Circuit City and Tweeter’s Pain is Best Buy’s Gain

Discussion
Nov 07, 2008

By
George Anderson

Circuit
City is closing 20 percent of its stores. Tweeter is closing all of its stores.
That leaves up to $2 billion in consumer electronics purchases up for grabs
according to an analyst with Piper Jaffray.

Mitchell
Kaiser Sr. said earlier this week that Best Buy is in position to pick
up to 30 percent of that figure.

Another
analyst, Gary Balter of Credit Suisse, believes that Best Buy will be able
to grab more than its 21 percent market share from the 155 stores being
shuttered by Circuit City.

Jay Vandenbree,
Sony SEL sales president, told TWICE (This Week in Consumer Electronics)
that if consumers don’t find what they want at one retailer they naturally
go to another.

"I
don’t know any consumers who go to one retail store and postpone their
plans to purchase a product if they can’t find it there," he said. "The
question becomes do they shop at Sears? Do they go online? Or do they go
to a smaller independent retailer for their shopping experience? It will
be interesting to see which value equation they do choose. But they are
going to choose to buy nevertheless. I have that much faith in consumers
that they will continue to do that."

Discussion Questions:
What does the closing of over 200 Circuit City and Tweeter stores mean
for other consumer electronics retailers? What will be the key for those
who continue to operate stores when it comes to picking up business from
the closed locations?

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14 Comments on "Circuit City and Tweeter’s Pain is Best Buy’s Gain"


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David Livingston
Guest
13 years 6 months ago

The Circuit City and Tweeter’s customers are already shopping somewhere else. That’s why they are closing stores. I would not expect to see very much increase at the competitor’s stores. I personally believe the best time to go after customers is when the competitor’s weak stores are still open. A good old game of cat and mouse teaches companies how to kill their competitors. After Circuit City and Tweeters are history, the big guys will probably go after Sears next.

Ryan Mathews
Guest
13 years 6 months ago

While this clearly benefits Best Buy and Amazon, put me in the camp that believes this may be a boon for Walmart, which can now grow its consumer electronics business by leaps and bounds by selectively increasing its presence in the most profitable pieces of the market.

James Tenser
Guest
13 years 6 months ago
In markets where CC and BB go head-to-head, consumers theoretically benefit from both price competition and wider assortment. So the closure of these Circuit City stores is not great news for the common shopper. I think the more savvy shoppers are already looking online. Those who need sales or aftermarket help won’t find much at Costco or Walmart or Target. They may find sales help at Office Depot, Max and Staples, however, and I think these outlets may stand to gain a bit from CC’s loss. And let’s not forget Radio Shack, which continues to survive with its unique mix of products and accessories. Finally, Sears is still doing alright with big TVs. All should gain something in markets where Circuit City closes. Still, it looks like Best Buy may become the only game in town when it comes to full-assortment consumer electronics retailing. I suppose Fry’s is still a threat in its Western markets, but the list falls off rapidly from there. Computer superstores are gone from the map already. This begs the question:… Read more »
Doron Levy
Guest
Doron Levy
13 years 6 months ago

Of course they will see some pickups but we are in a bad economic situation here, so any increase will be small and possibly have a negative effect on margin. Instead of cherry picking at CC or Tweet’s, the customer will cherry pick at BB instead. It’s up to BB to train associates to convert those cherry picks into full fledged baskets.

There is an opportunity here for increases but we are fighting an uphill battle. BB has the selection and price strategy to win but we really need to get floor associates driving the basket to truly become more profitable.

Camille P. Schuster, Ph.D.
Guest
13 years 6 months ago

What it means is that Circuit City and Tweeters were not giving the consumers what they want. The value equation of what consumers want is more complex than just price; it also includes availability, selection, right models, integration of online and in-store, service, and assistance after purchase. Many electronics consumers go online to check prices, go to retail outlets to check out the physical products, and then decide how and where to purchase.

Purchasing the stores that close is a decision that another company should think about very carefully. Consumers may not find those locations desirable and/or useful.

