Circuit City Closes Its Doors For Good

bsharma is amongst the hordes of people wanting us to share the news that long beleaguered retailer Circuit City has finally decided to close for good, asking for court approval to close the remaining 567 US stores. "Whalin said management mistakes over the past few years combined with the recession brought down Circuit City. 'This company made massive mistakes,' he said, citing a decision to get rid of sales people and other mismanagement. What's more, given the credit market freeze, Whalin added that no manufacturer wants to sell to any retailer who doesn't have money to pay for the merchandise. At the same time, Whalin said there's still a very slim chance that one or more firms that have expressed an interest in buying Circuit City could still buy it out of bankruptcy over the next few days."

Comments

Main mistake they made?

[It doesn't come easy]

The main mistake Circuit City made IMHO was that their prices were always higher than their primary competitors (Best Buy, CompUSA, etc.). They had a policy that they would match the price of any competitor; however, they wouldn't beat the competitor's price. Of course, their high pressure sales tactics didn't help either but my main gripe was their advertised prices.

Only matching a competitor's price (and not beating the price) meant they were basically forcing their customers to do their job, i.e. price shop their competition. If I find two stores selling the same item, and one store is less than the other, I'm going to the lower priced store. The only time I'd consider going to the higher priced store would be if they gave me a price LOWER than their competitor. A price match is meaningless.

Maybe they changed their policy in later years (after I stopped visiting their stores), I don't know, but the negative perception I developed about them persists to this day. And now they're gone. I wonder if they learned anything?

Re:Main mistake they made?

[bdenton42]

My issue with them was that several times when I would go to their store to buy their advertised loss leader... they wouldn't have it. Then I would go across the street to BB and pricematch, and BB almost never seemed to have a problem with having something in stock. At some point I just stopped going to CC completely... I'm surprised they lasted as long as they did.

Re:Main mistake they made?

[megamerican]

That pretty much sums it up. The only reason to go to a Circuit City was to avoid crowds.

Re:Main mistake they made?

[orclevegam]

Compounding their sin of higher prices they also had the singularly least helpful (or knowledgeable) staff of just about any store I've ever been to. The selection was also rather poor often missing products from major vendors. They tended to try to cram overpriced and unneeded warranty programs down your throat as well. The final insult however was almost every time I've ever been in a Circuit City some moron would be in the back with the car stereo systems cranked to max volume, the bass knob broken off on 11, and some truly horrid radio station tuned in. Simply stepping in the front door was usually an invitation to permanent hearing damage and a pounding headache for a few hours.

Re:Main mistake they made?

[erroneus]

People aren't afraid to spend too much money if they get good service. And that was precisely what Circuit City did. They fired all of their best, most expert sales and service staff because they cost more. They replaced these people with kids off the street and they got what they paid for.

It was bad customer experience that killed Circuit City. The bean counters thought they could improve their bottom line by lowering payroll costs but they neglected to consider that it would damage the store's reputation and drive customers away. We see this time and time again. Every time you see IT salaries fall and people start leaving the field, what is left? Do they really think they can fire skill and experience and replace it with inexperience and STILL maintain productivity, efficiency and quality of service?

At the next CEO/CFO conference, I hope this is topic for discussion -- they are destroying their businesses with short-term greed. And every time I see it happen, it is tragic... and they never learn from it.

Re:Main mistake they made?

[Chonine]

I worked at Circuit City from 2000 to 2003, and this was not the case for us.

I cannot speak for CC nationwide, as I was in a store in the northeast, but we had a "price match plus" policy. If you found a lower price from a brick and mortar store, and you or we could verify it, we matched the price and beat it by 10% of the difference. Perhaps this was not the case before or after I was there, or in different regions.

To the best of my knowledge, prices were also identical to the competition. Every weekend a small group of us would comb through every newspaper they brought in, and would familiarize ourselves with what the competition was advertising in their flyers. We were usually the ones to announce to customers that a certain item was on a price match sale, and managers were supportive in helping us get them that lower price. We would call or go online to verify a better price if needed. Only very rarely did a customer find a lower price elsewhere and bring it to our attention.

