More Changes at Circuit City
By George Anderson
Things are certainly busy in Richmond, Virginia where the consumer electronics chain, Circuit City, finds itself the target of a takeover bid, searching for a new chief operating officer and getting ready to go it alone online after ending its deal for a storefront on the Amazon.com Web site.
Yesterday, Circuit City announced its vice president and COO, John Froman, had resigned from the company effective today. No replacement has been named to replace Mr. Froman who took responsibility for the company’s operations in November 2001. He first joined the company in 1986.
The retailer also announced it was ending its storefront deal with Amazon.com, which originated in August 2001.
Saying the Web site has performed well since the deal with Amazon was initially inked, Fiona Diaz, president of Circuit City Direct added in a released statement, “We have been pleased with customer response to our own Web site and have elected to focus on growing the business through our own channel, rather than focus on the small amount of sales the relationship with Amazon.com has generated.”
Moderator’s Comment: What do you make of the latest announcements from Circuit City? What strengths should the company be building on as it moves forward?
Where is it weak and what should it do to shore up those areas? –
George Anderson – Moderator
- Circuit City Stores, Inc. Ends Relationship with Amazon.com – Circuit City
Stores, Inc./ PRNewswire-FirstCall via COMTEX - Circuit City Stores, Inc. Announces Resignation of John W. Froman – Circuit
City Stores, Inc./ PRNewswire-FirstCall via COMTEX - Circuit City Stores, Inc. Receives Acquisition Proposal From Highfields Capital
Management – Circuit City Stores, Inc./ PRNewswire-FirstCall via COMTEX
Techanalyst is, of course, correct. With Toys ‘R’ Us almost certainly a goner from the Amazon storefront after it is sold, how many more defections can Jeff Bezos and company take without it seriously hurting the company’s prestige and bottom line?
Circuit City seems to be another retailer that has lost its way lately. It used to be the place to go for electronics, TV’s and etc., but now Best Buy is doing all the business. I was recently shopped for a new digital camera and, in the past, I would have considered Circuit City and CompUSA, but this time I checked Best Buy, Costco and Wolf Camera. After getting a fair sales pitch at Best Buy, a better one at Costco and a great one at Wolf Camera, I bought my camera online. I got the exact model I was looking for and saved $300.00 plus, but I had to wait a couple days to get it. That was O.K. because it took me a couple days to decide which one I wanted.
Why didn’t Circuit City get a chance this time? They have too limited a selection, not a knowledgeable enough staff and were not competitive enough on prices to have wasted my time there. It appears others must feel the same way judging from how much smaller their customer count seems to be compared to Best Buy.
One of the real keys to this announcement is not for Circuit City, but Amazon. Amazon has made a nice business working with other retailers to build their virtual shopping mall and managing some of the back end processes for other retailer’s ecommerce. As ecomm grows up, the other retailers are finding they don’t need Amazon to make their ecomm business hum. Circuit City has a strong and lively web site with strong volumes. The advantages they get from the Amazon relationship are much less than they were when it first began.
Now we have seen two breakups; first TRU and now Circuit City. One wonders how long companies like Office Depot and Target will remain with Amazon.
It’s just so easy for consumers to price compare these days, especially online, that brick and mortar retailers must have other things that distinguish them. Staples has their easy rebate program, Best Buy has the Geek Squad, Radio Shack has knowledgeable employees, etc. Rather than go it alone, you’d think Circuit City might be looking for additional innovative programs to run with Amazon, rather than killing one of its few points of difference.
I wouldn’t necessarily agree with Circuit City not having knowledgeable enough staff. Aside from the handful that you have at every company, Circuit City’s associates actually seem to know their products really well and be able to answer customer questions just fine. CC actually has a reputation of customers going to the store, getting all the information from an associate, but then going online and purchasing the product for cheaper elsewhere.