Posts Tagged 'Circuit City'

Can Circuit City make a comeback?

Whoever bought the Circuit City brand after the store’s demise a few years ago plans to revive it — both as an e-commerce site and as a re-engineered brick-and-mortar store. The question in front of RetailWire panelists: Does the world need a revived Circuit City? (Or, as their headline put it, “Can Circuit City come back from the dead?”) Here’s my skeptical point of view:

This reminds me of the Linens-N-Things saga, in which the brand survives as an e-commerce site but its physical stores are long gone. There simply wasn’t the need for two similar big box concepts, so Bed Bath & Beyond turned out to be the survivor. (But BBBY stock price has fallen sharply in the past five years, like many retailers, as it faces increased competition from Amazon and others.)

It’s hard to see what value Circuit City brings to the table at this point — except as a web-only play. Does a small-footprint “experiential” store offer something different from Best Buy or Apple? (Especially now that Best Buy is removing CD’s from its physical stores, it’s easy to see that they will roll out more engaging and productive uses of that space.) The Circuit City brand was already “damaged goods” because of bad decisions they made to reduce customer service and in-store expertise.


Best Buy: On the comeback trail…or not?

Here’s an appropriate followup to my last post (about the “premature burial” of big box stores). There is a lot of attention paid to the turnaround efforts at Best Buy, and justifiably so. Here’s a recent comment from RetailWire:

Best Buy was declared dead far too early, considering its size and its niche. And Hubert Joly’s hiring — at first met with skepticism — turned out to be a smart way to refocus the business on customer satisfaction.

I give credit to Mr. Joly and team for focusing on the fundamentals at Best Buy: First, embrace the challenge of “showrooming” by converting store traffic into transactions. Second, recapture at least some of Best Buy’s reputation for customer service, which slipped after the demise of Circuit City. Finally, find some new merchandising strategies (Samsung and Microsoft “shops,” for example) to use the center of the store more productively.

Best Buy still faces plenty of challenges, including robust competition from Walmart and Amazon among others, some unproductive sites and the cyclical nature of consumer electronics demand. But there is no doubt that the company has taken some important steps forward.

POSTSCRIPT: Since I published the comment above, Best Buy reported very disappointing holiday sales and their stock priced has fallen from the upper $30’s to the mid-$20’s as of January 24th. Obviously they are not out of the woods yet. I still think Mr. Joly’s initiatives are the right ones, but it’s hard to drive demand in consumer electronics without an influx of new products.

Best Buy: Going down the Circuit City road?

Today’s Retail Wire discussion ought to provoke a lot of conversation. Best Buy is making some payroll and staffing moves that remind a few observers of the mistakes that helped bring about the demise of Circuit City. Best Buy may feel that its principal competitor has left the stage, so it’s free to make some changes in its store…but be careful when your brand positioning is built in large part on customer service:

This move puts Best Buy in a tough position. Economic reality dictates cost-cutting moves at headquarters and in the field, as with many other retailers trying to protect shareholder value in a demand slump. But history is a good lesson — not only Circuit City but also Home Depot under Nardelli — so Best Buy has to be extremely careful here. A short-sighted and less than surgical approach to cost-cutting will be just as visible to the consumer as what Circuit City did, especially in a company building its marketing position on good service. And the consequences for a demoralized team are high unless management makes its case internally, not just to outside stakeholders and observers.

Reviving a “dead” brand name: A good idea?

Today’s New York Times contains a story about defunct retail companies trying to make comebacks as pure web plays or for their brand equity. Their article focused on Sharper Image, which appears to have a second life as a purveyor of packaged gift and electronic items for stores like Macy’s and JCPenney.

I’ve commented on this blog about Linens n’ Things and also commented yesterday on Retail Wire about attempts to resuscitate the Comp USA electronics brand. In this case, I’m skeptical:

I agree with other panelists…reviving the Comp USA business under the existing name is a mistake. You might as well name it Circuit City 2.0 for all the negative connotations. And making price the key competitive difference is also a questionable decision…there is always somebody (Walmart, anyone?) willing to be the low price leader in every category it competes in, including consumer electronics. Since Walmart already “owns” price and Best Buy “owns” customer service, maybe it’s smarter for Comp USA 2.0 to stake out a different competitive position altogether, such as providing the easiest shopping experience in the segment.

Should Home Depot spend money on better service?

Short answer: Absolutely the right move for Home Depot. The current management already undid some of the damage made by Bob Nardelli when he was the CEO, and there is still work to be done. The best parallel from a strategic standpoint is Best Buy, which rose to the top of its market by stressing customer service while its chief rival eliminated its best sales associates in a cost-cutting move. (And we all know how that worked out for Circuit City.) In fact, the “Geek Squad” premise would be a good concept for Home Depot to follow, giving its stores the halo effect of great service while also driving a free-standing revenue stream.