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Circuit City Brand Garage 2007 Update Last year we had Circuit City in the garage, and talked about how Best Buy was basically cleaning up sales in the category while Circuit City languished. Looks like things have changed for the better for the Big Red Ballers. First, they made quite a few substantial changes: A new president, fresh from Best Buy; new marketing management; a new ad agency and processes jiggered to fit the market's retail variables. They still trail Best Buy by a serious chunk of change, but same store sales have risen 4.2% from December 2005 to December 2006. By contrast, Best Buy's same store sales rose 7%. The BB's are still king. Store managers are happy. Customers are happy. But some of the increase can be attributed to economic factors beyond any changes made by the electronics giant. Over the last year, retail sales of electronic items rose across the board in general, so some of this success is the old truism that a rising ocean lifts all ships. Thank you's go to digimongous sales of portable music devices (ala iPods), hot GPS navigational products, satellite radio, home audio equipment and the fast-selling flat-screen plasmas and LCDs. Even with this good news, Circuit City shares were down 71 cents, closing the year at $19.29. Seems Wall Street is still looking for more adjustments. Conversely, Best Buy's shares were up 16 cents, closing out at $50 per. Looks like there is still a little work to do. However, the ship seems pointed in a more positive direction than a year ago. How much did branding have to do with this upturn? Hard for us to say without knowing their inside plans and goals. It seems they shifted quite a bit into online efforts and they continue a strong presence in newspaper inserts. Obviously, they brought in some good people in the top management spots and revamped marketing as well. Firedog was launched to compete with Best Buy's wandering Geek Squad. TV efforts seem little changed beyond the news of a new agency. Outside the stronger interactive presence, This is absolutely the right thing to do. Get your internal and external aligned. But at some point, they will need to make a broad, fresh branding statement to grab consumers' attention and press the offensive. Think of the oft-copied retail branding campaign of Target. That said, CircCity is in a far better place than they were a year ago and they deserve kudos for the beginnings of a turnaround. But they also know in their hearts that the retail electronics market itself gift-wrapped a lot of that 4.2% improvement. They still wake up every morning staring at Best Buy's butts, and to adjust that view they will need to open up the passing game.
Circuit City Today, we pull the Big Red Ball into Bay #1, pop the hood, feel the grease and sniff the spark plugs to see what's up with Circuit City. TT: This one is fascinating. Circuit City used to own the electronics farm and the company was even highlighted in the book, Good to Great. Then Best Buy showed up with an attitude and became even greater than great. Their recent travails have been cited endlessly. I've been visiting several Circuit City and Best Buy locations for a couple of weeks now (a little secret shopping excursion) and have asked more than a few questions of customers and salespeople from both places. I also spent some time in quite a few Wal-Marts and Targets as part of this little brand diagnostics exam. I'll give those observations as we open the hood, yank the manifold and check out the pistons.
TT: It's definitely a tangle of cords with CCity's new CEO from Best Buy and the departure of CCity's ad agency. Yessir, the Internet is packed with editorials and blogs and electronic yapping about the meteoric rise of Best Buy at the expense of CCity. But that always means opportunity. As of this writing, Best Buy was tops in electronics sales, followed by Wal-Mart and then Circuit City. CCity and Best Buy both have around 600 stores. Best Buy was slugging Circuit City for a while. Recent numbers show CCity is coming back stronger due to advanced tech TV sales and their Internet site sales are exploding. But BBuy is still ahead. GS: The Internet looks like the bright future for them. TT: Definitely. BBuy has clearly been winning the battle of getting more moolah from the same amount of real estate in stores. But Circuit City shifting more to Internet-based sales can make a fast change and apparently is. Still BBuy’s "Customer-Centric" approach seems to be pushing them ahead. Even with the recent good sales numbers, how did CCity go from being touted in Good To Great to playing third fiddle so fast? GS: CCity seems to have shorted a circuit somewhere along the way. Until a few years ago, a lot of their practices were rooted in the old-school "commission" model that permeated consumer electronics. Customers were treated as though they were a pile of pollen at a bee festival. The Internet can solve much of that. TT: Yes it can. And it apparently has to some degree. GS: Being a star on the Internet can level the playing field a lot. In the past, many "salesmen" were seldom, if ever, electronics or media experts, and their advice was sketchy at best. Some people said CCity was a great place to get bad advice. Opinions vary with experience, but the store environments often instilled as much faith as the staff. TT: Yeah, I am a longtime CCity customer and have been on the receiving end of some of that dubious advice. Again, the Internet takes that problem away. GS: Exactly. The consumer electronics