harder that turn around is going to be.
Circuit City had a great opportunity 2-3 years ago to make their mark in flat panel televisions. They remodeled the area and updated the prototype to showcase flat panels and make a strong statement by putting them in the front of the store. There was a strong emphasis in the store to make this THE reason to shop at CC. CC knew the prices would drop within a few years to where everyone from Wal-Mart, Target and Costco would enter the playing field but this 2-3 year time frame gave CC the chance to wow the customer and excite them with new and exciting technology and great selection in the stores. It also was a great opportunity to bring lost customers, as well as new customers into CC and shore up the shopping experience and customer service. Three notable things happened since….
1. The customers did come into the stores to check the assortment and sales did pick up and drove CC sales for a year or so.
2. The customer experience unfortunately did not improve and when many other retailers started matching CC’s assortment and/or pricing, there was no reason to go back to CC. The blew their chance with the consumer.
3. While flat panel TVs drove sales for a while, CC did not find any other categories to explode or introduce, so with the sales of flat panels falling to many other retailers and CC losing market share, there was no other place for them to go for sales and higher margins.
On top of all of this, the decision to buy the Canadian supplier/retailer was ill timed and a very poor decision and haunts them to this day.
So where does this put CC?…In a heap of trouble if they can’t turn around customer service, because why else shop a CE retailer with poor locations and outdated store formats?
Ouch!
For me, I think the difference is managing store personnel as a touchpoint. The Best Buy staff is populated with bright, hip, young, attentive, and obvious hobby enthusiasts for what they sell.
Last time I was in Circuit City, I swear the same furniture salesman that IKEA makes fun of in their ads was now at Circuit City!
Best Buy, Starbucks, IKEA vs. Circuit City, McDonald’s, local furniture place…the difference starts with the employee as touchpoints!
Circuit City’s in store automation and IT infrastructure pales in comparison to Best Buy. I had a friend standing in the check out lane at CC for about 4 hours on Black Friday. This was due to an archaic POS and the struggle that the long rebate form posed to the clerk there. BB had a very good process for Black Friday and had people checking out in 30 minutes and didn’t have any mail in rebates! I was at a BB recently to pick a microwave for a friend of mine and had an extremely helpful associate helping us with the sale. BB will survive, there are customers who still feel comfortable going to a BB for picking electronic goods as compared to Wal-Mart for the sheer knowledge of associates and shopping experience.
I’m glad that I read these comments so that I now realize that it wasn’t just me that couldn’t get anyone to help them at Circuit City. And I have had the same exact experience with Best Buy so it must be fairly widespread. If CC is reading this and accepting it, it could save them a lot in consulting fees as to what they need to do to fix their business.
I dislike anecdotal information but let me relate this.
We were opening up new territories and my reps were not too familiar with the new area(s), so I decided that since I liked my Garmin GPS, that I would buy 8 for my reps. This was when the units were about $700 per.
I went to CC where one clerk was trying to talk to a guy about some kind of sound system that a friend of his was considering. Another clerk in an adjacent department was on a cell phone with friend(s). Another older clerk walked by and told both of them to help me. Neither did, and after 20 minutes, I left.
I went across the street to BB and was greeted at the door and directed to the department, where I met by the department manager and a clerk. They asked a few questions and showed me the unit I decided on purchasing. They had 8 in-stock and I was out the door in about the same time I twiddled my thumbs at CC. BB had $5,600 sale and CC lost a pretty high-spending former customer.
I sent a certified letter to the CC CEO, apprising him of what happened…I guess he was too busy trying to get his numbers up, he didn’t respond.
Prices do have a part, but if you don’t have the service, they better be the lowest in the country or you’ll end up as a brand name or trademark that nobody wants at any price.
Closing stores is not going to save Circuit City. Figuring out what the customers who walk into the stores are looking for and delivering it would be more effective. If they continue to ignore what consumers want, continue to have associates who ignore customers and can’t answer questions, and a mix of products that are not attractive to consumers, then they will be closing more than a few stores.
Interesting that the J.C. Penney’s commentary precedes this one.
I think that the survival of Circuit City will depend on them being able to do the same kind of cultural change that Penney’s was able to make, otherwise, in today competitive market, they will be gone.
Circuit City? Radio Shack? They should merge! These guys have backed themselves into competing with Wal-Mart and, in my opinion, they are losing. I went into my local CC to get a package of DVD-RAM disks. Looked around a bit before heading for my target and saw they are selling two Panasonic DVD recorders (both come with a sample DVD RAM disk). Now I go over to the recordable disk section and I can find Blue Ray, DVD-R, DVD-RW, DVD+R, DVD+RW, BUT no DVD RAM. I FOUND an “associate” and asked him if they had any DVD RAM disks. He immediately pointed me to the section I had just perused.
