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Will Circuit City Invade the S.D. Market? : Consumer Electronics Chains Could Face Tough New Competition

January 05, 1988|ELLIOT KING

Christmas sales. Pre-Christmas sales. After-Christmas sales. White sales. Excess inventory sales. Truckload sales. Carload sales. Trainload sales. Factory direct sales. Factory blowout sales.

If you listen to San Diego-area consumer electronics retailers, every day is an unbelievable buying opportunity as long you buy it today, right now, this instant. And if the message already sounds strident, you may not have heard anything yet.

This year, consumers will see the first major price increases for goods such as television sets, stereo systems and video cassette recorders since color broadcasting began. The price hikes should further dampen already slack consumer demand.

At the same time, the expansion plans of national consumer electronics specialists such as Silo and Circuit City could lead to intensified competition with home-grown San Diego chains such as Dow Stereo and Mad Jack's.

Ready for War

A retail war is about to be fought here for the hearts, minds and pocketbooks of San Diego consumer electronics buyers.

Dow and Mad Jack's seem to own the biggest shares of San Diego's $300-million consumer electronics market. Dow claims to be top dog with a 15% market share. Established in 1973, Dow currently has five stores and plans to open two more this year.

"Anybody can come up with numbers," Mad Jack's Dave Sprosty responded. "We have a friendly battle going with Dow so we will say that we have 15% of the market, too." Mad Jack's, founded by two San Diego State University students 15 years ago, has seven stores and no current expansion plans.

Which is larger? Consumer Electronics, a trade magazine, estimated Dow's 1987 annual revenues at about $30 million and Mad Jack's at about $25 million. Neither of the privately held firms would confirm or deny those figures.

But both Dow and Mad Jack's face formidable, well-financed and growing competition. Silo, America's third-largest consumer electronics specialist, seems determined to make a run at Dow's market share, having just opened its seventh San Diego-area store on El Cajon Boulevard. Silo plans to open at least two more stores, perhaps more, in San Diego County.

Feeling 'Bullish'

"We are bullish that we can get the business," said Jay Winslow, president of Silo's western division. "We always have gotten the business, and we always will get the business."

Consumer Electronics estimated Silo's annual sales nationally at $480 million. San Diego probably accounted for about $20 million of the total.

Silo is not the only retailer with its eye on growth in San Diego. Los Angeles-based Leo's Stereo, a 40-store chain with annual revenue estimated at $120 million, recently opened a store in Carlsbad and plans to open two more in San Diego County in 1988, bringing its total to seven. Montgomery Ward opened a consumer electronics specialty shop in Oceanside last spring. Based on that store's results, Ward will announce its expansion plans this month.

But the great unanswered question is what Circuit City will do. Circuit City is the nation's largest consumer electronics specialist--the first to top $1 billion in yearly sales. It has announced it will open 20 to 25 stores next year but declined to say whether San Diego figures in its expansion plans.

When Circuit City moves into an area, it moves in with a vengeance, flooding newspapers and broadcast media with advertisements. In 1986, it opened eight stores in the San Francisco Bay area within two months. It currently operates 24 stores in Southern California and has at least two stores in every Southland county except San Diego.

'Take a Slice'

If Circuit City does invade San Diego, the effect could be dramatic, said Stan White, district manager at Leo's, which competes with the retailer in Los Angeles. "The pie will be spread thinner and they will take a slice."

"They cleaned Federated Group's clock in Los Angeles," observed another retailer. Los Angeles had been considered the Federated Group's stronghold, but its battering by Circuit City led, in part, to its sale to Atari Corp. last fall.

The Federated Group operates five stores in the San Diego area but did not return several phone calls to discuss its expansion plans, if any, for San Diego.

Regardless of what Circuit City and the Federated Group do, the number of consumer electronics stores in the county should increase by 25% to 30% in the next 12 months, industry observers say. That rapid expansion comes at time when the market as a whole is undergoing significant changes.

After years of spectacular results fueled by the popularity of the video cassette recorder and low prices for Japanese-manufactured goods due to the strong dollar in the early and mid-1980s, the growth rate in most major product categories has slowed.

According to the Electronics Industry Assn., wholesale sales rose only 3.8% in 1987 to $29.8 billion. By contrast, in 1986, wholesale sales rose more than 11%.

VCR Sales Off

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