industry fuels one of the most dynamic and ever-expanding retail markets in the world. The Internet is custom-built for such an expansion. The essence of technology is to stay cutting-edge and relevant to today's needs while fueling the fires for tomorrow's desires. Today's electronics are sexy and expensive, and whether I'm paying several grand for my 24-foot-plasma-fusion-cinematic-surround sound-o-rama display, or just upgrading to the latest iPod, I want the whole purchasing experience to measure up. It seems in some ways like the old CCity was born of yesterday's technology and a dated retail model, and never tuned-in to changing consumer values. Best Buy has agitated that perception. They might have been top dog once, but now they’re playing follow the leaders, and the bronze medal is easily lost. Of course, BBuy was a smart predator. TT: With the Internet, they can have a very smart front. The advice can be cutting edge. Maybe the training for all electronics salespeople in the stores needs a new paradigm. And not just at CCity. You know, like have people who understand what the product can do, how it works. The Internet can make them look like tremendous experts versus a salesman who doesn’t know what is what. Do I really need a gold-plated Monster Cable? GS: You don’t have one? TT: I have a Monster Jack Russell. GS: Sounds like a personal problem. Okay, back to point. When you're the retail alpha, you're under the competition's microscope. In today's “we’ll beat any advertised price" world, specialty retailers can't compete only for the bargain-hunting consumer (and in that, Wal-Mart is the 800 pound-gorilla). CCity got out-maneuvered by a more astute, aware and savvy competitor. BBuy had the vision and drive to do what they said and get the job done in the minds of the shoppers. CCity is in catch-me-if-you-can mode. When they opened their first store in CCity's hometown, the BBuy employees wore shirts that said "Circuit Breakers." Interesting that CCity's future sits in the vision of BBuy's former voyeur. TT: Clearly CCity's new CEO has already begun the shift. The numbers show promise. BBuy doesn't have an ad agency of record, so CCity ousts theirs. Many more changes are coming, no doubt. The buying experience will probably change as well both in-store and on the web. Expect an easier shopping experience and maybe even cooler looking stores from CC. Certainly they need a more interesting web site experience. There are a lot of ways to skin a retail experience these days. So let’s skin that smokewagon. (thank you Kurt Russell). GS: I’m ya Huckleberry (thank you Val Kilmer). TT: In the old world of concrete and carpet, CCity had already begun to unveil some new prototype stores that compete much better with BBuy for customer experience than the old ones. Strolling through their stores, you see some obvious differences. BBuy puts the digital cams, miniDV cams, iPods, cell phones and such in the middle back of the stores on cool, rounded snake-shaped surfaces that give each customer a bit of privacy to check out the items. You have to walk by a lot of things that can grab your eye on the way to those items. At CC, that stuff is right up front. BBuy still sells appliances. CCity ditched them long ago. A while back CCity had some major issues with their checkout scheme and the lines could pile up. BBuy created a faster way to move buyers through. Even their web sites are radically different. Blue for Best Buy, red for Circuit City. The blue states are winning this one right now. BBuy has a more easily navigable site, with the bar down the left side listing everything so you can find it quicker. CCity has adopted some of that for emailers. GS: What about your diagnostic detective work – Your Circuit City: CSI? TT: Glad you asked. I found a location where the two competitors are directly across the street from each other. Circuit City has been there for a while. Best Buy just opened a few months ago. So what are customers saying? I spoke with several. GS: Roll that beautiful consumer footage. CIRCUIT CITY CUSTOMERS MAN IN HIS LATE 30s: "I usually go from here over to Best Buy and see what the different prices are. Since they are so close, it makes that easier. They are about the same to me as far as buying stuff.” WOMAN IN HER LATE 40s: “I have shopped here (at CC) a long time. It's a habit. But we are looking at getting a new HDTV and I will definitely look at Best Buy as well. Best Buy seems a little friendlier right now. Maybe a little easier?" TEENAGER: “I look at the music here. I look at it there. I really like the places where you can listen to the CD's first. Over at Barnes & Noble you can do that, but the CD's cost more. I listen over there and come here if I'm buying. Which is better? I think Best Buy has better prices. My friends say that too. It looks cooler at Best Buy compared to Circuit City, like they’re more up on what's happening, ya know? But I also download a lot of my stuff too; most of it actually. I will listen to it here and download it at home. The Pod rules." FAMILY WITH KIDS: “We're looking for a new TV, flat screen, the works. I think we're going over to Best Buy, though. Why? They don't seem to be selling so hard over there. They gave us a little more space when we were looking. Not hovering over me. I have looked at most of what we want online so I’m not totally stupid. I don’t need selling.” OLDER WOMAN: “I like Circuit City. They've always helped me here, but they do have a lot of turnover. I never see the same person twice. Maybe that’s just the way it is now.”
