Thursday, November 20, 2008

Do you really wonder what happened to Circuit City?

Welllll, If anyone reading is as old as me, they will remember the time a few years back when CC and BB were neck and neck in volume around the $9-10 billion range. Now, with BB over 4 times the size it is interesting to second guess what happened. Clearly it is much more than the fairly recent (07') change in commissioned sales people to hourly. Circuit has ALWAYS had a much more stodgy, sterile brand positioning than BB. They just have never appeared to be fun or cool or happening. They also pretty regularly abdicated a business when they couldn't figure it out thus reducing traffic (and cross traffic) and making people go elsewhere (BB, Wal-Mart) when they couldn’t find what they wanted at Circuit. They got out of the CD, DVD software business when they couldn’t figure out how to make margin there (and pre-downloads this was the main traffic source for CE retail and MADE BB for a long time. Movie and music media bring traffic and is a much more fun business than hardware. It represents celebrity and passion. Its all about the movies and music). They got out of the appliance business when they couldn’t figure that one out. They basically fed BB the business they didn’t want or couldn’t hack. The salesperson transition was just another bad decision in a long line of them.

This is exactly what happened to the Good Guys. Every time they couldn’t figure out how to make exorbitant margins in a category, they got out of it. Video game software, entry level prices points, computers, on and on. You would go in and ask for something and they would literally send you to BB to get it. Once you went to BB and saw they have the entry level CD player for $39 that you wanted to buy for your kids room or a gift and saw they also had the $299 one that you wanted when yours broke, why would you go back to the Good Guys, ever? Retail isn’t rocket science but you would think so with so many bad executions out there.

The irony is that the market is HUNGRY for a good, solid competitor to BB. I hope my friends at BB forgive me, but the experience is not so terrific there. In an effort to compete with Wal-Mart they have really downscaled the experience. You can't find more than a handful of aisles with more than a little tiny 1" by 2" tag with no more than a price and a model number. If you haven't already spent hours online figuring out what you want, the store selling environment will clearly not help you. What happened to the days of experiential selling? Look at Apple. While they have a much smaller assortment and granted Apple products are hot in and of themselves, their stores are cool (or as the younger folk say, "tight"). Can you imagine an Apple-like store with all of the gear of a BB? Wow, I would go there. Target sells a LOT of the same stuff as Wal-Mart but they sure do appeal to my sense of fashion and make me feel better about shopping. So does Costco. Great brands, great prices. And who can say they don’t love all of the food sampling stations?! So, retail doesn’t have to be such a trying, boring, stodgy, staid, depressing, negative experience as what CC has provided. Of course I have a lot more ideas has to how they could execute a successful turnaround but if I give them all away, then why would they hire me to turn it around? :-)

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abluevoice said...

I was in a mall the other day during this retail depression and it was like a ghost town except for the Apple Store that looked like Christmas inside, jammed with shoppers. You are on to something Lew, as usual. Retail entertainment, the food sampling at Costco is a great example you mention. Another example is Ameoba Records in LA and SF, always busy and CDs are dying. They have free concerts in their stores.
Instead of survivor CE retailers like Frys and BB saying hey now with CC going away we can squeeze the manufacture drier. They need somebody like you (The Obama of retail)to "reach across the aisle" to the manufacturers and vendors and say hey lets make me stronger as a retailer, move more of your goods, and a desirable destination to see your goods and buy them, together as a team. More in store demos, give aways,product knowledge centers or kiosks, etc.

CE guy said...

Thanks for your comments. You example of Amoeba is a good one. And in the CE world, this not only sells more goods but higher end, higher margin goods. The more interactive and better demonstrated the goods, the more people understand the value of the additional features to them. Manufacturers generally make less margin on the entry level products and customers enjoy their purchases more when they know how to use and benefit from the added value features of the products they purchase.

Robert said...

Hey Lew, Well of course you are right. Why so many act like deer in the headlights in an industry that has no constant other than change is a mystery. Far too many names of the past adopted a "run away" strategy while passed by those "running toward". And of course, CE is too complex so no matter the model of experience or price, some folks really do need demo, explanation and assurance. This is a big tent and the other models are not bad or dead, just not being executed. see you soon!

Robin Wilton said...

True. There are so many different ways of adding value in the retail market; it must almost take an effort of will to avoid *all* of them ;^)

Admittedly, I have never *quite* believed that the Borders "sure, show up, hang out and just read our books/magazines for free in a nice armchair" approach attracts more paying customers than it does freeloaders and odd-balls, but you have to admire Borders for trying it as a differentiator and then sticking with it...