Welcome to Circuit City, where stupidity is state of the art

May 5, 2007

Guest Post by Morbo

As the Carpetbagger mentioned briefly on Wednesday, the electronic store chain Circuit City is in trouble. A few weeks ago, the super-geniuses who run the company decided to adopt an innovative cost-cutting measure: 3,400 of the chain’s most experienced — and thus highest paid — employees were told to hit the bricks.

I’m don’t pretend to be Adam Smith, but at the time I remember thinking, “That sounds stupid.” My reasoning was this: Most people who like electronic gadgets and gizmos follow new developments very closely. They like to have the latest stuff and probably want to deal with a salesperson who knows all about what’s hot. Yet Circuit City just sent those people out the door and replaced them with inexperienced, low-wage newbies.

How’s that working out for Circuit City? Not well, I’m afraid. The Associated Press reported this week:

Circuit City Stores Inc. shares plunged to a new 52-week low Tuesday, after the electronics and entertainment retailer said it expects to post a first-quarter loss because of poor big-screen TV sales and withdrew its earnings outlook for the first half of the fiscal year.

I realize that Circuit City might be having these problems even if it hadn’t fired anyone. The chain faces tough competition on big-screen TVs from (surprise!) Wal-Mart. But I can’t help but think that an experienced and knowledgeable sales staff might help offset that – especially if the chain valued these people and maybe even viewed them as an asset.

A story in The Washington Post’s Business section supports my view. The piece quotes analysts who assert that canning experienced and knowledgeable sales stuff was a dumb thing to do: “I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates,” said Tim Allen, an analyst with Jeffries & Co.

Circuit City has managed to annoy its entire customer base. Its potential customers probably fall into one of two broad camps: People who are really into electronics and people who just need an upgrade or a new device.

Consider the second camp. My guess is it has some semi-Luddites in it.

Let’s say you’re a tad intimidated by new technology. Maybe you’d like to have a giant TV or an MP3 player or a digital camera that’s also a GPS or whatever. People like that might be willing to pay a few extra bucks to get some help from an experienced salesperson rather than just plunk down some money at Wal-Mart and walk out with an item they can’t even turn on.

A Circuit City ad campaign that offered customers the ability to draw on the experience and knowledge of a seasoned sales staff might have made the difference. Instead, Circuit City decided these people were a burden and handed them pink slips.

Finally, there is this: Many people probably read the original news accounts about the firings. At least some of them are not likely to patronize a store that treats its most loyal employees so poorly. “Workers of the world unite” and all that. It’s yet another reason to bypass Circuit City.

Hoping to save a few bucks, Circuit City has thrown itself into a death spiral that will probably lead to bankruptcy, restructuring or maybe even collapse. Its well-compensated executives have no one to blame but themselves.

Yep. My personal guess is that American companies will keep doing this kind of thing–maximize the “short term profit” (hey, they “saved” the cost of several weeks’ salary for those laid-off employees) until a lot more compaines have run themselves into the ground. Expect the trend to continue.

  • Circuit City’s position is: We can’t match Wal*Mart’s prices, but we can match their ignorance.

    There are 2 issues with the new hi tech TVs. 1 is short term. Led by Wally*World, HDTV prices were drastically slashed for the past holiday shopping season. So, people who might have been inclined to wait on a HDTV, found bargains they couldn’t resist. The short to near term market was sated. In other words, people likely to buy one of these in the first 1/2 of 2007, probably already made their purchases. There’s no doubt this caught many electronic retailers off guard.

    The 2nd thing should have been obvious years ago. It’s no secret that every manufacturer has been converting their plants to HD/flat panel manufacturing. If you’ve been to a big box electronics store lately, you’ve probably noticed that flat panels significantly outnumber CRTs. For reasons that defy common sense, CC thought they could continue to charge a premium price for what has become a commonplace product.

