Circuit City Short Circuits

by Braden Kelley

As many readers already know, Circuit City has been wiped from the face of the retail planet. Doomed by poor management and an inability to compete in the marketplace any longer.

In 2007 it would seem that Circuit City decided customers only care about price when it comes to consumer electronics, and Circuit City shed their highest paid employees to reduce their costs. Best Buy, believing instead that consumers valued good advice in making their buying decision, quickly snapped up many of those laid off from Circuit City.

On the pricing front, my favorite ‘no wonder they went out of business’ story is this:

  • My step-brother picked up a digital camera in the Circuit City liquidation sale at more than 20% off and he was feeling good until he found out that Wal-Mart’s regular price was $4 cheaper. Circuit City may you rest in peace.

Now let’s examine other reasons why knowledge is profit and then look at some possible innovations that would increase customer satisfaction and profitability.

Consumer electronics are complicated products that need some explanation, and if people don’t feel comfortable that they will be able to successfully operate a piece of electronics when they get it home, then they won’t make the purchase.

One lesser known fact is that 95% of returned electronics are returned not because they are faulty, but because the customer experienced buyer’s remorse or could not figure out how to make the device perform the desired task. Source: Accenture study

My electronics retail experience found that functioning returns are the bain of a retailer’s existence. They take up space, many customers will refuse to purchase them, and there are a lot of other costs hidden in the financials (lost sales, extra staffing, etc.).

How can surviving electronics retailers innovate to improve their chances of surviving?

  1. By leveraging in-store expertise solutions provided by companies like Experticity, to augment (not replace) in-store staff expertise and give both customers and staff access to product experts that can answer questions the in-store staff can’t.
  2. By creating mobile applications for iPhones, etc. that allow customers to take a picture of a bar code on or near the product (or to enter a product code) and access a wealth of information about the product and possibly an expert on that particular product and its competitors
  3. By distributing mobile devices at the front of the store that give customers without a smartphone access to the same product information
    • Retailers could probably convince a device manufacturer to contribute toward the cost for the positive brand exposure

If electronics retailers take steps such as these then repeat customer visits will be more about accessory and media sales and less about returns.

What do you think?

@innovate

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