BEST BUY CUSTOMERS MAN IN 20s: “I used to go to Circuit City. What options were there? Didn't want to go to Wal-Mart with the cattle. Best Buy seems like they are what's newer, cooler, what's next. Like Honda or Scion. Circuit City seems like Buick or Chevy. Not bad, just not quite up on it. If Target went into this biz, they’d rock.” WOMAN IN 20s: “Cooler atmosphere here. Not so high-pressure. I hate to be shagged at the door by desperate salespeople. Seems like all guys at Circuit City. They seem to have more women working here. I like that.” TEENAGER: “You just saw me over at Circuit City. (laughs) Yeah, I bought a CD, some batteries, a new cord for my cell phone, lost the old one. Okay, so I guess I like Best Buy better, huh. They got my dollars. Check out the Geek Squad Bug. Don’t know exactly what that’s all about but sounds like they’ll come to you, help you set stuff up maybe? Fix it? That’s cool. I love that idea.” OLDER MAN: “I don't know much about all this electronic stuff, but I figure these young kids here do. I'll probably look at Circuit City and Sears too, to be honest with you. Best Buy looks like it might be what Sears used to be for us when I was young – the place to go for this type of thing. But Circuit City is good, too. Can’t say anything bad about them.” MAN IN 30s: “Best Buy is the new. Circuit City is the old. Look around here. Go over there. You can see it, feel it.” MAN IN 40s: “Would I buy this stuff at Wal-Mart? Ugh, not this stuff. (points to a new TV and accessories he just bought). I want more advice than I get at Wal-Mart.” TT: Is there a pattern in what they're saying? CCity is old, BBuy is new? There were more young people in Best Buy than at Circuit City the days I went. Again, the Internet is changing this situation. GS: I'd say so. Don’t play catch-up in terms of retail environment and experience. Play leap frog at every brand touch point, customer experience and organizational culture level. That's not to say a new prototype store, complete with improved flow, strategic product placement and lovely lighting isn't a nice step, but it's not the giant leap CCity needs to escape the mental image many consumers have forged. I know it costs a lot to change a store environment, but that’s still simple compared to what they really need to change – consumers’ minds! TT: Amen, bro. Preach on and pass the miniDV. GS: BBuy has already created valuable mental stock that says, “We're younger, hipper, and more knowledgeable.” They did this from day one. And years later they still check the pulse and maintain the pace, leading the way with consumer-oriented services tailored to the lifestyles of their customers. Take that "Geek Squad" example. This is circuit nerds gone 007-Avengers cool, offering incredible computer, IT and network support at a moment’s notice. It is a well-crafted brand and great progressive allegiance. Every BBuy serves as a Geek Squad precinct, and there's a tricked-out GS-VW bug in front of every store. That's not just fresh, that's smart business! TT: That Customer-Centric thing percolating. GS: Absolutely. I want to shop at that place. Granted, there's a LOT of infrastructure and logistics at play, and much of this ultimately translates to the consumer in more “tactile” ways like ease and convenience, availability of merchandise and the perception of an overall “good experience.” But CCity needs to actually develop a vision for what they want to achieve – what they want their brand image to become. Are they playing the short-yardage game plan? Immediate profit, not long-term prosperity. Hard to tell from out here. They should take this good numbers opportunity to listen closely and look hard. To let consumers teach them. Maybe it's time CCity stopped taking baby steps and made another moon-clearing giant leap like they did in the ‘80s. Maybe it's time they stop being “just” CCity and build something completely new. TT: Maybe the best location to build that next store is between our ears. GS: True. Is it going too far by suggesting they send their “old” brand to the scrap yard and start completely tabula rasa – blank-slate thinking. They used to be Ward’s in the Stone Age but reinvented themselves as CCity and grew because people saw them as true experts. BBuy has taken that ace away. Do “Circuits,” which alone sound like old and tired technology, no longer hold promise? BBuy's name says it all. Is it time CCity stuck a fork in their own outlet? TT: I'm not sure what “too far” is, exactly, when you’ve been getting dunked on by a competitor who blew past you in a 12-month period like you were standing