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Business & Technology

Circuit City struggles as Best Buy's customer focus strategy pays off

April 6th, 2007 9:42 pm by Associated Press




PALO ALTO, Calif. - Ralph Devoe's hunt for a new computer monitor didn't include a stop at Circuit City, even though one of its stores was only a few doors down from the Best Buy where he went shopping this week.


"They often don't have what I want," the retired physicist said. "And Best Buy just seems a little better. The salespeople actually know what they're doing."


Though Best Buy also has its detractors, Devoe's dislike of Circuit City illustrates a challenge facing the electronics retailer as it competes in the shadow of its larger and younger rival. Its sales staff at stores is thinner and product selections are often more limited and less organized.


The companies' financial results are telling. Best Buy, the nation's No. 1 electronics retailer, this week posted an 18 percent rise in fourth-quarter profits despite a bruising environment of flat-panel TV price drops. No. 2 Circuit City, on the other hand, swung to a loss in the quarter and is shaving its total work force by 8 percent, laying off 3,400 of its most experienced (and expensive) clerks.


Analysts say Best Buy is executing well on all fronts. Its rapid expansion and earlier investments in its Geek Squad tech support service and high-end Magnolia home theater segment - all part of its "customer centricity" strategy - are paying off.


"Circuit City has spent a lot of time catching up, and right now, they're not catching up fast enough," said Stephen Baker, analyst at market researcher NPD Group.


Yet the tale of the dueling electronics chains goes beyond numbers. It also boils down to consumers, where they like to shop and where they spend their money.


For sure, bargains and good rebates could be found at the stores of either chain - an important draw for the price-conscious American public.


But other times, it's as basic as how a store feels, how the products and aisles are laid out, how the workers there treat you.


A friendly greeter is stationed just inside Best Buy's front door.


"How's it going? Welcome to Best Buy," he repeats.


Within a minute of browsing in a section, a Best Buy associate swings by to offer assistance. The staffer casually dispenses product info or comparisons, and just as quickly lays back if you decline the help.


A visit to Palo Alto's Best Buy and Circuit City to pick up a component-video cable illustrates the differences.


At the Circuit City, it took some effort to find a store employee to ask where to find the cables - and the red-shirted employee who was tracked down misdirected this shopper to cables for TVs.


At Best Buy, the greeter at the door quickly responded with a more specific question, "What kind of component video?" By asking, he learned the cable's purpose was for a game console and pointed to the video game section.


The desired Sony-branded cables were sold out, but the Best Buy associate did double check the store inventory.


That kind of attention to detail goes a long way in a shopper's experience.


At another Best Buy in Sunnyvale, for instance, the music MP3 players on display were in good working order, and a patron could test the controls and use headphones to listen to them. By contrast, the Palo Alto Circuit City's portable players - with the exception of a separate display for Microsoft Corp.'s Zune player - were not powered and lacked headphones so a shopper couldn't get a good test run of the devices. Product information placards were also missing from some models.


"I like how it's easier to find things (at Best Buy), and it's cool when you walk in and they greet you," Dustin Durham said outside the store, clutching a new projector. Durham used to shop at a Circuit City when he lived in Kentucky but moved a year ago to the San Francisco Bay Area where both stores geographically compete neck-in-neck. He hasn't been back to a Circuit City since because he said the store just felt "like a maze."


Devoe, who bypassed Circuit City in his search for a computer monitor this week, first tried the local Costco, then a Fry's electronics store and finally Best Buy, where he admittedly was pleasantly surprised with its selection and knowledgeable staff.


At Costco, displays weren't powered on, and at Fry's, he couldn't adjust the display resolutions. But at Best Buy, he was sold on a 24-inch, $700 display after he was able to actually compare and adjust the resolutions of various models.


In some cases, it just comes down to location. With more than 800 Best Buy stores in the U.S., compared with Circuit City's 650, Richfield, Minn.-based Best Buy Co. Inc. has an upper hand at the moment.


"I don't have anything against Circuit City, but this one is just closer to me," Daisy Zhao said, as she stepped out of a Best Buy with a new digital camcorder. It was just a one-mile difference from the next closest Circuit City - where Zhao said she used to shop before the Best Buy opened in her Sunnyvale neighborhood about three years ago. Since then, the homemaker has bought a DVD recorder, a DVD player, a small, flat-panel TV and some other computer accessories from Best Buy. On the same day Richmond, Va.-based Circuit City Stores Inc. reported its disappointing fourth-quarter results, A.J. Sanchez and his 8-year-old son emerged from one of its stores with two new video games. He chose that store because it's closer to his home. But for electronics, he has shopped at both leading chains, looking for the better bargain. He recently spurned both in favor of a good deal for a 42-inch high-definition TV at a Sears store going out of business. But Sanchez said there seem to be fewer sales representatives at Circuit City and the store layout is confusing. Titles for the Xbox 360 were limited and spread across different areas, which made his shopping mission Wednesday just a tad frustrating. "But they both beat Target and other stores, hands-down," Sanchez added. Representatives of Best Buy and Circuit City did not return calls for comment. Analysts agree that Best Buy and Circuit City do a better job of training its employees on high-tech products than other large general retailers. Indeed, a Circuit City employee spent a good five minutes explaining the pros and cons - as well as a good dose of history - of Intel and AMD processors during a recent visit to check out Windows Vista laptops. "One of the key differentiators of retail stores is the person on the floor," NPD's Baker said. And that customer interaction, he said, will be all the more important as Circuit City and Best Buy continue to battle not just each other but the growing conveniences of online shopping. AP-CS-04-06-07 1538EDT

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