Circuit City Tests Smaller Stores

Discussion
Feb 26, 2008
Tom Ryan

By Tom Ryan

Circuit City is testing a compact, interactive format, called The City, as a key part of its turnaround plan. The stores measure 20,000 square feet compared with up to 33,000 square feet for a regular Circuit City and focus on blockbuster sellers in electronics categories.

The stores are being staffed with younger workers (80 percent between the ages of 18 to 25) equipped with headsets and carrying computer tablets to look up stats on any product in the company. Computers, cameras and video games are all hooked up and ready for hands-on testing with plentiful inviting stools to encourage customers to sit down and interact. Shelves rest on wheels so that product assortments can be re-arranged easily.

The staff recites such mottoes as “Keep it real” and holds twice-daily rituals of “shameless self-recognition.”

According to The Washington Post, The City is “a window into the kind of company Circuit City hopes to become, as innovative as the genius bar at Apple stores and as convenient as a drive-through pharmacy.”

In an interview with the Wall Street Journal, Circuit City CEO Philip J. Schoonover said that the concept stores give customers the convenience of shopping online and picking products up, as well as the option to try things out in the store.

“It offers a different experience. Customers can touch and compare, and learn how to use the most complex products and services that we sell,” Mr. Schoonover said. “It is a more efficient use of space… We can get higher revenue per square foot, higher-margin dollars per square foot, and we can find additional sites that weren’t necessarily available for our old box.”

So far, Circuit City has 16 of the newer stores up and running, and plans to open 50 to 60 in the fiscal year that begins next month. The best ideas from ‘The City’ will be rolled back into the core Circuit City stores.

Circuit City says early sales and customer feedback have been positive. Circuit City has posted losses for the past year as store-level changes disrupted operations and competition intensified with rival Best Buy.

Discussion question: What do you think of the possibility of a smaller, more interactive format in the consumer electronics space? What would the keys to success be for a winning concept?

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14 Comments on "Circuit City Tests Smaller Stores"


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Joel Warady
Guest
Joel Warady
11 years 4 months ago

It seems that Circuit City executives have spent time in an Apple store, with a much smaller footprint, and figured that they would try and replicate the feel of the Apple experience. Yet asking your employees to recite scripted phrases like “keep it real” and other hip, pithy sayings will not make the stores any more inviting in which to shop. When you hear about retailers who have figured out a way to execute “cool,” it seldom works. Being cool is a natural phenomenon, and one can’t try and manufacture it.

While we will have to take a wait and see attitude regarding The City concept, it does not seem to have success written all over it. Limiting the salespeople to 18 – 25 years old, and telling them that it is okay for them to listen to music while they work, playing with their handheld computers, does not seem to be a formula for customer service excellence.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 4 months ago

A lot of comments above are comparing CC with Apple. There are several critical differences however. Apple has cachet, centered around dominant, destination items. And Apple’s cachet developed organically. CC most decidedly lacks cachet, and it’s not likely that it can be “manufactured.”

Mark Lilien
Guest
11 years 4 months ago

The current Circuit City management has a limited time left to turn the company around. Mark Wattles bought 6.5% of the shares and named 5 candidates for the board. If Circuit City isn’t turned around very soon, either the management will be replaced and/or Best Buy will destroy it outright.

Ryan Mathews
Guest
11 years 4 months ago

Hey, how about “keeping it real?” Circuit City isn’t Apple and never will be. People go to big box stores for their wide selection and low prices. If they want abbreviated inventories they go to high-end stores or specialty shops. Phony hipness won’t help Circuit City.

Davd Fuhe
Guest
Davd Fuhe
11 years 4 months ago

If this is truly the winning formula moving forward for the CE retailers, how would Circuit City’s plan have (or gain) an advantage over what Radio Shack could do viz a viz implementing the exact same plan? Seems Radio Shack is in a far better position to go this route (if they wanted to), given their “right sized” location size, their lower cost structure, and better brand name recognition among shoppers who prefer a more hands on customer service experience.