I then asked the CC expert if he knew what a DVD RAM disk was and got a blank look. So, I left and went over to Wal-Mart and found what I wanted in 5 minutes.
I’m not sure if Circuit City was caught off guard or that they just weren’t aggressive enough or managed well enough to keep up with Best Buy. Best Buy took–and takes–nothing for granted, from their aggressive pricing to their stand on customer service. Best Buy has learned to connect with their customers whereas many Circuit City locations make the customer feel as if they are doing them a favor.
I’ll describe 2 shopping experiences. Recently, in January, I went into a Circuit City near my office in New Jersey about mid-day. I was looking for a digital frame for my wife’s digital camera. 2 other customers and I were in the digital camera area; no associates. 4 Circuit City associates passed us by within 10 minutes and didn’t acknowledge any of the shoppers. I went over to one of their tech people to ask for assistance. He said he’d find someone. An associate finally approached the area. Instead of speaking to any of the customers, he went straight to the telephone and started speaking to someone. When I approached him for assistance, instead of taking time to find out my needs, he simply pointed to a spot 2 aisles away and said you’ll find frames there. When I couldn’t find the product and returned to him, he said (instead of going with me to look if he could find it or checking if there was inventory) I guess we’re out of them. I walked out.
I went into the Best Buy, also near my office, and also at mid-day. Upon entering the first associate who passed me greeted me. I went to the digital camera area and an associate greeted me, asked what I was looking for and walked me to the product. The associate explained the product, answered my questions and offered me additional information.
Based on the above, is it a wonder that Best Buy is kicking butt?
In 2003, Circuit City stock went as low as $4. Today it’s $21. In 2002, Best Buy stock went as low as $12. Today it’s $51. Both companies have gone through tough times and both companies have remade themselves. There’s no doubt that Circuit City can stage a comeback again. The root problem for both companies: neither has a sustainable competitive moat. They can copy each other’s tactics easily, and they both get very similar merchandise. Both struggle for margin, since private label margin-beaters aren’t a significant part of their mix.
Circuit City announced plans to close roughly 70 stores and eliminate 400 jobs. Since January 1, 2006 Best Buy has returned 18.36% to its shareholders while Circuit City has returned -3.59%. With its collection of former Best Buy executives, Circuit City must ‘leap-frog’ Best Buy in its ‘win-the-home’ initiative Dick Schultz put in motion several years ago. The growth of online purchasing is further eroding the margins of consumer electronic equipment. Circuit City needs to reinvent itself in the eyes of the consumer. Give us a reason to shop at your stores. Surprise us!
It’s ironic that Circuit City seems to be faltering just as the consumer electronics category seems to be at its tipping point. The combination of wireless, HDTV, biometrics, fiber optics, etc. all seem to compel more whole-house networks where entertainment and information converge. Young couples getting into their first home, who have worked with computers all their lives, will want every room connected. Baby-boomer-empty nesters want to digitize their old LPs, and 3 X 5 prints, and movies of their children. They want to relax and entertain in their newly renovated great room in front of an HD home movie, on demand. The tens of millions who work at home want network connectivity wherever they are.
Best Buy has done a better job of tapping into this demand than Circuit City. Their geek squad and $100 site visits overcome some of the buyer worry about interconnecting all those gadgets and gizmos. But neither company is doing a very good job selling solutions. To do so, their salespeople need to focus on the customer, not the products. On a recent visit to Circuit City, I watched a salesperson demonstrate 14 different HD models before he thought to ask the customer to define their needs. In the end, it’s about proposing good solutions, then delivering working interconnected systems. They do this for car installations; why not for the home?
As has been mentioned above, price alone will not win the marketplace. High quality customer service is just as critical as price, especially in the area of high-tech/electronics.
Consumer electronics have become more and more complicated over time, requiring ever more sophistication from the consumer to install and program them. I for one would feel much more comfortable buying electronics from Best Buy where the service is very good, than from Circuit City, which is one step (very small step) above a discount warehouse.
As an addendum to my earlier comments I would like to ad that the marketing tact of the land of 1000 rebates is going to insure the demise of Circuit City. I can remember cheering when I saw Wal-Mart’s commercials indicating that they don’t use rebates to sell their big screen TVs. Has anyone who has ever shopped at Circuit City not gotten frustrated with one of their rebates?
