Circuit City Leads Best Buy in Site Visits, but Lags in Conversions

I’m on the lookout for some good deals on electronics. Being the strict online research person I am, I started with the first two sites that came to mind: Best Buy (BBY) and Circuit City (CC). As I did my research, I wondered how the online presence of these two retailers stacked up, especially as we get into the back-to-school marketing campaigns and head into the all-important holiday shopping season.

And I found some surprising things. Since May, Circuit City’s website has drawn in more people than Best Buy’s, but at the same time their conversion rates have fallen.

In July, for the first time since October 2002, CircuitCity.com saw more visitors than BestBuy.com.

• For months, Circuit City’s traffic (in red) was consistently lower than Best Buy’s (in yellow)
• Starting in May 2008, Circuit City traffic began to climb, eventually surpassing Best Buy’s

Not only is Circuit City bringing more people to their site, but they are coming back more often.

• Since May, the average person visiting Circuit City has had almost one additional session on the site
• The upward trend in sessions per person at Circuit City marks a dramatic increase when we look at Circuit City’s position relative to Best Buy

Recent reports I’ve seen in the press indicate that Circuit City has been falling behind Best Buy, but they have clearly drawn a lot of people to their site, and often. Could these be indicators that Circuit City’s fortunes are changing?

The increase in volume of customers and the number of repeat sessions might be good signs, but Circuit City’s site still has one problem: their conversion rates are beginning to drop.

The lower conversion rate is likely due in part to the recent increase in traffic on circuitcity.com – more people and more sessions means a bigger denominator. If you look at conversion as a percentage of all sessions, Circuit City has converted an average of 1.5% over the last 2 years, Best Buy an average of 1.3%. But since May when the upward trend in traffic and sessions began, Circuit City’s conversion rate fell from 1.9% to 1.1% in June and 0.5% in July.

As we can see in the chart below:

• In June and July 2008, Best Buy’s conversion rate began to exceed Circuit City’s, just as the latter’s traffic and sessions began to increase
• Circuit City has historically outperformed Best Buy in converting browsers to buyers as a percentage of their overall sessions

But not only the conversion rate has dropped – despite the increase in traffic, Circuit City’s total number of conversions is still significantly lower than Best Buy’s. As we can see in the chart below, Best Buy tends to convert more sessions in absolute terms each month either matching or exceeding Circuit City since November 2006. So Circuit City’s recent increase in web traffic isn’t generating more online customers for them.

So, the bad news here for Circuit City is that although it’s attracting people to its site more often, it’s actually converting a smaller percentage of them into online customers, and still significantly fewer overall than Best Buy.

In a few weeks, we’ll get a fuller picture of how these two retailers fare for the full back-to-school shopping season both in their bricks and mortar and online stores. Will Best Buy widen its lead, or will Circuit City turn more of those new browsers into buyers? And what will that mean for the high-stakes fourth quarter?

Comments

[sinnr:]

One item that also plays into this, but probably would be very difficult data to collect would be the value of the converted purchases. It can probably be assumed that most big-ticket items would not be purchased from these stores via the web, so even if CC had an advantage in conversions they probably would be lower priced sales.

I don't think BBY is at all concerned about CC selling a few more DVDs via the web if people are still coming into BBY stores to buy their flatscreen and home theater set-up.

2008 Aug 13 05:01 PM

[billddrummer:]

I agree with snnr. In a number of cases, BBY conversions occur when people stop by the store, don't find what they want in stock, and then order from one of the in-store kiosks. CC isn't getting store traffic, so conversions from that source are probably nil. (In many cases, BBY customers are encouraged to buy online by sales associates.) And it's probably correct that the ASP of online sales at CC lags BBY's.

2008 Aug 14 11:07 AM

[adashjr:]

A recent American Express promotion drove me towards the Circuit City site, I believe for 'Membership Rewards' program

2008 Aug 14 04:51 PM

[taxman:]

I agree with adashjr, Memebership Rewards programs is a huge draw for consumers, in these current economic conditions.

2008 Aug 20 11:17 AM