    Wal*Mart screwed them in the short term. They screwed themselves in the long term. Now they’re doing what every corporation does after screwing themselves – they are screwing their workers.
    I say screw Circuit City. I haven’t set foot in one since they announced their brilliant scheme to staff up on idiots.

  • If bankruptcy occurs for Circuit City, let’s hope that it becomes iconized as a way NOT to do business. It would truly help in the future for the “Circuit City Strategy” to show up in the textbooks of America’s leading business schools as outstandingly bad decision by a management team. Morons–just like the current CEO POTUS.

  • It’s the Bushification of America: competence means nothing anymore. Thanks W for setting such a fine example.

    My impression on the big box electronics guys was that they were all the same. Now I have a reason to never walk into one of them ever again.

  • Hmmm…firing experienced, knowledgeable personnel and replacing them with know-nothings. I seem to remember seeing a lot of stuff like that recently in Bu$hylvania….

  • It’s not just Circuit City. My mother sells furniture for a very high-end department store. They work on commission. She’s one of the best in the business and a consistently high earner. The company is trying to push her and the other high earners out because they make too much and having been around a while, have too good benefits. It seems not to have occurred to these brainiac executives that the reason these employees are paid so much is that they sell so much.

    They’re being replaced by much cheaper employees who don’t get good benefits. What has happened? Sales are going down. So what have the executives done in response? Decided to accelerate the pushing out of the old employees.

    Most have already left, my mother is leaving in a couple of months, meanwhile, the sales continue to spiral downwards, because the new people are well, new, they’re inexperienced and the type of people who are willing to work cheap do not have experience in high-end retail. When you’re dealing with high-end, wealthy customers, the customers expect a certain sophistication and knowledge and if they don’t get it, they can easily go elsewhere.

  • I suspect that another big reason why Circuit City has done so badly is the large number of people turned off by a company that would treat its workers like dirt. For these consumers, their need for electronics is utterly beside the point.

  • Further proof of what happens when you let people who can pass the IQ test low enough to be Republicans go to school – where they get MBAs and are then put in charge of operations that take actual intelligence to make decisions. Perfect example of what I mean: our “MBA President.”

  • Luddites are people who oppose technology (the original Luddites destroyed mechanical looms for fear it would put weavers out of work). A Luddite wouldn’t have a big-screen TV. “Luddite” doesn’t mean people who want technology but are just ignorant about it.

  • Marks & Spencer here in Canada (at least in British Columbia, where I live) pursued a similar path, although not quite so draconian. Although management remained relatively unchanged (probably ditto at Circuit City, I bet you’d find), senior staff were encouraged to accept buyout packages and retire, and no more full-time workers were taken on to replace them. Part-timers don’t get benefits like company medical and dental, or a pension, which used to be pretty much de rigueur at any major retail chain. A study of more or less every retail chain in North America would likely reveal a steady trend toward easing out the full-time staff and replacing them with part-timers on an on-call arrangement. Don’t show up when they call you, get fired. Not a big headache for the chain, when they’re just replacing one untrained spear-carrier with another. Circuit City just made it noticeable by trying to shortcut the process.

  • Mark (@11),
    Not only retailers do that; replacing old-timers (with their benefits) with part-timers (no benefits) is happening also at many small-time private colleges. Which then are terribly surprised, when their teachers don’thave any loyalty and spend most of their time looking for another job instead of plowing their energy into teaching.

    Re Circuit City. I must admit that, as a total compu idiot, I tend to make a beeline for the youngest male among the sales clerks, when I’m in the market for an electronic toy. They grew up with electronics, where the older staff might not have had. And they tend to be enthusiastic — what they don’t know themselves, they’re eager to learn. And, because they’re so much younger than I am, they’re less likely to sneer at my lack of knowledge; they’re happy to show off their own. I get along better with them, than with someone older.

