Business Driven Technology 6th Edition by Paige Baltzan

Exercise 134

Changing Circuits at Circuit City
When Circuit City expanded the big-box warehouse format to consumer electronics retailing in the 1980s, the company was on its way to becoming the place to go for TVs and stereos. By the late 1980s, it had sidestepped its then top competitor, Silo, and it soon put the squeeze on the likes of Tweeter and RadioShack. Circuit City was doing so well in the 1990s that business consultant Jim Collins, in his best seller Good to Great, wrote: "From 1982 to 1999, Circuit City generated cumulative stock returns 22 times better than the market, handily beating Intel, Wal-Mart, GE, Hewlett-Packard and Coca-Cola."
Today, Circuit City is in a markedly different position. By 2001, Best Buy had raced past the Richmond, Virginia-based chain, usurping its position as the number one consumer electronics retailer. Best Buy now has 608 stores compared with Circuit City's 599 and nearly $25 billion in revenue to Circuit City's $9.7 billion. Circuit City is ranked by consultancy Retail Forward as the number three seller of consumer electronics, behind Best Buy and Walmart. "Circuit City was the 800-pound gorilla," said Joseph Feldman, a research analyst with the investment bank SG Cowen Co. However, "they woke up one morning and Best Buy had doubled its size with the same number of stores."
Catching Best Buy
Circuit City has been trying to catch up to Best Buy, or at least cement its position as a serious contender in consumer electronics retailing. Its top executives announced plans to turn the company into a customer-focused business that delivers a personalized experience to all customers across all its channels (stores, web, and call centers). Michael Jones, who took over as Circuit City's CIO in January 2004, speaks passionately about the high-profile role technology will play in delivering personalized customer experiences. However, before he can achieve his vision of store associates recognizing customers through their loyalty cards as soon as they enter the store, he has a lot of unglamorous groundwork to lay. Circuit City's strategy hinges on a robust IT infrastructure that makes information readily accessible to decision makers. Everything the company is doing to improve its business-from developing more effective promotions to deciding which products should be displayed at the ends of aisles in stores-hinges on data. "This is heavy analytical work. It's fact-based, data-driven," said Philip Schoonover, Circuit City's new president who was hired in October 2004 from Best Buy.
Circuit City is just starting to invest heavily in the technology needed to act on this strategy. It is upgrading its mostly proprietary point-of-sale (POS) system and building an enterprise data warehouse to replace siloed databases. However, some analysts say Circuit City's turnaround effort has been hampered by a stodgy, overly complacent leadership that lacks vision. Top executives saw the Best Buy locomotive coming but failed to react as it steamed past them. Indeed, some analysts say they doubt Circuit City will ever catch up.
Bottom-Up Changes
As part of its turnaround effort over the past few years, Circuit City has sold all of its non-core businesses to focus on its core: consumer electronics. It also has changed the pay structure for in-store employees, begun relocating stores (it closed 19), and hired new management. In addition, the company is finally starting to hone its customer-centric strategy. Circuit City is already improving the customer experience in its stores by, among other things, locating accessories and services close to big-ticket items so that customers can see more quickly what they might need to furnish their home office or outfit a home theater. For example, when a customer is looking at a high-definition television, nearby is a selection of furniture to hold the TV, the cables needed to hook it up, and DirectTV or digital cable service products. Circuit City is also making merchandising decisions based on what is important to the customer. For example, its stores are beginning to feature products deemed most important to customers on the displays at the ends of aisles. The company is trying to nail the basics of customer service by making sure that items are not out of stock.
How would anticipating Best Buy's growth have helped Circuit City remain as an industry leader