Electronics retailers find service sells

STERLING, Va. -- Three of the TVs are dark in Wal-Mart's electronics department, where the only two clerks in sight stock a shelf and disappear. At a nearby Target, the digital camera desk is unmanned, and there's no staff roaming electronics. In Circuit City, a clerk concedes it's his first day on the job and first week in the country.

"Across many industries, we've seen that the retailers that grow customer-service ratings the fastest have greater sales growth," says Chris Denove of J.D. Power and Associates. "Prices have come down dramatically on electronics items, and at the same time, the complexity of the products has increased. Expert advice is more important than ever."

Circuit City's struggles could serve as a case study in the critical role of customer service in the retail industry, especially electronics. Last year, Circuit City laid off thousands of its best-paid and most knowledgeable sales staffers, only to see many of them snatched up by Best Buy. And since March, Circuit City's answer to Best Buy's popular Geek Squad tech-help team — called Firedog — has laid off up to 200 people. And its cable TV-installation unit has shut down.

"Best Buy's strategy is not to cut back on people," says Mike Mallett of Corporate Research International, which conducts customer and secret shopping surveys. "Best Buy gets it."

On the other hand, Mallett says, Circuit City is "going down because they're not doing a better job" of handling customers.

Denove agrees. Circuit City "decided to cut out its high-paid commissioned salespeople in favor of a younger and less experienced sales force," he says. "While this move cut costs in the short term, the new staff simply wasn't as effective at selling complex electronics and didn't provide the same levels of customer service. The net result was a downward spiral in sales."

Circuit City declined requests for an interview. But COO John Harlow told analysts last month that the company was working to improve service in home entertainment and to increase training.