Circuit City entry heats up competition in San Francisco

Circuit City Entry Heats Up Competition in San Francisco

The planned entry of 10 Circuit City superstores here by the end of 1987 could shake up the roster of CE retailers in the $700 million San Francisco-San Jose consumer electronics market.

The line-up in the Bay Area of major players are: The Good Guys, a strong San Francisco-based CE chain of 12 stores and one clearance center; The Federated Group, which operates four stores in the area and is scheduled to open a new store in Colma in February, and Macy's department store.

Circuit City Stores, which generated $705 million in sales last year and already has rung up sales of $654 million through the third quarter ended Nov. 30, 1986, will open it's first seven superstores by the second half of 1987.

Following the entry of the 88-store Richmond, Va.-based Circuit City into the $2-billion greater Los Angeles market in November 1985, the chain has opened 17 stores and become one of the top CE chains in the market. The 62-store City of Commerce, Calif.-based Federated Group is another top contender in Los Angeles, with approximately $364 million in sales for fiscal 1986, a 58% increase from 1985.

If Circuit City is as successful in San Francisco as it has been in Los Angeles, the other players in the Bay Area may have to rethink their competitive strategies. Montgomery Securities, a San Francisco-based brokerage house, predicts that the largest estimated market shares by next Christmas will be held by: Macy's and The Good Guys with 14% each; Circuit City close behind with 13%, and the Federated Group at 6%.

"We are keenly aware of Circuit City's strength but are not overly concerned,' said Wayne Inouye, vice president, audio merchandising for Good Guys, which generated over $89 million in sales in fiscal 1986 ended Sept. 30. Good Guys averages $10 million in sales per unit and $1,400 per sq. ft. of selling space.

Good Guys offers a different merchandise mix by concentrating more on upscale product and a broader selection within the brands it handles.

Circuit City, on the other hand, carries fewer sku's from a each manufacturer but represents more manufacturers than does Good Guys. "We feel the customer is more comfortable going from model to model within the same manufacturer,' Inouye said, "than to jump from one brand to another, as Circuit City does.'

There is a place for specialty retailers with alternative values to superstores in the San Francisco market, said Inouye, because it is an upscale market, ranging from middle to upper middle class.

Circuit City and audio/video specialists such as Magnolia and Sound Advice, which concentrate more on the lowest, most-competitive pricing strategies, also have a place in the San Francisco market.

Table: Greater San Francisco Area CE Chains