Circuit City 2004 Annual Report Download - page 8

and a Systemax account manager. 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. With access to
the records we maintain of historical purchasing patterns, our relationship marketers are prompted with product
suggestions to expand customer order values. In the United States, we also have 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 these customers. Our relationship marketers' efforts are supported
by frequent catalog mailings and e-mail campaigns designed to generate inbound telephone sales, and our interactive
websites, which allow customers to purchase products directly over the Internet. We believe that the integration of
these three marketing methods enables us to more thoroughly penetrate our business and government customer base.
Increased internet exposure can lead to more internet–
related sales and can also generate more inbound telephone sales;
just as catalog mailings which feature our websites can result in greater internet
-related sales.
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Our sales growth continues to be supported by strong growth in sales to individual consumers, particularly
through e-commerce means. To reach our consumer audience, we use methods such as website campaigns, banner ads
and e-mail campaigns. We are able to monitor and evaluate the results of our various advertising campaigns to enable
us to execute them in a cost-effective manner. We combine our use of e-commerce initiatives with catalog mailings,
which generate calls to inbound sales representatives. These sales representatives use our information systems to fulfill
orders and explore additional customer product needs. Sales to consumers are generally fulfilled from our own stock,
requiring us to carry more inventory than we would for our business customers. We also periodically take advantage of
attractive product pricing by making opportunistic bulk inventory purchases with the objective of turning them quickly
into sales. We have also successfully increased our sales to individual consumers by using retail outlet stores. We
currently have six such retail locations in North America, which are located in or near one of our existing sales and
distribution centers, thereby minimizing our operating costs. We presently plan to add two more in 2005.
Catalogs
We currently produce a total of 22 full-line and targeted specialty catalogs in North America and Europe under
distinct titles. Our portfolio of catalogs includes such established brand names as TigerDirect.com™, Global Computer
Supplies™, Misco®, HCS Misco™, Global Industrial, ArrowStar™ and 06™. 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. We mail catalogs
to both businesses and consumers. In the case of business mailings, we mail our catalogs to many individuals at a
single business location, providing us with multiple points-of-entry. Our in-house staff designs all of our catalogs. In-
house catalog production helps reduce overall catalog expense and shortens catalog production time. This allows us the
flexibility to alter our product offerings and pricing and to refine our catalog formats more quickly. Our catalogs are
printed by third parties under fixed pricing arrangements. The commonality of certain core pages of our catalogs also
allows for economies in catalog production.
During 2004, we distributed approximately 88 million catalogs, which was 9% fewer than in the prior year. We
mailed approximately 50 million catalogs in North America and approximately 38 million catalogs were distributed in
Europe.
E
-commerce
The worldwide growth in active internet users has made e-commerce a significant opportunity for growth. In
2004 we had approximately $515 million in internet-related sales, an increase of $131 million, or 34%, from 2003. E-
commerce sales now represent 26.7% of total revenue, compared to 23.2% in 2003. The increase in our internet sales
enables us to leverage our advertising spending, allowing us to reduce our printed catalog costs while maintaining
customer contact.