Circuit City Comeback?

Do you think bankrupt Circuit City’s brand, trademarks and e-commerce business is worth $6.5 million?

Well, that’s how much the assets went for just this week at an auction to New York-based Systemax, which manufactures and sells consumer electronics online, by direct mail and in retail stores.

Systemax is hoping this move will strengthen its position as a leader in online retailing of branded consumer electronics.

Word on the street (by street, I mean the online street!) is that Systemax will resurrect the Circuit City brand, but do so on a smaller scale just as they did with CompUSA.

I can’t help but wonder if this sick brand is worth bringing back.

When you look at Circuit City’s story, it seems like a classic tale of brand neglect and mismanagement.

Oh sure, the economic crisis didn’t help… but this brand was a walking zombie for a decade or more.

What went wrong is well documented, and former employees and customers have plenty of negative stories to share.

Here’s a list of management’s bad moves based on what I’ve come across:

• Allowed customer service to significantly degrade (especially after laying off its highest-paid employees in favor of cheaper workers)
• Failed to secure good locations for its stores, favoring out-of-the-way spots vs. prime real estate
• Offered non-competitive prices
• Failed to line up with winning brands
• Stopped selling appliances even though they were #2 in sales at the time
• Didn’t go big into the growing gaming market
• Didn’t improve its web presence despite growing popularity of online retail
• Mismanaged inventory, hindering its ability to pay off debts and improve product mix

That’s a lot of bad moves, but it certainly explains why the #2 electronics retail brand in the U.S. gave way. According to one analyst, Circuit City simply failed to adapt. They had a good run over two decades and then complacency set in.

So, back to the question: Is the Circuit City brand and all of its baggage worth bringing back?

My initial reaction is: It’s worth a try! Given the potential returns, $6.5 million is a bargain price.

The Circuit City name still registers with a large segment of consumers. We’re talking about a former #2 market player here. Why not try to tap into that market and exploit the equity?

The challenge will be setting the brand up for success. To do it, Systemax will need to emphasize that this is the “new” Circuit City.

This may mean limiting Circuit City to an online brand with products consumers want to buy and with excellent responsiveness – the best online store for innovative consumer electronics.

This will be tough. Changing perception is never easy, especially when you’re starting with a plethora of bad and ugly consumer memories. The “new” Circuit City needs to separate from its old self and project a new image.

What will also make this tough is the state of the market. Analysts say sales in consumer electronics are likely to decline over the next few years as innovation slows and consumers allocate a larger share of their wallet elsewhere.

All of this has me thinking about the life and death of brands. Brands have a slow death. In fact, one might say that they never really die. They live on in memories. They live on in minds and hearts. They may not be well thought of… or they may be cherished and longed for.

In the case of Circuit City, the brand patient hasn’t been in the morgue for very long. Despite all of its missteps, it was #2 behind Best Buy. A large segment of the market was still buying from Circuit City… and they’re still familiar with the name.

They just might be convinced to come back. And disenchanted fans might just be convinced to try a “new” Circuit City, one that’s again relevant to them with the right products and the right buying experience.

What do you think? Can the Circuit City brand be successfully revived? And if you were the brand manager for a “new” Circuit City, what would you do?

Brand Neglect Drives Failure

I just read an outstanding piece by Olivier Blanchard, principal at BrandBuilder Marketing, on the mistreatment of brands by lousy CEOs.

See Blanchard’s blog post: Killing America’s brands, one lousy CEO at a time (It’s a bit lengthy, but worth the read).

In this piece, he rants against ineffective leadership at Chrysler and GM, whose CEOs, he says, have focused to their detriment on aggressive cost-cutting, efficiency and short-term results in favor of rebuilding the brands that once made them successful. As a result, the downfall of these auto giants have accelerated.

I think Blanchard’s point is a good one. Too often, business leadership focuses more on short-term profitability (making the numbers). By doing so, they may be running the business, but they’re not managing the brand.

A brand management mindset is different. Brand management rises above profit and loss and focuses instead on value. And value wins customers, long-term revenues and opportunities for growth. Managing costs and production efficiencies may create value in the short-term, but you can only squeeze so much juice out of a lemon.

As Blanchard says:

“Repeat after me. No major brand ever rose to a position of market dominance by focusing on cutting costs.”

Perhaps it’s no coincidence then that Ford appears to have emerged as the best positioned among Detroit’s Big Three.

We see a lot of positive chatter about Ford these days.

One reason, no doubt, is that Ford is the one American auto-making giant that hasn’t asked for any loan money from the federal government. By doing so, the company seems to have claimed the position as the soundest, most dependable and most likely-to-stick-around American automaker.

That’s not to say they won’t ask for support. And by no means is Ford out of the woods. They still face an uphill climb. Their situation is still precarious.

But Ford seems to have gotten it right on many other fronts. And a large part of this seems to come down to the right mindset – a brand management mindset.

You can see it in the words of Ford CEO Alan Mulally himself. When asked about Ford’s healthier financial position vis-à-vis its Detroit rivals, he mostly talked about the value of the Ford brand. And he told the story about Ford’s focus and work over the past few years on ensuring that every new vehicle in the future was best in class in quality, fuel efficiency, safety and value.

And it seems as if the brand is performing. Ford is a recognized leader in safety and in recent reviews has received high praise for reliability and quality, including from the impartial magazine Consumer Reports. In fact, Ford’s reliability and quality is now said to be on par with Toyota and Honda.

Ford has also made meaningful progress on fuel efficiency, with a greater number of hybrid models this year and plans to replace almost half of its models in today’s showrooms with environmentally-friendly fuel efficient hybrids by this time next year. Ford already boasts the most fuel efficient SUV on the market.

Ford has had its share of cost-cutting and efficiency efforts, don’t get me wrong. But compared to its Detroit rivals, Ford seems to have put a lot more emphasis and substance behind its promise of being there with the quality vehicles people want.

Delivering on your promise is the ultimate test of  your brand. That’s where respect comes from. It’s where brand fans come from. It’s where long-term revenue comes from.

We’ll have to wait and see what happens with all three major American auto companies, but Ford’s brand management mindset may be giving it the edge.

As Blanchard says, one must drive your business forward with a focus on building the brand, on creating and pleasing customers. One must manage the brand, not just the profit and loss columns.

I’m certainly no expert on the American auto industry, so help me out.

Do you think Ford has set itself apart with a better focus on its brand, or are other factors at play?

Why does Ford seem better positioned at this moment to succeed than its Detroit rivals? Or is it?

Do you think Blanchard is right about CEOs failing because of brand neglect?