Public Companies See Custom's Profits

Now that Circuit City is overhauling its operations with a new management team, the national chain is not only revitalizing its merchandise mix, but its strategy as well.

The chain's president, former Best Buy and Tops Appliance executive Phil Schoonover, said during a recent two-day analyst conference that Circuit City will begin testing home services in the fall with a full-scale launch set for next spring. He indicated that the company's installation service will be faster and less complicated than traditional custom installations.

So Circuit City is going into custom installation. Best Buy started the trend last year and Tweeter is moving in that direction. National chains have discovered that custom installation of all types, and selling the experience and not the nuts and bolts of hardware and jargon, are where the profits are.

It will be more expensive for these chains with locations from coast to coast to give the same type of service and expertise that many independents and custom installers perform. But they seem to think with digital products becoming more complicated, and more of a commodity business everyday, it is a gamble they are willing to take.

PC makers are also entering the custom installation business. Microsoft and Intel made detailed presentations during the PARA Management Conference last month (TWICE, May 23, p. 1) implying that the Media Center PC is the “silver bullet” in this market and that independents should sell them because of the convergence of technology.

So, national chains want to become more consumer-friendly by providing consumer “hand-holding” when selling custom installation. And computer companies want to provide hardware that is easy to use.

Yes, independent retailers and custom installers will have to redouble their efforts to stave off the challenges that these massive, publicly held companies will bring to the business. National retailers have to serve and understand their customers a lot more like local dealers and PC suppliers must design customer-friendly hardware for their respective strategies to work. Until that happens, there still should be plenty of opportunities for established independent retailers and custom installers to keep and increase their market shares.

While not using the same exact phrase, “off-shore manufacturers,” as National Association of Broadcasting president Eddie Fritts used when describing the CE industry recently (TWICE, May 23, p. 1), Senate Commerce Committee chairman Ted Stevens (R-Alaska) sure came close. In discussing a plan to force TV manufacturers to provide digital set-top boxes to consumers when they buy analog sets, Stevens was quoted by sister publication Multichannel News as saying, “I don't know why these foreign manufacturers (my italics) shouldn't shift over to digital, and if they don't, they should give us a box.” I mention this not to challenge the Senator's view of this issue (which is, by the way is completely off base) but to illustrate how pervasive it is in D.C. to pigeonhole the CE industry in the United States as being a “foreign” industry.