    That’s not to say that what Circut City has done is either moral or intelligent, but…

  • I agree, Katherine. Their sales probably dipped a little due to electronics buyers who decided not to buy from a chain that so clearly didn’t give a crap about their employees. I bought a laptop at Circuit City last year and had a great experience. But when I read about the decision to lay off all the high-earning workers, I decided I wouldn’t shop there again – and I bought my $300 four-in-one from OfficeMax instead.

  • Geez, I haven’t shopped at CC in four years. I tried to buy a moniter in the days before flat screens. I went thru three and never found one to function properly. Then I learned from the frustrated sales associate that they were ‘remanufactured’. I haven’t stepped foot in any CC since that day. The store where this took place is GONE! A foretelling of many stores to follow. Buh-by…

  • That’s interesting, Libra @ #12 – I hadn’t heard that. Modern reality that sees the average worker change jobs 5 times in their working life, as opposed to my grandfather’s generation where you worked for the same company your whole life begs the question; it’s change, but is it progress? I still think a long-term employer of a company that takes care of its workers inspires greater loyalty and more dedicated work, but that may be just wishful thinking. I know my children’s generation is the most uncertain and apprehensive about its prospects that I’ve ever seen. One need only do a quick scan of how much management takes out of the company in profits now, compared to 50 years ago, to see where the new policies are coming from.

  • I currently (and I do mean currently) work at Circuit City. I hold a fairly respectable position in upper management. The company, already experiencing great challenges to say the least, is slowly driving upper management to the brink of leaving the company. Lets face it, my boss would have me taser people to get them to buy products with all the accessories if he could get away with it…..I along with many of my peers are starting to realize that circuit city looks at us as robots. They do not care about us as people…..
    Several companies that i am talking with have admitted that they have taken aboard several Circuit City store directors and management recently. Companies are headhunting and offering to treat you with respect!! They honor an acceptable work/life balance….I will soon be employed elsewhere and will do my best to recruit others…..NOBODY should be treated like a doormat……..to H#@$ with them…..they wont last…..

  • Well, I am glad CC is in trouble. This was going to happen for a very long time. As a former employee of Circuit City, this trend took place when they decided to go through and replace their management team with some of the most uneducated people in the world! Simply put, Circuit City will not be around for long unless someone decided to push the moron up top away from the position.

    I used to shop CC as a former employee and as an independent business owner. To tell you the truth, Best Buy is the same; however, they seem to care about the livelihood of their employees! I can already see the future for these morons, I can’t believe he made 17 Million this last fiscal! Save your money people, or spend it elsewhere!

  • Funny how the lunatic left blame bush for cc problems. You guys have truly lost it. Down sizing and and pushing out the high earners have been around for hundreds of years. GEt used to it and live with it. It’s not all bush’s fault.

  • The president gets blamed for everything, I don’t like Bush … in fact … I hate him, but bringing that up was just bating for an argument (although the time for such an argument has long since pasted). I thought I would just comment how CC is now filing bankruptcy. Good call Morbo.

  • As a senior on fixed income and having shopped in CC several times, because I could get the help I needed. I will not step foot in their store again, and then when I read about the salary the CEO gets I was sick. One of the things that is wrong with corporate America is the salaries the Board of Directors make. I feel it is wrong, yes make a good living but not at the expense of americans and you valued employees. Hiring new employees as part time workers means no benefits. It is the same in the sports world, 50 million dollars for a 5 year contract, stupid, and I can’t even afford to go to any sport game. Being overly greedy is taking us down…

  • Let me just say that if someone blaims the President on this then they must have a person who recently was hired as an idiot as part of the new Circuit City campaign- then not long after fired. Anyways, I was one of a handful of intelligent employees who knew as soon as I was taken of commission that this compant was sinking like the Titanic. Slowly at first, but then a major breakage and a huge loss. Not just employees, but the consumer who was used to, or at least expected, and rightfully deserved to receive to notch service. Period. There is no way in this day in age a salesperson can’t find out the answer to 99% of the electronic questions out there, laziness and greed is the downfall of of true customer service. Not providing enough training, staffing, tools for referencing or troubleshooting. These are no brainer things. It’s a shame for the 4 years I worked there, it was with a staff of people who had experience, knowledge, and integrity. People who actually shopped their competition. Online shopping will be a neccessity of the future to get all the answers.

