Circuit City 2001 Annual Report Download - page 5

communication and networking equipment; ergonomic accessories such as adjustable monitor support arms and anti-glare screens; and
packaged software.
The Company's industrial products include storage equipment such as metal shelving, bins and lockers, light material handling equipment such
as hand carts and hand trucks; furniture, small office machines and related supplies; and consumable industrial products such as first aid items,
safety items, protective clothing and OSHA compliance items. The table below summarizes the Company's mix of sales by product category:
SALES AND MARKETING
Systemax has established an integrated three-pronged system of direct marketing designed to maximize sales. The Company has been
expanding its "relationship marketing" team, which services large and mid-sized business customers. These efforts are complemented by
frequent catalog mailings and e-mail campaigns in order to generate inbound telephone sales and the availability of interactive Company web
sites which allow customers to purchase products directly over the Internet. The Company believes that the integration of these three marketing
methods should enable it to more thoroughly penetrate its customer base. Increased Internet exposure, for example, should lead not only to
more Internet sales but can also generate more inbound telephone sales; just as catalog mailings which feature the Company's web sites can
result in greater Internet sales.
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 Systemax account manager. In the United States, Systemax 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 goal of the relationship marketing sales force is to increase the purchasing productivity
of current customers and to actively solicit newly targeted prospects to become customers. The Company has taken a number of initiatives to
improve the productivity of its sales forces and to more aggressively pursue business from both past customers and new prospects, including
strengthening its training programs and utilizing new computer software sales tools.
CATALOGS AND INBOUND SALES
The Company produces a total of 38 full-line and targeted specialty catalogs under distinct titles. Full-line computer product catalogs offer
products such as PCs, notebooks, peripherals, computer components, magnetic media, data communication, networking and power protection
equipment, ergonomic accessories, furniture and software. Full-line industrial product catalogs offer products such as material handling
products and industrial supplies. Specialty catalogs contain more focused product offerings and are targeted to individuals most likely to
purchase from such catalogs. Systemax mails catalogs to many individuals at a business location, providing the Company with multiple points-
of-
entry. The Company's strategy is to increase sales volume through broader market coverage and improve the productivity of its customer file
through more focused marketing.
During 2001, the Company distributed approximately 126 million catalogs, of which approximately 89 million catalogs were mailed in North
America and approximately 37 million catalogs were distributed in Europe.
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. 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. The commonality of certain core pages of the European catalogs also provides for
economies in catalog production.
Systemax's catalogs generate calls to inbound sales groups. Sales representatives use the capabilities of the Company's information 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.
INTERNET MARKETING AND SALES
In the past several years, the Company has greatly expanded and upgraded its Internet presence. The Company currently has twenty-four e-
commerce sites, including WWW.SYSTEMAXPC.COM, WWW.GLOBALCOMPUTER.COM, WWW.DARTEK.COM,
PRODUCT TYPE - YEAR ENDED DECEMBER 31 (PERCENTAGE OF NET SALES)
2001 2000 1999
---- ---- ----
Computer and Computer Related Products ..................... 89% 88% 87%
Industrial Products ......................................... 11 12 13
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Total ...................................................... 100% 100% 100%
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