Circuit City 2005 Annual Report Download - page 6

Restructuring Activities
We continued to address the pressures of competitive markets with the identification of opportunities for cost
savings. In early 2005, we announced that we were taking steps to increase the efficiency and profitability of our
European operations, including combining certain back office operations in the United Kingdom, to provide better
customer service and reduce costs. These actions resulted in the elimination of approximately 240 positions and are
expected to result in approximately $6.0 million in annual savings.
Products
We offer more than 100,000 brand name and private label products. We endeavor to expand and keep current
the breadth of our product offerings in order to fulfill the increasingly wide range of product needs of our customers.
Our computer sales include Systemax PCs as well as offerings of other brand name PCs, servers and notebook
computers. Computer related products include supplies such as laser printer toner cartridges and ink jet printer
cartridges; media such as recordable disks and magnetic tape cartridges; peripherals such as hard disks, CD-ROM and
DVD drives, printers and scanners; memory upgrades; data communication and networking equipment; monitors;
digital cameras; plasma and LCD TVs, MP3 and DVD players, PDA’s and packaged software.
We assemble our Systemax brand PCs in our 297,000 square foot, ISO-9000-certified facility in Fletcher, Ohio.
We purchase components and subassemblies from suppliers in the United States as well as overseas. Certain parts and
components for our PCs are obtained from a limited group of suppliers. We also utilize licensed technology and
computer software in the assembly of our PCs. For a discussion of risks associated with these licenses and suppliers,
see Item 1A, “Risk Factors.”
Our industrial products include storage equipment such as wire and metal shelving, bins and lockers; light
material handling equipment such as hand carts, forklifts and hand trucks; ladders, furniture, small office machines and
related supplies; and consumable industrial products such as first aid items, safety items, protective clothing and OSHA
compliance items.
We began to market our ProfitCenter Software™ suite of business applications in 2004. ProfitCenter Software™
is a web-based application which is delivered as an on-demand service over the internet. The product helps companies
automate and manage their entire customer life-cycle across multiple sales channels (internet, call centers, outside
salespersons, etc.). We have not recognized any revenues for this service to date.
Computer and computer-
related products accounted for 92% and industrial products accounted for 8% of our net
sales for each of the three years ended December 31, 2005, 2004 and 2003.
Sales and Marketing
We market our products to both business customers and individual consumers. Our business customers include
large businesses (customers with more than 1,000 employees), small and mid-sized businesses (customers with 20 to
1,000 employees), educational organizations and government entities. We have invested consistently and aggressively
in developing a proprietary customer and prospect database. We consider our business customers to be the various
individuals who work within an organization rather than the business location itself.
We have established a three-pronged system of direct marketing to business customers, consisting of
relationship marketers, catalog mailings and propriety internet web sites, the combination of which is designed to
maximize sales. Our relationship marketers focus their efforts on our business customers by establishing a personal
relationship between such customers 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,