  • Well put TinaW! In general ALL of the problems that we have here in the United States are the direct result of greed and the general “I don’t care what the other guy has as long as I have as much as I want” attitude of the American public. I can trace it back as far as the 53 years I’ve been alive. One incredibly stupid case in point; Beanie babies. People were mauling each other to get a f$@#@? stupid stuffed toy! What a legacy for the world to see, eh?

    If everyone just looked at things as “just having enough” instead of “how much can I amass for my own pleasure”, we wouldn’t be in nearly the mess we’re in. What a truly sad day when we pay some barely literate athlete multiple millions of $ per year to go out and “play” a game once a week for our entertainment, but god forbid if teachers who are responsible for educating our future leaders ask for a 4% cost of living raise, get shot down because “they already make $35,000 per year” and “they only work 9 months”.

    Sometimes I hesitate to admit I’m an American…..

  • Its not just Circuit City using this practice, I use to work for their main competitor Best Buy and they use this practice as well, they just kept it away from the media. But they make it a regular practice unlike Circuit City. Times are tough right now and companies need to find ways to cut costs. Unfortunately it had to be workers.

  • I’m receiving “pass along” emails saying to cash in your Circuit City gift cards because of their upcoming bankruptcy. To learn they let go their intellectual capital and replace with cheaper, inexperienced people will likely bite them. I was one of many let go from my former company for this very reason. That company disappeared 2.5 years after this “bold” move.

    It’s pathetic to see several who use the forum for this well written article to slam George Bush/Republicans. I was a bit surprised to read the first slam, then seeing others do the same thing, how goofy. People with this top priority in life are worth the same to an organization as the Circuit City genius(es) who laid off the experienced employees.

  • This news about CC is giving closure.
    I was treated badly last year by them. I had ordered something on their website and had it shipped to their store near my home for pickup. I received confirmation from UPS that the item had arrived in the store, but when I went to pick it up, the young “genius” in the store told me that he couldn’t find it in the back room. He told me to come back when his supervisor was there. So I came back and met the young “genius” store manager and showed him my receipts and UPS confirmation. He still couldn’t find it. He looked to be in his early 20’s and had very poor customer service. My credit card was already billed. I was given the customer service number to call because they didn’t want to deal with me. I called and left many messages, but no call back. It reminded me of when I had to call any government department and didn’t get call back. I kept going back to the store and eventually they gave me the same item that was already in the store since my package was never found. I immediately returned it to get my money back and vowed to never set foot into another CC store ever again and never to look at another CC sales ad.
    This kind of bad customer service is obviously accepted by CC management since they probably don’t understand the importance of good customer service.

  • Hey Tom Cleaver and the like….so what is your solution? Or do you just plan on doing what most demo-craps do, piss and moan about situations, give it to the government to solve then piss and moan some more because that didn’t work out so well either. Quit just complaining about the problem and give a SOLUTION. And stop blaming the ENTIRE worlds problems on Bush for crying out loud!! I am not saying that I support him at all, in fact I don’t but puh-lease, he’s not responsible for every bad, unfortunate and wrong thing that happens in your little sphere of influence.

    What few of you seem to know about the move by Circuit City is that this move was done because of the transition from a commission based model to a non-commission based model. What happened is that the employees that stayed around after that transition were given the average amount of money they made the previous 3 months. For many of these employees this meant between $14 and $17 per hour in a market that pays around $10 for that individual. Do the numbers and all it would have done is for CC into bankruptcy faster.

