Circuit City reboots online, but can it plug into the market?
The brand relaunched last week as an online-only operation, for now. But analysts are skeptical it will have the service model needed to differentiate from market leaders Best Buy and Amazon.
This time, Circuit City is actually coming back from the dead. Or is it?
The brand is finally making good on a promise made over a year ago by retail veterans Ronny Shmoel and Albert Liniado to bring back the big-box electronics retailer. Only this time, e-commerce is the priority, as are "various concepts of innovative retail stores," the company has said.
But Circuit City's relaunch is already stumbling out of the gate.
The company announced it would open its digital doors on Feb. 15, however, a visit to the website that day yielded a simple "coming soon" message, and by Friday a new one greeted digital visitors: "We have been working around the clock to ensure that our site is optimized for our customers! Due to an overwhelming amount of preliminary traffic, we are reinforcing things a bit. Though we regret that our launch will be slightly delayed, we are looking forward to offering you the best possible online shopping experience in the immediate future."
Re-entering the market won't be without challenges, thanks to a history of turmoil.
Circuit City once had more than 1,500 stores across the U.S and Canada, but it had long played second fiddle to Best Buy. A reliance on commissioned sales and out-of-date stores in unenviable locations didn't help its competitiveness. Then came an internal investor battle and a recession, and with it a pullback in consumer spending and a freeze in credit markets.
The company filed Chapter 11 in 2008 — during the holidays, arguably the worst possible time — with plans to become more competitive and, later in the process, to find a buyer. Neither happened. Holiday sales collapsed. No acquisition agreement materialized. In January 2009, the retailer liquidated. For years afterward, Circuit City operated as an e-commerce-only retailer. That ended in 2012 though, when owner online electronics retailer TigerDirect bought the Circuit City and CompUSA brands with plans to consolidate, according to Internet Retailer.
As the brand plots its return, many industry experts are wondering what it could offer that shoppers can't already get from market leaders like Best Buy and Amazon. The discussion forum RetailWire asked its BrainTrust panel of retail experts the following questions:
Can Circuit City make a successful return from the grave to compete with the likes of Best Buy and Amazon.com?
Does beginning with e-commerce and then moving to kiosks, stores-within-a-store and showrooms seem like a sound strategy towards pursuing a comeback for the retailer?
Here are eight of the most provocative and insightful comments from the discussion. Comments have been edited by Retail Dive for length and clarity.
1. Good luck, you'll need it
Neil Saunders, Managing Director, GlobalData: Good luck to [CEO Ronny] Shmoel. With the wafer-thin margins in electronics, the extensive competition and the relatively slow growth, he’s sure gonna need it!
2. Don't call it a comeback
Doug Garnett, Founder & CEO, Atomic Direct: I wouldn’t call this "Circuit City returns." The question is whether an entirely new operation (online and some type of store) can make a go of it using the old Circuit City name. And there are parts to the answer.
Yes: there’s always room in the market for an innovative new retailer — even in electronics.
No: I’m skeptical about a "start online" strategy given what we know about bad online economics — and they’re even worse for electronics.
Meh: Will the Circuit City brand be an advantage or liability? Personally I was left with a strong vision of Circuit City from its seedy, ill-stocked stores at the end.
3. Follow Best Buy's lead
Kim Garretson, Advisor, MyAlerts: I used to work at Best Buy in strategy and innovation, and one of our best moves was the launch of private label goods like Insignia. Not only did these items deliver more margin, they increased staff pride in our brands, and they put pressure on vendors on their pricing and innovation. I am wondering if the Circuit City has private label plans.
Also another former BBYer lists the following at Quora.com as key factors in Best Buy’s success:
- Decreased dependence on product margins
- Understanding customers
- Admitting its mistakes before it’s too late
- Last man standing
4. Seriously, another place to buy a TV?
Mark Ryski, Founder, CEO & Author, HeadCount Corporation: Just what the world needs, another place to buy a TV. The Circuit City brand is essentially forgotten and unless new ownership has a truly new value proposition, then I would not bet a nickel on their success.
Sure Best Buy’s results have improved, but showing progress against poor historical results is not comforting … and let’s not forget HHGregg. This was a tough category when Circuit City was alive — and it’s gotten a lot tougher since they departed.
5. Ditch the business of 'yesteryear'
Art Suriano, Chief Executive Officer, The TSi Company: Yes, I believe Circuit City could make a go of it provided they built a business for today and not one of yesteryear. The big-box consumer electronics store is something not much in demand anymore which is why I like the store-within-a-store concept for them. I would look at Macy’s as an opportunity for a partnership and competitive advantage for both.
J.C. Penney has brought back appliances and if Macy’s had Circuit City stores inside their stores that could give them a competitive edge without the massive investment of doing it themselves. For Circuit City, they would be able to feed off of Macy’s floor traffic. Work out a deal for Macy’s credit card holders to be able to use their Macy’s card for Circuit City purchases, and you have another win.
6. Remember HHGregg?
Mark Heckman, Principal, Mark Heckman Consulting: The recent sudden death of HHGregg, an electronic appliance retailer that actually acquired many of the old Circuit City stores just before its demise, does not bode well for forecasting success for this new version of Circuit City. However if this new version is better balanced between online and brick-and-mortar and does a better job of product mix, pricing and service, there is always an opportunity for a new player.
Invariably the key to success will be a mix of all of these issues, but also being able to showcase enough inventory in-store to promote variety and selection, while being prudent with inventory expense. Linking in-store to online in terms of kiosks and picking up and a whole host of omnichannel offerings will also be critical for bringing Circuit City back among the living.
7. A known brand advantage
Harley Feldman, Co-Founder and CMO, Seeonic: The good news about Circuit City is that it has a recognizable brand. The bad news is that it is reentering the market against formidable competition and consumers that are more demanding than in the past. The quickest way back is through an online approach like they are attempting. However, they will soon need stores that create a brand presence and where the consumer can get help with the ever-increasing array of technology products and the complexity that comes with choosing and installing them.
The Circuit City strategy is a good one, but if they can accomplish it with the resources they have remains an open question.
8. The online-only problem
Camille P. Schuster, PhD, President, Global Collaborations: This was a surprise. With only an online program, how will consumers get their questions answered? By going to a competitor’s store. If the competitor does price matching Circuit City has no advantage. What will Circuit City offer to entice consumers to purchase electronics when consumers know the company could easily exit the market (especially if the are only online) and leave them with warranties that won’t be honored?
9. Differentiate or die
Max Goldberg, President, Max Goldberg & Associates: Circuit City can be successful if it can provide products and an experience that differentiate it from its competitors. Consumer electronics has become a commodity category, with Best Buy and Amazon entrenched as market leaders. What will Circuit City offer that the others don’t?
- Retail Wire Can Circuit City come back from the dead?
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