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Seeds Of Change Bearing Fruit For Chain

Circuit City credited companywide improvements on multiple fronts for explosive sales gains during its first quarter, ended May 31.

Comp-store sales surged for the period (see above), which chairman, president and CEO Phil Schoonover described during a conference call last month as “the best first-quarter comps in at least the last three years.” The company also showed its first first-quarter profit in several years’ time, he said.

Contributing to the spike were gains in Circuit City’s e-commerce operation, which Schoonover said represents a “tremendous opportunity” for the CE chain. Online sales were up 85 percent during the period, and e-commerce is projected to bring $1 billion into company coffers this year, he said. What’s more, more than half of all items ordered online are retrieved in Circuit City stores, which helps drive traffic, while e-tailing also allows the company to offer a wider assortment than what’s stocked in stores.

Also boosting business is a more engaged and “results-oriented” store-level staff. According to Danny Clark, executive VP and retail stores president, the company has organized retail leadership teams that are focused on improving the customer experience. The teams attend “training camps” in advance of calendar or category based “drive periods,” such as back-to-school, digital imaging or holiday, and employees are encouraged to improve their performance with vendor supported contests, monthly and annual bonuses, and other incentives.

Circuit City is also working to streamline store operations to free up personnel to better serve customers. A pilot program in Dallas that addressed truck receiving, shelf stocking, visual merchandising and other areas has been expanded to 50 test stores, while IT systems upgrades, supply chain improvements and other back-office investments across the company are designed to improve in-stocks, reduce inventory and optimize pricing and promotions.

Meanwhile, eight ongoing “innovation” experiments are taking place in service, multichannel selling, home theater and other areas. Improvements in home theater presentation, for example, will be rolled out to 500 stores later this year (see TWICE, May 22, p. 1).

Circuit City also created a new position, services and retail VP, to help coordinate corporate and store-level efforts toward new service initiatives. Clark said in-store PC service is currently available in all stores, while in-home service is offered in 100 markets, with an additional 25 markets to be added next week. Custom installation services are now available in all of Circuit City’s trading areas, and a branded program utilizing in-house and third-party resources will be introduced in August.

All told, revenue from services grew 175 percent during the first quarter, Schoonover said.

Clark acknowledged that the lynchpin to all of Circuit City’s plans is flat-panel TV, a triple-digit growth, “stake-in-the-ground category” that will produce adjunct audio, accessory, warranty and services sales. “It’s the engine that drives a basket of products,” he said.