Circuit City 2005 Annual Report Download - page 8

12% reduction from last year and approximately 21 million catalogs, or 44% fewer than 2004, were distributed in
Europe.
Customer Service, Order Fulfillment and Support
We generally provide toll-free telephone number access to our customers. Certain of our domestic call centers
are linked to provide telephone backup in the event of a disruption in phone service. In addition to telephone orders, we
also receive orders by mail, fax, electronic data interchange and on the internet.
A large number of our products are carried in stock, and orders for such products are fulfilled on a timely basis
directly from our distribution centers, typically on the day the order is received. We operate out of multiple sales and
distribution facilities in North America and Europe. The locations of our distribution centers enable us to provide our
customers next day or second day delivery. Orders are generally shipped by United Parcel Service in the United States
and by similar national small package delivery services in Europe as well as by various freight lines and local carriers.
The locations of our distribution centers in Europe have enabled us to market into four additional countries with limited
incremental investment. We maintain relationships with a number of large distributors in North America and Europe
that also deliver products directly to our customers.
We provide extensive technical telephone support to our Systemax brand PC customers. We maintain a database
of commonly asked questions for our technical support representatives, enabling them to respond quickly to similar
questions. We conduct regular on-site training seminars for our sales representatives to help ensure that they are well
trained and informed regarding our latest product offerings.
Suppliers
We purchase the majority of our products and components directly from manufacturers and large wholesale
distributors. For the year ended December 31, 2005, no vendor accounted for more than 10% of our purchases. For the
year ended December 31, 2004, Tech Data Corporation accounted for 12.2% and Ingram Micro Inc. accounted for
10.4% of our purchases. For the year ended December 31, 2003, Tech Data Corporation accounted for 14.7% and
Ingram Micro Inc. accounted for 10.3% of our purchases. The loss of either of these vendors, or any other key vendors,
could have an adverse effect on us.
Certain private label products are manufactured by third parties to our specifications. Many of these private label
products have been designed or developed by our in-house research and development teams. See “Research and
Development.”
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
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.