Circuit City Plugs Into Amazon.com - Twice

Circuit City Plugs Into Amazon.com

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Circuit City and Amazon.com have signed a multiyear pact that will allow cyber shoppers to purchase consumer electronics on Amazon and retrieve them right away at the nearest Circuit City store.

The service, which is expected to launch in time for Thanksgiving weekend, will increase Amazon's CE offering by several thousand products thanks to Circuit City's larger assortment of vendor-authorized goods, and could help cut the e-tailer's inventory and fulfillment costs.

In turn, Circuit City will be able to tap into Amazon's 35 million-strong customer base, while the in-store pickups could generate increased traffic and sales.

The multimode delivery option, which has been a hallmark of Circuit City's own e-commerce site, will initially be limited to products that are carried by both partners. Short term, the several thousand items that are carried by Circuit City but not by Amazon will be available for in-store pickup only, although the CE chain will add its own direct ship option on select items early next year. Merchandise available at Amazon but not at Circuit City will be shipped by Amazon.

The number and nature of CE products carried by both companies is still being determined, a Circuit City spokesman said. The chain is also "working through" issues of vendor authorization to decide which products and brands it will ultimately bring to the party.

The outcome of those discussions is expected to provide Amazon with vendor-sanctioned access to products that have been officially off limits to the pure-play cyber store. As Amazon's VP/consumer electronics Carl Gish noted, "We're not direct with some vendors and this will help."

Retail analyst Shelly Hale, a managing director at Banc of America Securities, specifically cited Sony as a potential prize. "As a result of this alliance, Amazon has significantly increased its exposure to the CE category as it opens the door to more CE manufacturers — especially Sony," she said.

A spokesman for Sony declined to comment on its distribution plans, saying only that "Circuit City is authorized, Amazon is not authorized."

Circuit City was similarly mum. "We haven't made any comments about any brands or products [that will be sold on Amazon]," although an announcement is expected soon, the company's spokesman said.

Three categories that won't be offered by Circuit City, however, are music CDs and DVD software — due to an existing fulfillment agreement with Alliance Entertainment — and big screen TVs. The retailer doesn't sell oversized sets online due to their difficult fulfillment, the spokesman said.

Shoppers who purchase a shared product will be able to choose a delivery option upon checkout, and merchandise that is offered by Circuit City solely will be labeled with the company's logo. Consumers can check the in-stock status of individual items at the nearest of 600 Circuit City stores in real time by entering their ZIP Codes, which is currently an exclusive feature of CircuitCity.com.

Under terms of the deal, which is non-exclusive, Circuit City will pay Amazon a percentage for any Circuit City inventory sold through the site, and will handle fulfillment, product-related customer service and returns. Amazon will process the transactions.

For Amazon customers, the service will afford the "instant gratification" of an in-store purchase to those who prefer to do their shopping online, Gish said. About half of CircuitCity.com customers opt for in-store pickup, McCollough noted.

All told, Banc of America's Hale believes the click-and-mortar marriage "is probably more of a plus for Amazon than Circuit City," citing expected cannibalization of CircuitCity.com sales. But the chain's spokesman said the company is not overly concerned about sharing cyber sales with an e-commerce competitor. "It's another way to reach out to other customers who aren't customers of CircuitCity.com," he said. "It's an excellent way to extend our service, further leverage our distribution structure and drive traffic to our stores."

Similarly, Amazon's Gish professed that "We're not too concerned about cannibalization [of our CE sales]. We provide great service and the best shopping experience, and ultimately that's what we're focused on."

For Amazon, the deal — which follows recent click-and-mortar alliances with Toys 'R' Us and the Borders bookstore chain — further fuels its two-year-old, 30,000-SKU CE business, which is its fastest-growing segment and second largest behind books. (See related story on Amazon's PC store launch, which starts on p. 1.)

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