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I agree with Bernie. Just had a very similar experience myself. There’s no question Best Buy (and I haven’t always been a fan) is leading service in its sector. That said, it’s a sector with generally poor service, so Circuit City still might be able to turn things around. But, the longer things go the way they are going, the harder that turn around is going to be.
Circuit City had a great opportunity 2-3 years ago to make their mark in flat panel televisions. They remodeled the area and updated the prototype to showcase flat panels and make a strong statement by putting them in the front of the store. There was a strong emphasis in the store to make this THE reason to shop at CC. CC knew the prices would drop within a few years to where everyone from Wal-Mart, Target and Costco would enter the playing field but this 2-3 year time frame gave CC the chance to wow the customer and excite them with new and exciting technology and great selection in the stores. It also was a great opportunity to bring lost customers, as well as new customers into CC and shore up the shopping experience and customer service. Three notable things happened since….
1. The customers did come into the stores to check the assortment and sales did pick up and drove CC sales for a year or so.
2. The customer experience unfortunately did not improve and when many other retailers started matching CC’s assortment and/or pricing, there was no reason to go back to CC. The blew their chance with the consumer.
3. While flat panel TVs drove sales for a while, CC did not find any other categories to explode or introduce, so with the sales of flat panels falling to many other retailers and CC losing market share, there was no other place for them to go for sales and higher margins.
On top of all of this, the decision to buy the Canadian supplier/retailer was ill timed and a very poor decision and haunts them to this day.
So where does this put CC?…In a heap of trouble if they can’t turn around customer service, because why else shop a CE retailer with poor locations and outdated store formats?
Ouch!
For me, I think the difference is managing store personnel as a touchpoint. The Best Buy staff is populated with bright, hip, young, attentive, and obvious hobby enthusiasts for what they sell.
Last time I was in Circuit City, I swear the same furniture salesman that IKEA makes fun of in their ads was now at Circuit City!
Best Buy, Starbucks, IKEA vs. Circuit City, McDonald’s, local furniture place…the difference starts with the employee as touchpoints!
Circuit City’s in store automation and IT infrastructure pales in comparison to Best Buy. I had a friend standing in the check out lane at CC for about 4 hours on Black Friday. This was due to an archaic POS and the struggle that the long rebate form posed to the clerk there. BB had a very good process for Black Friday and had people checking out in 30 minutes and didn’t have any mail in rebates! I was at a BB recently to pick a microwave for a friend of mine and had an extremely helpful associate helping us with the sale. BB will survive, there are customers who still feel comfortable going to a BB for picking electronic goods as compared to Wal-Mart for the sheer knowledge of associates and shopping experience.
I’m glad that I read these comments so that I now realize that it wasn’t just me that couldn’t get anyone to help them at Circuit City. And I have had the same exact experience with Best Buy so it must be fairly widespread. If CC is reading this and accepting it, it could save them a lot in consulting fees as to what they need to do to fix their business.
I dislike anecdotal information but let me relate this.
We were opening up new territories and my reps were not too familiar with the new area(s), so I decided that since I liked my Garmin GPS, that I would buy 8 for my reps. This was when the units were about $700 per.
I went to CC where one clerk was trying to talk to a guy about some kind of sound system that a friend of his was considering. Another clerk in an adjacent department was on a cell phone with friend(s). Another older clerk walked by and told both of them to help me. Neither did, and after 20 minutes, I left.
I went across the street to BB and was greeted at the door and directed to the department, where I met by the department manager and a clerk. They asked a few questions and showed me the unit I decided on purchasing. They had 8 in-stock and I was out the door in about the same time I twiddled my thumbs at CC. BB had $5,600 sale and CC lost a pretty high-spending former customer.
I sent a certified letter to the CC CEO, apprising him of what happened…I guess he was too busy trying to get his numbers up, he didn’t respond.
Prices do have a part, but if you don’t have the service, they better be the lowest in the country or you’ll end up as a brand name or trademark that nobody wants at any price.
Closing stores is not going to save Circuit City. Figuring out what the customers who walk into the stores are looking for and delivering it would be more effective. If they continue to ignore what consumers want, continue to have associates who ignore customers and can’t answer questions, and a mix of products that are not attractive to consumers, then they will be closing more than a few stores.
Interesting that the J.C. Penney’s commentary precedes this one.
I think that the survival of Circuit City will depend on them being able to do the same kind of cultural change that Penney’s was able to make, otherwise, in today competitive market, they will be gone.
