Circuit City May Rise From Dead
First CompUSA, now Circuit City. Electronics retailer Systemax is busy exhuming the remains of failed consumer electronics retailers, obviously hoping to persuade customers to remember the brand but not the negative baggage associated with it.
Earlier this year, Systemax paid $30 million for select CompUSA assets and retail stores, and now it has agreed to buy selected assets of Circuit City's e-commerce business for $6.5 million in cash, plus a cut of future revenues over a 30-month period. It's not a done deal, however. The agreement is subject to both bankruptcy court approval and the auction process, which means that another company could outbid Systemax for the Circuit City brand and domain.
Unlike the CompUSA deal, which kept 16 CompUSA locations open, Systemax's Circuit City offer doesn't include any brick-and-mortar stores. Last month Circuit City closed the last of its 567 U.S. locations after a liquidation sale.
By scooping up the brands of dead electronics retailers, Systemax is betting that shoppers have short memories - at least when it comes to customer service. But do they really? Yes, consumers prefer a household brand they've heard of, but they also avoid brands with tarnished reputations. And let's face it, neither Circuit City nor CompUSA rode off into the sunset with stellar reputations for service and support.
At the Houston Chronicle's site, readers are already questioning the wisdom of Systemax's interest in Circuit City and CompUSA. "DonutMuncher" writes: "What I'd like to know is exactly what are they getting for their money - a couple of used-up, washed-up trademarks ... Aren't those names a little tainted now?"
And "goofyguy77" believes that Systemax is making a mistake: "$6.5 million for that brand????? WOW... Seems like the old saying that there is a sucker born every minute still holds true. I suppose the buyer never imagined that a brand image can have a NEGATIVE value."
If Systemax does get the Circuit City brand, it might try a little creative marketing to spark shopper interest. Initial indications show it's up to the task. A few days ago, the company announced its CompUSA stores will have Web terminals that shoppers can use to find cheaper deals online. Systemax will need to be equally creative to persuade customers to give the new Circuit City a try.