Retailers pin holiday hopes on Web
By Stephanie Stoughton
Associated Press
RICHMOND, Va. — As Circuit City Stores Inc. prepares for holiday shopping, the struggling electronics retailer is relying on its Web site for a sales boost.
Alexa Welch Edlund • Associated Press
With more than 1 million items — electronics, toys and gadgets — now available, CircuitCity.com is seen as a formidable player as consumers spend more on online electronics purchases. Richmond-based Circuit City, which has lost market share in recent years to rival electronics chain Best Buy Company Inc., hopes its rejuvenated and expanded Web presence will improve its performance this season.
W. Alan McCollough, Circuit City's chairman, president and CEO, displays company merchandise, such as a photo/clock globe, a digital golf score keeper and pouch, and a solar powered AM/FM radio.
"There's a lot more potential," CEO Alan McCollough said. "But in the end, it's not so much about Internet growth, it's about customer growth and sales growth. It would be impossible to get that without a state-of-the-art Web store."
Besides DVD players, home theater systems and plasma TVs, the Web site features new private-label gift gadgets including an atomic clock, a talking pedometer and a keychain lock de-icer from InterTAN Inc., a Canadian retailer that Circuit City acquired in May. Shoppers will also find more electronic toys, including radio-controlled Jeeps and Ford F-150 trucks.
Although online sales are still a small part of Circuit City's total revenue, they are growing fast and becoming more critical to electronics retailers. This year, total Internet sales of electronics are expected to rise 32 percent to $7.5 billion, slightly faster than the rate of all retail sales online, according to a Shop.org and Forrester Research report.
Of course, executives at Best Buy are looking at the same trends. Over the summer, Best Buy, the nation's largest chain of consumer electronics stores, hired Sam Taylor, whose experience at Lands' End's pioneering Web site could benefit Best Buy.com during the holiday shopping season.
Taylor went to work, streamlining the site's check-out process and improving BestBuy.com's search engine and navigation. Asked what he thought of CircuitCity.com, Taylor said: "There are three competitors we talk about: Wal-Mart, Dell and Amazon. I'll just leave it at that."
But in an August survey by Keynote Systems, which measures Web site performance, customers indicated they were much more likely to purchase from CircuitCity.com than BestBuy .com. They gave Circuit City high marks for simplifying the search, navigation and checkout processes while complaining that Best Buy's site made browsing and buying difficult.
"Overall, Circuit City is making it much easier to find the products they want and to compare them and figure out whether they are appropriate for them," said Bonny Brown, research director of the company in San Mateo, Calif. "Best Buy is probably not taking as much of an advantage of its size as Circuit City is."
Still, Taylor's response reflects the huge challenges Circuit City, the No. 2 electronics chain, faces as it tries to gain back market share. Although Circuit City reported a smaller-than-expected loss in its fiscal second quarter ended Aug. 31, Minneapolis-based Best Buy outpaces the company in growth and profitability.
Best Buy earned $150 million on $6.1 billion in sales in the second quarter, while Circuit City lost $11.9 million on $2.35 billion in revenue.
Donald Trott, of Jefferies & Co. Inc., recently downgraded Circuit City to "hold" from "buy," saying its stock appreciation reflects investor recognition of McCollough's efforts to move poor-performing stores. He added that "meaningful incremental progress" will be needed to push the share price higher.