David Livingston
Guest
11 years 4 months ago

“Plans to open 50 to 60 in the fiscal year that begins next month…sales and customer feedback have been positive.” Somehow its always “next month” when these big plans begin. Those are the famous last words we have heard from other retailers as well. Most recently Sears/Kmart with their scaled down Sears Grand concept. Fading retailers are simply finding a way to fail in a smaller box. Now if Best Buy was testing a smaller box I would probably have a different outlook.

Bob Phibbs
Guest
11 years 4 months ago

Any company that can proudly issue a press release that they’ve fired their oldest commissioned workers to “turnaround” their business and then continue to sink doesn’t get it. Making it a fun place for employees to play with merchandise is not, in my opinion, a winning way to create a customer focused model. Quite simply, they aren’t Apple, cool or innovative…they’re just grasping at straws.

Mel Kleiman
Guest
11 years 4 months ago

Good try at following Apple. But it takes years to build great brand and a corporate culture. What ever good corporate culture CC had has been destroyed over the last 3 years.

The new concept is great if they can put fun into shopping. But cool statements do not create a cool feeling. The real questions are what will the level of knowledge really be in the salesforce, how good will the product mix be, what about price point?

Why should the customer even want to walk into the store?

Barry Wise
Guest
Barry Wise
11 years 4 months ago

I believe that Circuit City is borrowing a page from Apple’s playbook. The concept of a smaller, interactive format has been very successful for Apple; however the key for The City to be successful is in the execution, not the format. Apple’s success seems in great part to be a result of not just their merchandise and interactive format, but in the innovation they use in their store operations, and the training they use for their associates.

Bill Bittner
Guest
Bill Bittner
11 years 4 months ago
I first became conscious of this tactic when I noticed how many of the electronic devices at both Best Buy and Wal-Mart are now flagged as only available over the Internet. This format does not only apply to electronics stores. As manufacturing becomes more flexible, retailers need to become more adept at managing distribution costs (warehousing, transportation, store inventory and shrink) so they can service the “long tail” created by the Internet. Individual customer preferences which were once unprofitable and too difficult to service are becoming pockets of opportunity for the retailer who can serve their aggregated demand economically. The issue becomes “Inventory Deployment” rather than just “Inventory.” The favorite quote of an old operations guy I worked with was that “we only sell stuff in the stores.” That was the excuse for pushing the overstock produce and bakery goods to the store over the weekend, because no one was going to buy them from the warehouse. Well, now they can. Although it might not work for highly perishable merchandise, by considering the warehouse inventory… Read more »
Camille P. Schuster, PhD.
Guest
11 years 4 months ago

To be successful the stores will need to be fun to enter and entertaining with lots of impulse items. That will drag people in and allow them to have fun. Consumers will be able to see and touch the new products.

After comparing prices online and determining whether the products are in stock, if they are in stock the consumers can order the items to be delivered to their homes or pick them up in the store.

Max Goldberg
Guest
11 years 4 months ago

The key question is whether or not Circuit City has learned from its past attempts to reduce costs. Are the new, young salespeople knowledgeable about the products they sell? Are they skilled at interacting with customers? Will they turn off customers over 25? Will CC management reward employees for success?

If the answer to all of these questions is “yes,” the new format might succeed.

Peter N. Schaeffer
Guest
Peter N. Schaeffer
11 years 4 months ago
Smaller, more interactive formats have already been tried and for the most part failed. Tweeters, for example, is one of the smaller more focused failures, while Apple has blown away the competition in retailing computers and related components. Circuit City is on life support and its executives are trying anything they can to stabilize the patient. In reality, Circuit City’s current stores are smaller versions of Best Buy, and they have failed miserably. One can’t start a corporate “cult mantra” by stating it in a press release. Such cultures take years to develop and are usually indicative of the personality of the company’s founders. Circuit City’s problems are greater than a new format can solve. Store design, a failed sales staff conversion, weak inventories, a substantial competitor, excitement in only one product category, and flat screens is the true essence of their problem. This “new” test is really only a press release. You will be surprised as to how few stores they actually open or convert.
Craig Sundstrom
Guest
11 years 4 months ago

Moving staff and customers into smaller, more nimble venues…now why can’t I get out of my head the analogy of getting into a lifeboat?

I–and apparently most others on the board as well–have long given up any hope for CC. I don’t think this is the breakthrough that will prove us wrong.

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