Article
Circuit City: What went wrong?
As the once-great electronics retailer winds down, experts weigh in on what mistakes were made.
March 21, 2009 by James Bickers — Editor, Networld Alliance
In 2001, Circuit City was on an elite list of 11 companies, singled out by business writer Jim Collins as having gone from "Good to Great" in his book of the same name.
Eight years pass, and we have a powerful new definition for the word "ironic" (Fannie Mae's inclusion on that list is also wince-worthy in retrospect). So what exactly happened here?
I have my own consumer perspective on the company's decline, having watched the store just up the road from my house turn from a bustling geek haven to a dusty, disorganized and uninviting ghost town over the course of two decades. I also have a good friend who worked in the store's management during that period, and I watched his once-great career get slowly squeezed and eroded and whittled away before it was eliminated entirely.
Free webinar: "Behind the Fall of a Retail Giant: The seven things Circuit City did wrong." |
"Circuit City did not have a distinct brand position — they didn't stand for anything in particular," said Mark Michelson, who conducted the consumer research that was used to design the last round of Circuit City stores. "Best Buy is known for low price and good service; their employees are also among some of the most satisfied at any retailer. Wal-Mart became a stronger player in electronics, with dominance of the low price position. Amazon.com and other e-tailers offered convenience with low prices. Circuit City simply did not have a position, except a bad reputation for poor service and mistreating employees."
What Circuit City did have, at one time, was a commissioned sales staff, one that was filled with product experts. Best Buy, on the other hand, has 100 percent turnover on its sales force; the company knew it wouldn't be able to keep enough experts around, so it built a store that leaned more on self-service, a store that was more enjoyable for shoppers to navigate on their own.
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"Eventually, they made the dramatic step of cutting their most expensive salaries and in the process, eliminated what remained of their most loyal high quality sales staff," said Jason Goldberg, vice president of marketing for MTI. Jason was on the team that designed the in-store experience for Circuit City in the 1990s. "They were left with a store that required great sales staff, and no experienced sales staff to support it."
Shortly thereafter, it seemed like Circuit City became the once-great high school linebacker, now 42 and twice divorced and morbidly obese: he just didn't care anymore.
It wasn't just the sales staff — it was the in-store experience itself, which had shattered into multiple different experiences. Real estate was leased out to brands like Verizon, Sony, Monster and others to do with as they saw fit. What had once been a sleek, consistent environment was now more like a flea market.
"The hubris of some CEOs and VPs that they know it all and want to 'shake things up' often means they shake things apart," said prolific retail speaker and author Bob Phibbs.
We will delve further into this topic on Tuesday, April 7th at 2 p.m. eastern time — sign up now for our free webinar, "Behind the Fall of a Retail Giant: The seven things Circuit City did wrong."