still. Maybe starting from scratch is a tall order. But they can make huge strides just by being smarter. And those numbers seem to indicate a climate change of some kind. Basically, CCity is better than what they’ve been for so long. They have the exact same products as BBuy. They have the same number of stores. Honestly, their prices aren't that different. So their overhead should be similar. Yet one has generated so much more sales power than the other. There is some rewiring to be done. Is there a simple emotion at work here? Maybe the blank slate thinking will help them find their future. There’s a reason they put you to sleep before major surgery – it hurts. But sometimes thing have to be fixed. Yeah, I watched Dr. 90210. GS: It’s an exercise that could certainly lead to some new thinking. TT: Yup. One built a store on land. The other built their brand in people's brain. Now we’re living and buying on the web. Maybe CCity was getting out-coached, out-played and outsmarted. But there is a tremendous amount of equity in CCity. We have bought from them for a long time. Yes, they have been getting schooled by BBuy, but the question is, will the new head honcho do more than fire the old ad agency? I say yes. A big yes. I say he is in there right now retooling a lot of internal structure and thinking and doing, and these recent numbers are just the beginning. I say CCity is getting a good dose of BBuy mentality in the top office. And that stuff pours downhill pretty fast. GS: Let’s hope so… There’s no time for “trickle-down” management when dramatic actions are needed. TT: Absolutely. What would Jack Welch do? What would Apple do? Welch would rip it apart and put it back together in a more efficient way. Apple would just innovate it into a new place. If this were a sports team, what happens now? They need a cultural shift internally, a cultural revolution externally and an alignment between the two into a single positive force. The people need to be energized. The products inside these stores are shape-shifting by the month. Hot new electronic gadgets are constantly moving and changing. The web is opening up a whole new world for them. People are aware of that energy with the products. Are they attaching that cool new energy to the buying experience? More so at BBuy than at CCity right now. But how about tomorrow? They definitely need to build a stronger web presence and a better web experience. That is job one. Help people understand what the cool new technology really is and can do for people. Make it fun and friendly. Build more than a flashy hard retail site. Build a destination where you can learn about products easier. Talk to experts. Building stores is expensive. Your web presence can be changed dramatically and quickly. And that should happen immediately. As for their advertising, it is way too tame. I have three words: Big Buckin’ Chicken. AKA, make it cool and fun and make me have to work my butt off to ignore it. Okay, so much for esoteric yapping. Let's pull the manifold and see if the pistons can take a full 500 laps with the pedal all the way down. GS: And to go the distance, it's going to take more than a new ad agency, cool advertising, flashy stores and catchy slogans. Face it, no Indy legend, Daytona driver or NASCAR master took the checkered flag based on the color of his car, how cool it looked or what sponsor logos were slapped on. It takes a true and masterfully orchestrated team effort – the engineers and mechanics who know every nut, bolt and gasket, and squeeze every ounce of horsepower out of every inch of engine. They win the race. The pit crew that keeps the machine fine and fully tuned for peak performance in every lap wins the race. The driver who guides the screaming multimillion-dollar monster toward victory, fighting for every position while keeping everything from crashing in a blaze of lost glory, wins the race. And, of course, the leagues of "extraordinary everybodies," those countless loyal masses who know every name, rank and racing number of their chosen champions. You're right, BBuy built a brand in our brains... Maybe CCity needs to rebuild one in our hearts. TT: CCity, start your engines. Big R's Brand Garage will be happy to discuss your brand. Just send us your product or e-mail Terry Taylor or Geoff Stone. Click here to return to the main brand garage page.
Opinions expressed here and in any corresponding comments are the personal opinions of the original authors, not necessarily of Big River and may not have been reviewed in advance by Big River.
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