Article

Top 100: 5. Bankruptcies in retail

June 29, 2010

Circuit City may have been the biggest retail casualty in 2008, but it certainly wasn’t the only one. KB Toys, Linens ‘N Things, Sharper Image, Steve & Barry’s, Lillian Vernon and untold smaller names filed for bankruptcy this year. But the Circuit City story dwarfs them all; it is an HBO documentary waiting to be made, a virtual checklist of things not to do if you want your company to succeed. It outsourced prime floor space to vendors, putting the customer experience largely in the hands of nonemployees; it devalued its long-time expert employees, moving them from a commissioned sales structure to salaries; it dragged its feet on upgrading in-store technology, from slow and creaky POS terminals to HDTVs that weren’t showing HD content.

“The Circuit City experience is actually tied to pre-2008 actions — they fired their experienced work force and replaced them with people earning much less, thus undermining the quality of the in-store experience whenever you dealt with people who were clueless about their product lines,” said retail consultant Don DePalma.

Retail analyst Judy Hopelain noted that 2008’s bankruptcies came in two waves, the first of which hit in February and took out companies that sell things we want but don’t need (Sharper Image and Lillian Vernon were part of this wave). A second flurry hit in July, taking out companies that sell necessities that are available cheaper elsewhere — a list that includes Linens ‘N Things and Mervyn’s.