Lee Peterson
Guest
13 years 6 months ago

As we survey retailers about what “post-bust” retail is going to look like, the single most oft used phrase is “smaller.” Best Buy, or anyone for that matter, would be wise to wait and see just how bad this is going to get before leaping on to any real estate deal. Temperance is virtue, especially now.

Max Goldberg
Guest
13 years 6 months ago

Obviously the closing of some Circuit City and all Tweeter stores benefits other brick and mortar consumer electronics retailers. It also means more business for online retailers. The question is how much business. As consumers cut back on spending, other retailers might not benefit as much as they initially hoped.

Other retailers, online and offline, would be wise to increase market share through skillful use of price promotions and excellent customer service. The stores that will win are those that the consumer feels most comfortable with. And low price does not necessarily equate with comfort.

Phil Rubin
Guest
Phil Rubin
13 years 6 months ago

Easily the two biggest beneficiaries of Circuit City’s long slow train wreck will be Best Buy and Amazon.

These are the two most customer centric merchants in the CE category and there is no reason not to expect that they will gain. Best Buy should get more than its share (if you take out CC their de facto share goes up, right?) by virtue of its brick and mortar.

This will be further testament to Best Buy’s disciplined commitment to Reward Zone and its corresponding ability to identify, address and be relevant to customers.

Amazon is the only other player in this space with similar abilities and it will be interesting to see how aggressive they are given the further erosion of at least one competitor.

Anne Howe
Guest
13 years 6 months ago

Here’s another thought. I think both Walmart and Target have a significant opportunity to make a run after more share in consumer electronics. They have the shoppers in the stores already, so why not work to make electronics more of a destination? In the process, these retailers can pick up as many skilled service folks as they can find who just lost their jobs.

The perception of underqualified “ce” service staff in mass channel stores could be quickly converted into a valuable asset for these smart retailers who need to stay competitive to Best Buy and Amazon.

Liz Crawford
Guest
13 years 6 months ago

As consumers are holiday shopping for electronics, they’ll be using online comparison pricing tools. Hello Best Buy. Hello Costco. Sure, other retailers will pick up the slack. The only question is how will the pie be sliced, and who will get the biggest piece of Tweeter’s and Circuit City’s business.

Mel Kleiman
Guest
13 years 6 months ago

The closing of over a 100 stores is guaranteed to affect the competitive landscape. Will Best Buy get a greater share of the market? Most likely not. Will they get a fair share of the increase? Yes.

The closing of the Circuit City and Tweeter stores will make a lot of electronics retailers’ Christmas a little brighter. Not much…but a little.

Dick Seesel
Guest
13 years 6 months ago

Best Buy has run circles around its national competitors (especially Circuit City) for years, especially in terms of the store experience. So they stand to gain the most share from store closings in overlapping trading areas. An interesting long-term question, however: Who becomes the next threat to Best Buy itself as it becomes the one-and-only dominant electronics retailer? Is it Apple, which has a huge store-opening window of opportunity? Is it Walmart, with its unbeatable price advantage? This is one to watch.

Kai Clarke
Guest
13 years 6 months ago

The closing of CC’s many stores and Tweeter are more the result of consumers already going to other retailers. These stores have been largely empty for some time. Of course there will be a nominal amount of consumer shift, but this shift has already occurred. The closing of these stores is the result of the shift, not the start of it. The process is over when the stores close, not just starting.

Robert Heiblim
Guest
Robert Heiblim
13 years 6 months ago
It would be easy to make conclusions about Circuit save for the complexity of the items and purchase process. Sure, there are a lot of impulse items in CE where WMT or Target or Costco may grab share. On the other hand, these retailers assortments and skills have a clear ceiling surrounding their commitment or not to display and merchandising as well as educated staff. While not to laud the high turnover of either CC or BBY, they still have a lot more trained people. This is why the higher price points still are not performing or even merchandised at these low price leaders. Most all of that volume will go to BBY or to regionals and independents who can support and explain or else go to ground in postponement or redirection to another purchase. Interestingly, Best Buy has realized this and turned their model on its head. What once was a clerk for consumers who needed no help, is now the focus of retention and training. It will take that kind of effort at… Read more »
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