You win some, you lose some. The Circuit City electronics chain has had a taste of both success and failure in its efforts to integrate its multiple retail channels, which include retail stores, a Web site, and –later this summer—its first print catalog. In a keynote address yesterday at the Internet Retailer 2005 meeting in Chicago, Fiona Dias, president of Circuit City Direct, illustrated the company’s .500 batting average in melding the Web and the brick-and-mortar world with a story of one foul-ball effort and one very solid home run.
The success Dias pointed to was Circuit City’s in-store pickup for orders placed on the Web. Back in 1999, when it launched its first fully transactional Web site, Circuit City looked at customer impressions of several types of shopping experience, she said. Research showed that online shoppers disliked waiting for their purchases and the hassle of returning merchandise. On the other hand, buyers complained that retail stores were not open at convenient hours and offered neither enough product information nor broad enough inventory.
Those findings led Circuit City to try solving the problems of one channel with the virtues of another. Rather than shipping purchases from a central warehouse, the company decided to leverage its 600 U.S. stores to put product in the hands of online customers who wanted their purchases faster. “At the time it was a heretical idea,” she said. “This was 1999, and the pure-play Internet retailers were going to dominate the world. It almost didn’t make sense: Why would customers want to have the convenience of buying online and then drive to the store?”
But pioneering spirit prevailed, and Circuit City put in place the systems and policies needed to make in-store pickup happen. The Web site was designed to display each store’s inventory in real time. The company also instituted the necessary processes. When a customer bought online from a local store of choice, an e-mail went out to both the customer and the store. The store then had 15 minutes to pick the order out of stock and bring it to the customer service desk. If the company had no response from the local store 10 minutes after that e-mail, the store’s point-of-sale system sent out a reminder to get the order ready. If there was still no response from the store after 30 minutes, Circuit City’s call center was alerted to make inquiries at the store.
“Our goal was to have the order executed by the time the customer showed up at our local store,” Dias said. “Many of them show up within the hour, and most pick up the same day they purchase.”
Circuit City also found it necessary to make policy reconciling occasional differences between Web and in-store prices: Customers would get the lower price, wherever they found it.
The final element in the equation was training and motivating Circuit City’s sales associates. “In retail, it’s all about the people,” Dias said. “If they can’t do it or won’t do it, it’s not going to happen.” One potential problem was finding incentives for retail staff to serve online customers; the company did this by splitting credit for the sale to both the Web and the retail channels.
The in-store pickup feature has been a success for Circuit City. Dias said over half the company’s Web sales are now fulfilled through in-store pickup, and the volume, while low at the outset six years ago, has been growing steadily month over month. Customers give the company high marks for satisfaction, she said, and almost always mention the ability to get their online purchases quickly if they wish.
The in-store pickup innovation also introduced Circuit City to the multichannel customer, who Dias said shops more often, spends more, and has a lifetime value for the company that is five to six times that of its average retail customer.
But if in-store pickup was a solid win, the chain had less luck trying to offset customer complaints about the limited assortment and inventory of its physical stores with the abundance of the Web. The average circuit City store stocks about 10,000 items, while the company’s Web site offers about 1.5 million items, including digital downloads.
Dias says Circuit City has tried to solve this problem with in-store online ordering. If a customer wants to buy an item that is available on the Web site but out of stock at his local store, a sales associate can offer to place that order over the store’s POS system and have it shipped for free to the customer’s front door.
While in-store ordering went live in 1999-- the same time as in-store pickup—Dias said the feature has shown no growth at all since its inception. “I’m embarrassed to report that while we were so thoughtful in instituting in-store pickup, we were clueless in setting this one up,” she said. “We put the system in place, but we neglected to define a process for stores to follow, policies to set expectations, training for store associates using the feature, or even reporting that could figure out if we were making progress.”
The company is now re-evaluating what it can do to fire up the in-store ordering feature, both in terms of processes and people. The effort may be six years late, Dias said, but it will still be worthwhile if it gives Circuit City another access point to the same satisfied and profitable multichannel customers as in-store pickup.
