Circuit City 1997 Annual Report Download - page 6

The Company's in-
house staff designs all of the Company's catalogs. Catalog paper is purchased from various sources and has historically been
subject to price fluctuations. The printing of the catalogs is done by several sources under fixed pricing arrangements. In-house catalog
production helps reduce overall catalog expense and shortens catalog production time. This allows the Company the flexibility to alter its
product offerings and pricing and refine its catalog formats more quickly.
INBOUND SALES
Global's catalogs generate calls to the in-
bound sales group. Sales representatives use the capabilities of the Company's systems to fulfill orders
and explore additional customer product needs. Each sales representative has immediate access to customer files, including usage and billing
information, and real-
time inventory levels by distribution center. Using this data, inbound sales personnel are also prompted by their computer
screen to cross-sell selected products and obtain specific information relating to customer-specific purchasing habits and product needs.
MAJOR ACCOUNT MANAGEMENT
The Company has established a major accounts management program focused on expanding penetration of larger businesses. In the United
States, Global has the ability to provide such customers with EDI ordering and customized billing services, customer savings reports and
stocking of specialty items specifically requested by customers. The Major Account sales force's goal is to increase the purchasing productivity
of current customers and to actively solicit newly targeted prospects to become customers.
OTHER MARKETING
The Company also uses targeted fax campaigns, special single-product "solo" mailings and the Internet to generate incremental sales to
business customers. During 1997, the Company initiated Internet marketing with three build-to-order PC configurator websites.
CUSTOMER SERVICE AND SUPPORT
Order entry and fulfillment occurs at each of the Company's 15 locations. Global generally provides toll-free telephone number access to its
customers. The integration of the Company's call centers also provide some domestic locations with telephone backup in the event of a
disruption in phone service. In addition to telephone orders, Global also receives orders by mail, by fax, via electronic data interchange ("EDI")
and on the Internet.
When an order is entered into the system, a credit check is performed, and, if the credit is approved, the order is electronically transmitted to
the warehouse and a packing slip is printed for order fulfillment. Approximately 70% of the Company's 1997 sales were on open account and
the Company's bad debt experience has traditionally been less than 1% of sales. Orders generally are shipped by United Parcel Service in the
United States and by similar national small package delivery services in Europe, as well as by various freight lines and local carriers. Air
freight is also available. As a result of the regional locations of the Company's warehouses, Global estimates that most customers receive their
orders (other than custom items, large furniture and large industrial items shipped directly by the vendor) within one or two business days of
the order date. Customers are invoiced for merchandise, shipping and handling promptly after shipment.
The Company conducts regular on-site training seminars for its sales representatives and operates a separate customer service department
which responds to customer concerns. The Company also maintains a separate technical support group dedicated to answering customer
inquiries and assisting customers with the operation of their products. Technical support questions are logged into the computer, thus forming a
database of commonly asked questions for each product. This database helps sales representatives respond quickly to similar questions from
future customers and also allows product managers to monitor the effectiveness of the information provided in the catalogs. The Company also
employs a fax-back system that allows customers to call directly into a computer system that automatically faxes the requested information to
the customer.
DISTRIBUTION CENTERS
NORTH AMERICA
The Company operates eight separate facilities in North America. Each sales and distribution center has a general manager in charge of
inbound sales, outbound telemarketing, on-site operations, credit review, product fulfillment and asset management.
Many of the facilities are linked by a wide area network management information system. In the event of adverse delivery conditions (such as
bad weather) the Company can shift inbound calls and/or order fulfillment and shipping to an alternative location. Management believes this
provides Global with important operating flexibility and protection from possible sales interruptions for many of its North American
businesses. See "Management Information Systems."
A large number of the Company's products are carried in stock, and consequently orders for such products are fulfilled from the distribution
center. Certain products (such as selected computer hardware and large furniture and industrial items) are shipped directly by the supplier. The
layout of the Company's distribution centers is managed with a computer
-
based tracking system which dictates the location of specific stock