Now, I also think this was the "best" time for customers with CC. They had come out of a DivX salesman era, which stained the companies opinions in many peoples minds. The company started to revise its checkout system, and brighten up stores, as well as introduced a completely new layout for the new stores. But it was still playing catchup to the other guys. The same poor management was running the show. Any progress here was lost with the changes to the payment structure which lost a lot of good will with loyal employees, which were later outright laid off. Then they were just slow with keeping up with the competition with Firedog, and never had the kind of HDTV showcasing that Best Buy was able to foster.

The rise of Best Buy and Walmart did the company in, with superior selection, store layout, and even colors. Seriously, Blue and White or Blue and Yellow, just flat out beat Red and Black. Our stores were dark, dated, they felt old, the store was like the weird used car salesman of electronics. While the "we don't have checkout counters" idea was an interesting experiment, it was a failed one that the company never truly fixed. A poorly run company can survive in the absence of great competition, and I think CC was floundering for the past decade. Semi-competent (at least more competent than Circuit City) competition and a recession is all it took.

Re:Main mistake they made?

[blueZ3]

Here in the Valley, my wife an I say that you can tell the state of the tech economy by the quality of wait-staff in restaurants... It's sort of like a trickle-down employee quality metric: as intelligent tech workers get laid off they replace less intelligent folks in other jobs, which eventually percolates down to waiters and waitresses in Dennys and such.

When the economy is really bad, you get excellent service in restaurants. When it's boom time, you get a ten-minute wait time for a seat in an empty Denny's while four sub-seventy-IQ employees stand around ignoring customers.

Re:Main mistake they made?

[Gojira Shipi-Taro]

Well there's still Blood Bath and Beyond.

Re:Main mistake they made?

[IorDMUX]

In my hometown, we had a Best Buy, a Circuit City, and a Microcenter within about a .25 mile radius. (Don't ask me which planning genius decided we needed that level of saturation, but at least there were advantages for the consumer.) My options, when it came to purchasing that tech-whatever-on-sale that I needed, tended to go as follows:

* Best Buy -- Be told that there are 6 of the item remaining in stock, but... uh... "We can't seem to find them. No, we don't do rainchecks, why do you ask?".

* Circuit City -- Find the item, take it to the cashier, see it ring up at 125% of the shelf-listed price, and be told "Sorry, what the cash register says is what goes."

* Microcenter -- Find the item (no advertised sale, but a decent price nonetheless), chat with a guy for 10 minutes about the latest AMD motherboards, and check out without further issues.

Needless to say, one of these stores received the majority of my business, as well as that of the other tech-knowledgeables in the area. The other two shops are not doing quite as well.

More than mismanagement

[SomeJoel]

I guess the business model of high prices, unfriendly sales staff and poor quality merchandise didn't pan out for them.

Re:With Circuit City and CompUSA all but gone...

[MozeeToby]

...what's to stop Best Buy from inflating their already-borderline-ridiculous prices even further?

Target, Wallmart, Sam's Club, local retailers, amazon, newegg, froogle, etc...

Obvious

[notque]

But DIVX was just about to take off!

Re:With Circuit City and CompUSA all but gone...

[Iphtashu Fitz]

An aunt of mine recently decided to splurge on an HDTV. She'd looked at what was available at Best Buy, Sears, etc. and found a nice 40" Sony at Best Buy that she really liked. But she wanted to buy the tv from a local store, not a big box store, for a number of reasons. She's the kind of person who believes in "mom & pop" types of outfits. She's also a photographer and wanted to use the HDTV to view photos from her computer. We went to the local store she was interested in and found the same Sony there. The sales rep bent over backwards to help us out and answer all our questions. I was impressed when my aunt started asking about viewing photos and pulled a photo CD out of her purse. The guy ran around the store, found a DVD player, hooked it up to the tv she was interested in, and let her view the photos. Then she started noticing some of the other HDTV's there and asked if she could view the photos on any of them. So the guy figured out where the feed to all the tvs in that section was and hooked the DVD player up to it, so my aunt was able to look at her photos on a dozen different HDTVs all at the same time.

We decided to do a little more shopping around and grab some lunch before making a decision. We stopped back at the Best Buy and saw that it was selling the HDTV for something like $200 less than the local store. We went back to the local place and asked if they'd match the price. The guy ran off for a few seconds and came back and said they could but then couldn't offer us the free local delivery they typically provide. Big deal - we were planning on taking the tv with us anyway. And the local shop offers full warranty & repair service AND will come pick up the tv for free if any work needs to be done on it.

