Circuit Lauded For Majap Move

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Industry analysts and even retail competitors are tipping their hats to Circuit City for its bold test of dedicated stores for electronics and appliances.

"I think it's great," said David Schick, a senior analyst at Salomon Smith Barney subsidiary Robinson-Humphrey. "To build modular business units is a smart decision," as gauged by such productivity measures as sales per square foot and return on invested capital.

Although the strategy de-emphasizes appliances through its selective placement of majap stores, Schick believes both white and brown goods stand to gain. "Electronics can do better by pulling appliances out and devoting the space to CE," he said, while majaps will benefit from the single-minded focus of a stand-alone store. "They're doing the right thing."

Conversely, Rebecca Yarchover, a principal at U.S. Bancorp Piper Jaffray, sees the move as a major majap play, and a reaction to Home Depot's appliance aspirations.

"It's a pretty interesting experiment," said Yarchover. "It's almost like saying, 'We have a hot product cycle that we have to make room for.' " Moreover, as appliances become Internet enabled and linked to other home devices, they will be "very well suited to be sold at technology-oriented stores because the technology has to be explained."

Bob Lawrence, executive director of Associated Volume Buyers, said Circuit's plans for white-goods specialty stores surprised him, "given their strength on the CE side." But noting that "the last two years have been very good for major appliances," he agreed that "if there was a time to capitalize on the category, now's the time to do it."

Warren Mann, executive director of the MARTA buying cooperative, lauded Circuit for its culture of taking chances and trying new things, but said the chain appears to be "turning its back on appliances" based on the category's net loss of dedicated floor space. "They want to take out a profitable department that anchors them to mid-America to put in PCs? It could work, but I don't believe we have a lot of members who would do that."

"Right now," Mann continued, "Circuit represents a pretty good one-stop-shopping environment. Without appliances, there's one less thing to see." He added that the advent of majap stores means Circuit is "probably playing with the matrix to tune it up a little." Nevertheless, he said the stores will still have to contend with "one of the most resistant, thorniest of competitors -- the local merchant."

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