Circuit City 2005 Annual Report Download - page 7

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.
Our growth in net sales 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 seven 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 retail locations in
2006.
E
-commerce
The worldwide growth in active internet users has made e-commerce a significant opportunity for sales growth.
In 2005 we had approximately $650 million in internet-related sales, an increase of $135 million, or 26%, from 2004.
E-
commerce sales represented 30.7% of total revenue in 2005, compared to 26.7% in 2004. 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.
We currently operate multiple e-commerce sites, including www.systemaxpc.com , www.tigerdirect.com,
www.globalcomputer.com , www.misco.co.uk , www.hcsmisco.fr , www.misco.de and www.globalindustrial.co , and
we continually upgrade the capabilities and performance of these web sites. Our internet sites feature on-line catalogs
of thousands of products, allowing us to offer a wider variety of computer and industrial products than our printed
catalogs. Our customers have around-the-clock, on-line access to purchase products and we have the ability to create
targeted promotions for our customers’ interests. Many of our internet sites also permit customers to purchase “build to
order” PCs configured to their own specifications.
In addition to our own e-commerce web sites, we have partnering agreements with several of the largest internet
shopping and search engine providers who feature our products on their web sites or provide “click-throughs” from
their sites directly to ours. These arrangements allow us to expand our customer base at an economical cost.
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.
As noted above, the increase in our internet sales allowed us to reduce the distribution of our catalogs to 66
million, which was 26% fewer than in the prior year. We mailed approximately 45 million catalogs in North America, a