Circuit City 1998 Annual Report Download - page 7

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 third parties 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 to refine its catalog formats more quickly.
INBOUND SALES
Global's catalogs generate calls to the inbound 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.
RELATIONSHIP MARKETING
The Company's relationship marketing program focuses on expanding penetration of large and mid-sized businesses by establishing a personal
relationship between such customers and a designated Global account manager. In the United States, Global also has the ability to provide such
customers with electronic data interchange ("EDI") ordering and customized billing services, customer savings reports and stocking of
specialty items specifically requested by customers. The relationship marketing sales force's goal is to increase the purchasing productivity of
current customers and to actively solicit newly targeted prospects to become customers. In 1998 the Company added close to 200 relationship
marketing personnel, for a total of almost 700 by year end. As a result, relationship marketing sales increased 78% from 1997 to $476 million,
or 33% of total revenues.
INTERNET MARKETING AND SALES
In the past year, the Company greatly expanded and upgraded its Internet presence. By year end, the Company had eighteen e-commerce sites,
including WWW.GLOBALCOMPUTER.COM, WWW.MWMICRO.COM, WWW.SYSTEMAXPC.COM, WWW.DARTEK.COM,
WWW.MISCO.COM, WWW.TIGERDIRECT.COM, and WWW.EZBID.COM, offering a wide variety of computer, office and industrial
products. Many of these sites also permit customers to purchase "build to order" PC's configured to their own specifications. In 1998 the
Company had over $28 million in unassisted Internet sales.
CUSTOMER AND PROSPECT DATABASE
Global has invested consistently and aggressively in developing a proprietary customer and prospect database. This database, which includes
more than 45 million names, represents a major asset of the Company. The Company considers its customers to be the various individuals that
work within an organization rather than the business location itself. The customer and prospect database includes detailed information,
including company size, number of employees, industry, various demographic and geographic characteristics and purchasing history.
Management believes that this variety and depth of information on its customers provides Global a significant competitive advantage.
CUSTOMER SERVICE AND SUPPORT
Order entry and fulfillment occurs at each of the Company's 17 locations. Global generally provides toll-free telephone number access to its
customers. The integration of the Company's call centers also provide 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, EDI and on the Internet.
When an order is entered into the system, it is submitted for credit or credit card approval, as applicable. Upon approval the order is
electronically transmitted to the warehouse and a packing slip is printed for order fulfillment. Approximately 70% of the Company's 1998 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 provides extensive technical support to customers. A database of commonly asked questions which is maintained for each
product is available to technical support representatives, enabling them to respond quickly to similar questions. It also allows product managers
to monitor the effectiveness of the information provided in the catalogs. The Company conducts regular on
-
site training seminars for its sales
(IN MILLIONS EXCEPT RESPONSE RATES) 1998 1997 1996
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North America.............................. 144 125 120
Europe..................................... 35 37 40
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Total...................................... 179 162 160
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Response rates............................. 2.14% 2.18% 2.12%