    The problem is, they did it REALLY wrong. Their PR people and other head honchos must have taken a serious mental vacation when the plan on how to do this was conceived. For that they will suffer but if they can come out of it – probably by changing C-level management – they will be where they need to in years to come. If not, then as slip no more says – they can be examples of how NOT to do business in college textbooks.

  • I had invested $1 million dollars in Circuit City stock, so I understand the pain. Overnight, I lost $440,000, it was painful. But not as painful as being sentenced to 3 years in prison for tax evasion. Little did I know that what I did so many years ago was viewed as unlawful under the watchful eyes of our government. But don’t weep for me Argentina… weep for those who would mess with me in prison. It don’t matter if they send me to white collar prison that includes weekly congugal visits, or the pound me the “ass” prison. I can take care of myself, for I hold a 5th degree black belt in Karate.

    Wess

  • A new product will be announced tomorrow. It’s called iPain. This may be the silver bullet that saves the store where service is state of the art. iPain is for those who went long on Circuit City shares (and in bulk). If you did that then you understand iPain. Please consult your doctor before taking iPain if you are ready using iPhone.

  • Please vote for me in the next set of primaries. I am the only hope for McCain at this time. The longer we Democrats waste time bikering amongst ourselves over the next presidential campaign, the better McCain’s chances are in November. Like William Wallace said to the 5th Bruce of Ireland, “Unite us. Unite us now! We will follow!” As Obi-Wan said to little Ani, “use the force, use the force, use it now!”, I too must tell everyone here to unite.

    We must ban together and buy Circuit City goods (stuff). Together we can make a difference, and save some jobs at the same time. Come together my fellow Americans, Democrats and Republicans alike, and take control of the land where we once said, “where service is state of the art.” As that is the first mandate of the U.S. Constitution, we must burn this into our hearts, teach our children, preach it to our neighbors, and not just talk the talk but do the walk.

  • Hey Jon Johannsen,

    Please don’t use the word “Demo Craps.” That is offensive. But I like it, as I too am a Retardo Can… ur I mean Republican. Look bottom line, we must unite. In the words of William Wallace (google it if you have to), and in the words of the famous Jon Johannsen, “… we must unite, unite us now” (34 Keeting).

    Ronald

  • What everyone does not seem to understand about Circuit City is that this is a basic cost restructuring teactic. What they did was move funding from SLK to their primary accounting office, which resulted in a minor books based deficit loss. To offset this, they basically implemented a textbook OPCODE procedure, which essentially offset the deficit in the short term. In the long term, the money that was moved from SLK will simply flow back to the company. As a results, they will be able to avoid bankruptcy, increase their bottom line, and come out ahead. In the end you will find that their sales has increased, their knowledge base and intellectual property is in tact, therefore resulting in the preservation of service is state of the art.

  • Shirley Fox, what are you on?!? You are not making any sense what so ever. Please clarify what you are trying to say… What is SLK and OPCODE?

  • Steve Wozniak,

    Stop with the silly posts. You are a has been. A wannabe of the yesteryears. We all know you invented this cool idea where you can encode color using integers… RGB… we heard your story a million times and etc. Move on. Your engineering skills are simply no good in todays truly high tech world. Apple II just does not cut the cheese anymore.

    Oh, and lets not mention Wheels of Zeus, which yes, you did run that company into the ground and took off with your investors money.

  • Mr. Reagan. My purpose was not to offend so for that I apologize. It gets quite old in this country to conveniently point the finger at the other guy. “Well I’m a Democrat and it’s obviously the Republicans fault.” or “I’m a Republican and it’s obviously the Democrats fault.”

    Is this how this country became great? Absolutely not. Our founding fathers repeatedly warned us against party systems in government. It didn’t take the nation long to go against that advice and we’ve been paying for it ever since.