Circuit City? Radio Shack? They should merge! These guys have backed themselves into competing with Wal-Mart and, in my opinion, they are losing. I went into my local CC to get a package of DVD-RAM disks. Looked around a bit before heading for my target and saw they are selling two Panasonic DVD recorders (both come with a sample DVD RAM disk). Now I go over to the recordable disk section and I can find Blue Ray, DVD-R, DVD-RW, DVD+R, DVD+RW, BUT no DVD RAM. I FOUND an “associate” and asked him if they had any DVD RAM disks. He immediately pointed me to the section I had just perused.
I then asked the CC expert if he knew what a DVD RAM disk was and got a blank look. So, I left and went over to Wal-Mart and found what I wanted in 5 minutes.
I’m not sure if Circuit City was caught off guard or that they just weren’t aggressive enough or managed well enough to keep up with Best Buy. Best Buy took–and takes–nothing for granted, from their aggressive pricing to their stand on customer service. Best Buy has learned to connect with their customers whereas many Circuit City locations make the customer feel as if they are doing them a favor.
I’ll describe 2 shopping experiences. Recently, in January, I went into a Circuit City near my office in New Jersey about mid-day. I was looking for a digital frame for my wife’s digital camera. 2 other customers and I were in the digital camera area; no associates. 4 Circuit City associates passed us by within 10 minutes and didn’t acknowledge any of the shoppers. I went over to one of their tech people to ask for assistance. He said he’d find someone. An associate finally approached the area. Instead of speaking to any of the customers, he went straight to the telephone and started speaking to someone. When I approached him for assistance, instead of taking time to find out my needs, he simply pointed to a spot 2 aisles away and said you’ll find frames there. When I couldn’t find the product and returned to him, he said (instead of going with me to look if he could find it or checking if there was inventory) I guess we’re out of them. I walked out.
I went into the Best Buy, also near my office, and also at mid-day. Upon entering the first associate who passed me greeted me. I went to the digital camera area and an associate greeted me, asked what I was looking for and walked me to the product. The associate explained the product, answered my questions and offered me additional information.
Based on the above, is it a wonder that Best Buy is kicking butt?
In 2003, Circuit City stock went as low as $4. Today it’s $21. In 2002, Best Buy stock went as low as $12. Today it’s $51. Both companies have gone through tough times and both companies have remade themselves. There’s no doubt that Circuit City can stage a comeback again. The root problem for both companies: neither has a sustainable competitive moat. They can copy each other’s tactics easily, and they both get very similar merchandise. Both struggle for margin, since private label margin-beaters aren’t a significant part of their mix.
Circuit City announced plans to close roughly 70 stores and eliminate 400 jobs. Since January 1, 2006 Best Buy has returned 18.36% to its shareholders while Circuit City has returned -3.59%. With its collection of former Best Buy executives, Circuit City must ‘leap-frog’ Best Buy in its ‘win-the-home’ initiative Dick Schultz put in motion several years ago. The growth of online purchasing is further eroding the margins of consumer electronic equipment. Circuit City needs to reinvent itself in the eyes of the consumer. Give us a reason to shop at your stores. Surprise us!
It’s ironic that Circuit City seems to be faltering just as the consumer electronics category seems to be at its tipping point. The combination of wireless, HDTV, biometrics, fiber optics, etc. all seem to compel more whole-house networks where entertainment and information converge. Young couples getting into their first home, who have worked with computers all their lives, will want every room connected. Baby-boomer-empty nesters want to digitize their old LPs, and 3 X 5 prints, and movies of their children. They want to relax and entertain in their newly renovated great room in front of an HD home movie, on demand. The tens of millions who work at home want network connectivity wherever they are.
Best Buy has done a better job of tapping into this demand than Circuit City. Their geek squad and $100 site visits overcome some of the buyer worry about interconnecting all those gadgets and gizmos. But neither company is doing a very good job selling solutions. To do so, their salespeople need to focus on the customer, not the products. On a recent visit to Circuit City, I watched a salesperson demonstrate 14 different HD models before he thought to ask the customer to define their needs. In the end, it’s about proposing good solutions, then delivering working interconnected systems. They do this for car installations; why not for the home?
As has been mentioned above, price alone will not win the marketplace. High quality customer service is just as critical as price, especially in the area of high-tech/electronics.
Consumer electronics have become more and more complicated over time, requiring ever more sophistication from the consumer to install and program them. I for one would feel much more comfortable buying electronics from Best Buy where the service is very good, than from Circuit City, which is one step (very small step) above a discount warehouse.
As an addendum to my earlier comments I would like to ad that the marketing tact of the land of 1000 rebates is going to insure the demise of Circuit City. I can remember cheering when I saw Wal-Mart’s commercials indicating that they don’t use rebates to sell their big screen TVs. Has anyone who has ever shopped at Circuit City not gotten frustrated with one of their rebates?