Circuit City 2004 Annual Report Download - page 10

Research and Development
Our research and development teams design and develop products for our private label offerings. The individuals
responsible for research and development have backgrounds in engineering and industrial design.
This in-
house capability provides important support to the private label offerings. Products designed include PCs,
servers, furniture, ergonomic monitor support arms, printer and monitor stands, power supplies and other durable
computer related products, storage racks and shelving systems, various stock and storage carts, work benches, plastic
bins and shop furniture. We own the tooling for many of these products, including plastic bins, computer accessories,
furniture and metal alloy monitor arms. See "Research and Development Costs" in Footnote 1 to the Consolidated
Financial Statements for further information.
Competition and Other Market Factors
Personal Computers and Computer Related Products
The North American and European computer markets are highly competitive, with many U.S., Asian and
European companies vying for market share. There are few barriers of entry to the PC market, with PCs being sold
through the direct market channel, mass merchants, over the internet and by computer and office supply superstores.
Timely introduction of new products or product features are critical elements to remaining competitive in the PC
market. Other competitive factors include product performance, quality and reliability, technical support and customer
service, marketing and distribution and price. Some of our competitors have stronger brand-recognition, broader
product lines and greater financial, marketing, manufacturing and technological resources than us. Additionally, our
results could also be adversely affected should we be unable to maintain our technological and marketing arrangements
with other companies, such as Microsoft®, Intel® and Advanced Micro Devices®.
The North American computer related products market is highly fragmented and characterized by multiple
channels of distribution including direct marketers, local and national retail computer stores, computer resellers, mass
merchants, computer and office supply "superstores" and internet-based resellers. In Europe, our major competitors are
regional or country-specific retail and direct-mail distribution companies and internet-based resellers.
With conditions in the market for computer related products remaining highly competitive, continued reductions
in retail prices may adversely affect our revenues and profits. Additionally, we rely in part upon the introduction of new
technologies and products by other manufacturers in order to sustain long-term sales growth and profitability. There is
no assurance that the rapid rate of such technological advances and product development will continue.
Industrial Products
The market for the sale of industrial products in North America is highly fragmented and is characterized by
multiple distribution channels such as retail outlets, small dealerships, direct mail distribution, internet-based resellers
and large warehouse stores. We also face competition from manufacturers' own sales representatives, who sell
industrial equipment directly to customers, and from regional or local distributors. Many high volume purchasers,
however, utilize catalog distributors as their first source of product. In the industrial products market, customer
purchasing decisions are primarily based on price, product selection, product availability, level of service and
convenience. We believe that direct marketing via catalog, the internet and sales representatives is an effective and
convenient distribution method to reach mid-sized facilities that place many small orders and require a wide selection
of products. In addition, because the industrial products market is highly fragmented and generally less brand oriented,
it is well suited to private label products.
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Employees