Circuit City 2006 Annual Report Download - page 6

www.tiger.ca , www.globalcomputer.com , www.globalgoved.com , www.infotelusa.com , www.misco.co.uk , www.misco.fr ,
www.misco.de , www.misco.se , www.misco.es , www.misco.it , www.misco.nl , www.profitcenter.com and
www.globalindustrial.com
, 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 19 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-related sales allowed us to reduce the distribution of our catalogs to 59
million, which was 9.5% fewer than in the prior year. We mailed approximately 41 million catalogs in North America, a 8%
reduction from last year and approximately 18 million catalogs, or 12% fewer than 2005, 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 through 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 third-party delivery services in the United States and in Europe. 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, 2006, Ingram Micro accounted for 12.8% of our purchases. 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. 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