Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, April 8, 1993 TAG: 9304080114
SECTION: BUSINESS PAGE: B10 EDITION: METRO
SOURCE: The Washington Post
DATELINE: WASHINGTON LENGTH: Medium
CIRCUIT CITY BRANCHES OUT - INTO USED CARS
At Circuit City you can buy the car tape deck, the car compact disc player, the car phone and even the car fax - and now, you will soon be able to get . . . the car.The Richmond-based consumer electronics and appliance chain confirmed it will begin a limited experiment of selling used cars.
While Circuit City was vague about specifics, sources said the retailer is planning its first "Auto World" - offering more than 500 cars with a one-price, no-haggling sales strategy. The sales will be on a 15-acre site in Richmond, near but not next to one of its regular stores.
"We believe that automobile retailing offers opportunities to capitalize on Circuit City's strengths in customer service and big-ticket retailing," Richard Sharp, president and chief executive of Circuit City Stores Inc., said in a statement.
The unusual move opens a new line for Circuit City, which also reported strong earnings and sales increases for both its most recent fiscal year and the fourth quarter. Analysts said the retailer has benefited as consumers have started to shop again.
But moving those home-theater television sets and top-loading washing machines apparently isn't enough for the nation's biggest specialty electronics retailer, which is looking for new directions for growth. The 260-store Circuit City has been experimenting recently with the home stereo installation business, enlarging and renovating stores, adding tape and compact disc sections in stores, modifying its personal computer offerings and rethinking its smaller, in-mall electronics "Impulse" stores.
Stock market and retail industry analysts are unsure about Circuit City's leap into the used-car business, but many said it is not a bad idea. That business, they said, is bigger than the new-car market and is highly fragmented, with no market leader.
Because of its large size, Circuit City could land in the market with a major splash by offering better service, warranties and trained salespeople, the analysts said.
Moreover, they said, people might trust getting a used car from Circuit City a bit more than one from, say, Phil's Just-Like-New.
But other retailers have attempted to enter new areas of business with mixed results. Department store chains such as Sears, Roebuck and Co. and R.H. Macy & Co. tried and mostly failed at specialty retailing.
"It's a highly synergistic situation for Circuit City," said Kenneth Gassman, retail analyst with Davenport & Co. in Richmond. It allows the company to take advantage of its experience in selling big-ticket products that are purchased infrequently, he said.
"You can make a lot of profits in a well-run used car lot," he noted.
One potential market could be selling after-market car stereos to customers who have just purchased a used car, analysts said.
Some analysts were skeptical of the plan.
"I can't imagine why Circuit City would want to be in the used-car business, or why, for that matter, anybody would," said Terrence J. McEvoy, an analyst at the Janney Montgomery Scott Inc. securities firm.
In its fiscal year ended Feb. 28, Circuit City's profits jumped 41 percent, to $110.3 million ($1.15 a share) from $78.2 million (82 cents) in the previous year. Sales for the year rose 17 percent, to $3.27 billion. Same-store sales - sales at stores open more than a year - were up 7 percent.