    Circuit City falls under the same rules as do all companies in a Free Enterprise system. If you have a viable product and/or service at a competitive price, you can succeed. If you don’t and don’t make proper adjustments, you will fail. Plain and simple. And as for that….let’s do our part to quit taking the easy road. Forget “party differences” and start thinking about American Ideals for crying out loud. It does nothing to strengthen us or move us forward.

    BTW RR….great quotes up there. 🙂

  • I worked at Circuit City when it decide to do away with its inventory of “White Goods”. That being washers, dryers, and other household appliances. I said, “Oh, no. This cannot be good.” We had captured the other end of the market: new home buyers, people rennovating, or just replacing old and worn out appliances. We were actually number two in the nation. I just shook my head in disgust and thought how stupid that move was to implement. Then they shrunk the music deptmartment in order to expand a a very low margin/profit software selection. Being the “Merchandising Manager” it made me sick to think that they would minimize the VERY popular music dept to expand a product that offered very little in the way of profit. The music deptmartment was popular for several reasons. 1, it offered CDs at an awesome price. While our competitors at the mall were selling CDs for 17.99 and up we were selling them for usually 11.99. And some classical selection in the “dump bins” were going for 1.99!!! I knew customers by name and greeted them as such. What a clever stradegy: get them in the door when they are young to buy low priced cds and when they mature and buy a house we will have them purchase our “White Goods”. It was an unbeatable combo. But, alas, distant and out-of-touch-overpaid- executives ruined the Circuit City niche. I ended up being fired because I rang up myself for an item. The till came out right on the money. They needed an excuse because I was “extra”. And did I mention out of the 15 Merchandising Mangers I was consistantly in the top three? They have a disturbing pattern of doing what is wrong. Now their stock sits below $5 a share. You reap what you sow.

  • For my birthday my husband bought me a new laptop,(would rather of had a dell) had some problems with it almost from the get go, they said it would be 60 dollars to look at it, I said heck it just came out of the box and not even two weeks old. (he bought it a week before my birthday) I think the customer service sucked! I would not buy another thing there nor recommend them to anyone. Not a loss in my eyes. Only feel for those that will be loosing their jobs.

    Linda in Ohio

  • I too worked there and when I come back to shop they would rather play video games and talk on their cell phones while at work.What kind of douche bags are they hiring these days?Usually its kids that don’t know the a#@ from a hole in the ground and since they done away with the commision,good luck on trying to get waited on!!!I hope these dirt bags all lose their jobs and see what their greed has done to all of their loyal associates…

  • The prices on everything are way too expensive!

    Usually, one only has to drive down the road to find another retail outlet that has a better price.
    Circuit City should hire a traveling analyst to survey competition and adjust their prices to be more reasonable.

    I noticed a floor item that was for sale (old beat-up printer) that was sitting on the shelf for around 6 months.
    When i stated the price is a little high the salesman looked at me like i was a vagrant or gypsy!
    I only asked for a fair price and was viewed as a piece of trash, i am not trash or a vagrant, i am a human being.
    Maybe the Army Jacket made me look like a bum but i place a lot of honor on all the military troops, i was treated like a sub-human.
    God bless our troops they have always protected the USA.

    I may never go to Circuit City again after the latter degrading experience.

    EJ

  • Funny how people with BDS (Bush derangement syndrome) will find any excuse to display their ignorance — see petorado and steve’s posts from May 5th — thanks for an insightful (NOT!) comment on a retail issue. I bet Kerry would have made a much better CEO of CC than President Bush!

  • I am surprised that the company has dismissed quality salespeople, as I never found they had any to begin with. I am not alone in my opinion; this issue has been discussed here in OKC on more than one occasion. The only reason I would ever venture into CC would be to pick up an item I had already set my mind on and knew they had it in stock. Transactions of this type require very little associate assistance, which works at CC, because very little is indeed what you will get.

  • I was in a Circuit City about two weeks ago and noticed how run-down the place looked. If I didn’t know any better, it was starting to look like Kmart.

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