Innovation

How CompUSA Made a Comeback


Just a year ago, CompUSA seemed like a goner. The consumer-electronics retailer had closed all 103 of its stores, done in by giants such as Best Buy (BBY) and Wal-Mart Stores (WMT), which leveraged their scale to offer lower prices and wider selections. Today a smaller CompUSA is bouncing back. Despite the recession, the chain's sales are growing, thanks to a thrifty remake of its reopened stores.

In essence, CompUSA's new owner is turning the stores into Internet entrance ramps. PC and television monitors not only display eye-catching clips, as they do in most retail chains; each points as well to the device's product page on the compusa.com Web site. Shoppers can also check store inventories and even browse competitors' sites to compare prices. "We want to give people the rich experience of buying online," says Gilbert Fiorentino, who heads the chain's retail strategy.

CompUSA's approach has been driven by its corporate parent. Systemax (SYX), a publicly traded e-tailer and PC maker, paid $30 million in early 2008 for 16 CompUSA stores as well as its name, customer list, and Web site. With little money for remodeling, the reopened outlets were initially a flop, bringing in 30% less revenue than expected. "There were desktops and laptops sitting there doing nothing," he says, "and TVs showing the same DVDs over and over."

So Gilbert Fiorentino, who heads the chain's retail strategy, turned to making better use of existing assets. He had in-house programmers write software linking computer monitors to each store's inventory database. TVs were hooked up to hard drives and equipped with keyboards to make them Net-accessible, too. The setup cost $50,000 to $100,000 per store and took a month. The chain, which now has 24 sites, mostly in Florida and Illinois, plans to update every one this year.

Display Model Assistance

Of course, CompUSA isn't the only retailer to put display models to work. Apple (AAPL) invites shoppers to Web surf while testing Macs in its stores, and Best Buy has an interactive tool on floor-model computers that asks shoppers what they're looking for to help steer them to merchandise.

Still, Systemax says North American sales rose 14%, to $1.9 billion, in 2008. In contrast, Best Buy's same-store sales have been declining since last year, and Circuit City declared bankruptcy and earlier this year shuttered its 575-store chain. (Systemax recently bid $6.5 million to acquire rights to Circuit City's brand and Web site.) Systemax Chief Executive Richard Leeds credits CompUSA for the industry-bucking increase.

The company plans to go further with interactive gear. In four stores, CompUSA has installed stations where people can scan merchandise bar codes that trigger information to pop up on a computer screen showing user manuals and accessory suggestions. The retailer is testing a motion-sensor-driven display that launches product-specific infomercials on a nearby monitor when a shopper picks up a digital camera.

The Net access has become crucial to CompUSA's survival, says analyst Stephen Baker of market researchers NPD. "If it breaks down, then they will look just like any old retail store again," he warns.

Big-name companies such as Microsoft (MSFT) and Intel (INTL) are tracking CompUSA's results as they prepare to branch into retailing. Noting that consumers are shopping more online, Steve A. Peterson, Intel's U.S. retail marketing manager, says: "Bringing the online research process into stores offers more than just touching and trying." Plus, it seems easy to do.

Jana is the Innovation Dept. editor for BusinessWeek.

Reena_jana
Jana is the Innovation Dept. editor for BusinessWeek.

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