100 LEADING NATIONAL ADVERTISERS;BEST BUY, CIRCUIT CITY RAISING THE STAKES IN ELECTRONICS WARFARE

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Detroit is about to become the latest war zone in the fight for supremacy in the electronic retailing market between Circuit City Stores and Best Buy Co.

Best Buy hit first with six new stores in 1993, the same year retailer Highland Appliance went out of business. Circuit City charges into the market next year, as part of a plan to add 60 stores nationwide. Eight stores alone are planned for Detroit in the next few years.

Best Buy, with its Detroit presence now ballooned to 14 stores, has become the city's No. 3 most-shopped electronic retailer after local retailer ABC Appliance and Sears, Roebuck & Co., according to Scarborough Research Corp.

The contest between the two giants already being played out in Atlanta, Cleveland, Seattle and Minneapolis, among the larger markets, is a big reason category ad spending accelerated 14.1%, to $3.14 billion, in 1994.

Specifically, Circuit City supercharged its markets almost by itself, boosting media spending 16.2% to $304.8 million, mostly in newspapers. Best Buy's media, concentrated in spot TV, also advanced 16.2% to $46.6 million.

Sustaining these market battles is an industry that grew 20.5% to $49.75 billion in sales in 1994, attesting to consumer demand for personal computers, big-screen TVs, home theater setups and compact disc players.

The electronics world has changed because of Best Buy and Circuit City, says Bob Gerson, editor-in-chief of Twice, a consumer electronics trade publication: "The supers have even forced department stores out of the electronics business."

Circuit City and Best Buy, whose market shares are separated by only 0.1 share points, are the new standard for marketing electronics products in a retail environment. Low prices for name brand merchandise is their common denominator.

Price is the battleground in Atlanta where Circuit City and Best Buy currently are butting heads. When Best Buy moved into Atlanta, it forced Circuit City to lower prices. Retail pundits believe that for now, price will be the factor in markets where these two come face-to-face, but net margins-taking a backseat in any price war-will gain in importance as the retail environment thins out.

More competition in this category has caused some retailers to change retail formats. Service Merchandise Co. is changing its "catalog showroom" into traditional stores to make them more shoppable.

Circuit City and Best Buy couldn't be more like night and day. Circuit City concentrates on service with highly trained, full-time sales staff to assist consumers. Best Buy, assuming customer sophistication, uses a hands-off approach that includes a blue golf-shirted, no-pressure sales staff featured in a TV campaign this year with the line, "If it weren't for the blue shirts, you'd think we were just cheap." Circuit City store formats bear traditional shelving; Best Buy stores are mini-warehouses where consumers are encouraged to load oversized pushcarts with items they take off the shelves.

The two retailers are successful because they appeal to different crowds.

"It's baby boomers at Circuit City and a Generation X crowd at Best Buy," says Donald Trott, analyst for Dean Witter Reynolds.

Best Buy went high-tech from its traditional Concept II store last year when it opened its first Concept III in Washington. The store offers interactive "clerks" consisting of Answer Center kiosks containing touch-screen access to product functions, features and prices. It also has a "fun & games" area. Part of its lure with Generation Xers is entertainment software (CDs, videos and computer software) that grew an astonishing 107%, to sales of $728.5 million, in fiscal 1995.

Some computer stores also are performing well in this market. As a group, computer stores increased retail sales by 41.9% in '94 over the prior year, according to Twice. CompUSA, its sales up 46% to $2.5 billion, captured 5.1% of the electronics market.

Even home-office stores are getting a piece of the action. This category grew 36.7% in electronics sales to $3 billion during '94. Office Depot led the way with $1.75 billion in sales.

Those being pinched are the veterans of the electronic retailing circuit: Sears (Brand Central), Tandy Corp. (Radio Shack), Wal-Mart Stores, Kmart Corp. and Target Stores.

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