"Why Circuit City Failed"

Now that Circuit City has finally sputtered out, it’s fun to talk about what did them in—see their firing-your-best-employees stunt a few years back, for example. But what do former Circuit City employees think? This guy worked with them from 1997 to 2002, and he says for one thing, they should have never stopped carrying appliances.

The next major change which I believe was the beginning of the end was to stop carrying major appliances. There was no major mark up and there was nothing to make big profits off of but it was a sound constant income. People are always going to need stoves and refrigerators. They ended up using the floor space to sell small electronics and software. You know the stuff most people buy online for much less.

I never understood the decision and for years after people would come in looking for major appliances and we would turn them away. Circuit City tried to get one hot item back, window air conditioners. We would sell over 200 units in 2 days during the middle of the week if the weather was hot. Let me repeat, they sold 200 AC units in a Wisconsin market. Circuit City tried to carry just air conditioners but it never caught back on.

He also talks about the mismanaged transition from commission-based sales to self-service—the precursor to their infamous laying-off of everyone with skills. But one point that comes across in his story, whether intentional or not, is that maybe Circuit City’s original commission model of sales was never a good idea for big box electronics retailing in the first place, because it just doesn’t work on smaller consumer electronics.

When I started in 1997 Circuit City was expanding stores like crazy, most of which were close to a Best Buy or any other major electronic big box. The major difference between a Best buy and Circuit City was Circuit City was more upscale. The sales guys wore sport coats and were paid a nice commission. Because each person’s paycheck was impacted by how much they sold and didn’t get returned, salesmen know they had to learn the products and go around helping people. If they didn’t learn or maintain good sales numbers they were weeded out. The only down side as a shopper is a sales guy pushing expensive accessories and extended warranties but they knew the products (for the most part). This meant Circuit City’s main focus was expert knowledge and customer service. This is great for big ticket items like TVs, computers and sound systems. No so great for items like batteries or cordless phones. People like to just grab it off the shelf and get out without getting [shaken] down for a warranty.

On another blog, a former retail manager for a department store says that Circuit City stunted its own growth with bad store floorplans and a tendency to hold on to showroom-style layouts instead of packing the shelves and aisles with merchandise.

I know when my store came under threat of Best Buy we responded by forgoing the showroom style and going full big box. Pack the shelves with merchandise, and focus on self service. Honestly It worked. During the whole time I was there we had 20-30% sales increases every year, and never really even noticed Best Buy’s impact on our sales. People don’t want to ask for assistance these days… They just want to walk in, grab what they want, and get out.

…In my opinion Circuit City would have done well to employ this strategy, and probably would not be in the jam they are in now if they had simply changed with the times. Get the merchandise out on the sales floor, and come up with a sensible floor plan… Those two things work wonders in any modern retail environment.

So what do you think? Any other ex-CC employees, or retail employees in general, care to pitch in with what you think the company did wrong?

“Circuit City… Fail???” [Guillotine]
“Why Circuit City Failed, an insider’s look.” [TheRealAustin]
(Photo: F33)

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