Circuit City expands CE space, tests appliance-only format - consumer electronics in-store display - Brief Article

Discount Store News, March 20, 2000 by Laura Heller

RICHMOND, VA. -- For the first time in almost two decades, Circuit City is making a format change. The largely traditional company is pulling appliances out of some stores to devote more space to consumer electronics while simultaneously testing a new, appliance-only format.

"We want to create an informative, energizing and fun environment where consumers can learn about and purchase new products and services," said Alan McCollough, president, coo and ceo-elect, Circuit City Stores, "while also giving them an easy way to purchase more traditional technologies."

By removing appliances, which comprise roughly 3,500 sq. ft. of floor space, and converting additional non-selling square footage to selling space, the chain will increase sales space for CE products by approximately 30%.

The store will feature an expanded selection of digital products, software and PCs. New displays will include the AOL Internet Centers featuring a range of interactive products and services and the Sony Interactive Memory Stick Universe, which is part of a strategic partnership announced in January that will feature Sony's new Memory Stick products and related devices in all Circuit City stores. Expanded digital audio displays, redesigned wireless phone displays, enhanced DVD, digital set top box and satellite receivers, and expanded digital television displays will also be part of the new format.

Several elements of Circuit City's test program seen by DSN last fall at the chain's Chesterfield, Va., store will also be incorporated. More products will be available for self-service by consumers, and checkout stands are being added to the front of the store. Full game departments will be developed featuring Sony, Nintendo and Sega hardware and software; music and DVD titles will be expanded; and both digital imaging and traditional camera selections will expand as well.

Remodeling will begin in late spring on 30 to 35 stores in the Richmond, Miami, West Palm Beach, Tampa, Ft. Meyers and Orlando markets. The company expects the work to be completed by fall 2000. "It represents Circuit City's vision of the CE store of the future," said David Strasser, Solomon Smith Barney "[They're saying] appliances don't necessarily fit and let's leverage these new products."

"I think it's the right move," agreed Doug Gordon, an analyst with Bank of America Securities, "It makes sense to begin adding more and more square footage in CE."

"There are no synergies between the appliance business and CE," Strasser said, pointing out that Best Buy and Circuit City picked up the appliance business when no real quality national retailers, other than Sears, participated in the category. Now that Home Depot and Lowe's are focusing on appliance sales, it's a less attractive prospect for CE retailers. "They get better returns on square footage by following these other [CE] products," he said.

But Circuit City has plans for appliances separate from its CE business. The chain will open six to eight free-standing appliance stores, purely as a test. The 8,500-sq.-ft. units will feature all brands currently available through Circuit City superstores, working kitchens and a children's play area. Product will be displayed in lifestyle vignettes rather than lined up all in row.

"Customers are looking for a different environment when they are shopping for major appliances," said McCollough. "By moving appliances into a freestanding location, we believe we can devote more attention to the appliance customer and highlight some of the significant advances in technology in the category. In addition, we believe the free-standing locations will increase consumer awareness of our appliance offering and further strengthen our market share position."

Circuit City has long been the nations second largest appliance retailer and is looking to raise its profile in the category, according to a source familiar with the company. But the recent addition of appliances by national home center chains has served to make the category more competitive.

Appliance retailers are looking for new, innovative ways to capture the market. Sears' The Great Indoors is one example of this. Circuit City's new prototype will incorporate many of the same elements, such as lifestyle vignettes and working kitchens, albeit on a much smaller scale; and, like The Great Indoors, Circuit City plans to target women, ages 30 to 50, according to the source.

The new stores will be located in high traffic areas near such complementary houseware outlets such as Bed, Bath & Beyond and Linens'n Things. While the company has yet to hit on a name for the new prototype, Morgan Stewart, manager of communications and media relations, Circuit City said, "There will be no doubt that it is a Circuit City store."

While the appliance-only format is clearly a test, the addition of more selling space for CE products appears to be more of a chain-wide rollout. In addition to the 30 to 35 stores to be remodeled, the retailer will open 25 new superstores in the current fiscal year, which began March 1. All new units will reflect these changes starting with the first new store opening in Jacksonville, Fla., in early summer.