You'll NEVER get those sorts of services from places like Best Buy. My aunt was treated amazingly well throughout the experience, and the local support she'll get is top notch. If she ever has any questions/problems she can call the store and they'll help her out.

My guess is that as the economy manages to sort itself out over the next year or so you'll see a comeback in smaller individual stores, local/regional chains, etc. that provide MUCH better service. I think consumers are becoming more and more savvy when it comes to realizing that they need to think about things like after-sale service & support, and the big box stores simply don't provide that with any sense of reliability or consistency.

Re:With Circuit City and CompUSA all but gone...

[fuzzyfuzzyfungus]

Of course, the moral of your story is that the little mom 'n pop store bent over backwards to give you high quality service; but only ended up getting best buy prices... That isn't really an inspiring tale of the victory of the little guy.

Re:With Circuit City and CompUSA all but gone...

[jollyreaper]

While I do agree with you, I'll take a moment to play Devil's advocate. Small store owners can be dicks just like the big store owners. I do a lot of grocery shopping at hole in the wall ethnic markets and the staff there can be every bit as surly as disaffected slackers in big box stores. The difference (usually) is that good performance goes unrewarded at the big box stores, actually punished at Circuit City since they fired their top salespeople. In a small shop environment, it should be possible for a good salesman to be rewarded for his efforts, therefore you would expect more positive reinforcement and better reps there.

I worked for a computer guy back in '99 as the box stores were rising in prominence. The mom and pop shops couldn't compete with the box stores on price and this guy decided to add PC hardware to his midrange business that was slowly dying off. I told him that trying to make money off of merchandise was ridiculous and that the only way a smaller shop could compete was on service. If we built a proper service department, we might have a shot at surviving. He didn't, I moved on, and from what I've heard of people who have tried running service shops catering to businesses, its a damn rough game to be in these days. Businesses will pay for lawyers and accountants to come in and help as necessary but they seem to think that computer people should be paid the same rates as the janitorial service.

Apple's first big loss to Microsoft was thinking people would pay more for mac quality but the market said Windows wasn't great but good enough. It'll be interesting to see how it goes in the future. The iPods are ridiculously overpriced as mp3 players but those bastards sell like hotcakes. I guess the bit of genius there was equating this to fashion. People will be ruthlessly efficient when it comes to making practical purchases but when it comes to buying impractical things like handbags, shoes, and designer goods, logic and reason go out the fucking window.

Service?

[neapolitan]

If we are going to discuss this in detail, though, I would specify how you define service:

I don't care about salespeople *at all*, in fact, I would generally just like for them to leave me alone unless I ask is something is in stock, etc. I generally know what I want or can read the back of the package (or often just find the partnumber and read reviews online right there on my cellphone.) I don't expect some teenager to know nuances about RAID setup, PATA vs SATA notebook drives, or what webcam is compatible with linux, etc. After junior high I stopped asking pretty much any non-engineer/programmer/somebody-that-actually-made-the-device anything about computers, as I'm sure many of you did.

What I do care about is being friendly and helpful with logistics (delivery of the flat-screen TV) or returns / exchanges for defective parts. A few online companies are absolutely fantastic with this (Amazon, etc.), so I almost end up with everything online unless I need it immediately. FWIW, despite their adherence to retail (and rarely ABOVE-retail prices), Best Buy has always been pretty good in terms of my definition of service for me.

Re:What about "The Source" in Canada?

[crabboy.com]

Someone please mod parent down for reading the article.

Re:With Circuit City and CompUSA all but gone...

[amabbi]

My wife and I had almost the same experience. Our fridge died. We went to Best Buy, Home Depot, Lowes.. Everybody said that it would take four of five days to get one delivered. We decided to check out a local place. They had a great fridge for a great price. Then came the delivery, the answer was how about tomorrow?

Ugh. I hate it when people answer a question with a question. Bastards.

Re:With Circuit City and CompUSA all but gone...

[Compuser]

The small guys got the business. In this economy that is huge. Survival through blood, sweat, and tears is rarely "an inspiring tale", except when it is told by the survivors to their thriving descendants.