What the Future Holds for Circuit City Unsecured Creditors

This list is interesting for a variety of reasons, more in terms of the implications for the PC industry than the seemingly huge dollars on the list. After all, HP’s $119M - while a lot of money - has to be considered in the light of HP’s annual sales of $118B, annual earnings of $8.3B and market cap, even in today’s depressed market, of $86B. Also, Circuit City's demise has been coming on for a long time, and HP, along with all the others on this list, probably took reserves against the event long ago and has already written them off. I think the real interest in the list lies elsewhere:

  1. The rank order of the list, and the relative amounts of the dollars involved, probably pretty closely parallel the relative market share. In other words, HP is the number one computer manufacturer, and Lenovo, with only $11M of exposure, is pretty much a non-player in our domestic PC market. Be a little careful in the comparisons at the product level, since there are a number of categories represented—video and cameras being the other two big ones.

  2. With Circuit City gone, the retail electronics industry in general is increasingly in the hands of a very small, very tough list of national retailers—Best Buy and WalMart. Yes, retailers sell PC hardware at relatively small margins, but the manufacturing margins are also tight, with Microsoft and Intel really making the big dollars on a PC sale. You can bet that both Best Buy and WalMart are and will continue to take advantage of their increasing dominance in the category, pressing margins even tighter at the manufacturing level.

  3. Best Buy and WalMart are now in an even stronger position to play the PC manufacturers against one another—since, with the notable exception of Apple, there is no difference between their machines. They all run Windows, they all have Intel processors, they are all made with parts from China. In other words, HP does care about which PC the consumer buys, but Best Buy doesn’t.

  4. All of these manufacturers also have a web business, but as Dell has shown in recent times, bricks and mortar retail is still indispensable to a successful distribution strategy. So the manufacturer's website, while a necessity, absolutely does not eliminate the need to sell through retail stores—all of whom in turn have their own websites.

Where do analytics capabilities, fit in all of this?

  • Every one of the manufacturers on this list needs to be looking at who their customer is in terms that can be mapped and counted. This is the best first step to looking at the new, and still-changing, retail landscape in order to evaluate where the investment opportunities are. All of the manufacturers on the list have customer data, from product registrations and warranties, direct ship sales, etc.

  • Every one of the manufacturers on this list needs to be running their sales and profiles through the Buxton Decision Matrix—this tells them not only where the opportunities are, but also the size of the opportunity. This drives strategy, tactics and investment dollars.

  • Every one of the manufacturers on this list needs to be considering an Alliance Fit Model to evaluate alternative distribution partners, both traditional and non-traditional. Could/should cell phone stores be selling netbooks? Should Barnes and Noble have an electronics department? Could/should FedEx Office be selling electronics? How does RadioShack fit in all of this? Remember—department stores used to be the leading electronics retailers in America, so nothing is forever and all things change in time! What an Incredible Universe we all live in!

  • Finally, every one of these manufacturers could be considering whether to open their own stores, and where best to do that. Gateway (who’re they?!) proved it couldn’t be done—except Apple does it really well (probably better than anyone in the mall). Dell didn’t think they needed to be anywhere but the web. Then they needed, then didn’t need, kiosks. Now they are in WalMart and Best Buy.

Journey Awareness Persona C-Suite/Finance Retail