Is Circuit City in danger?

According to a recent report from Ina Fried, Circuit City is having quite a bit of trouble turning a profit and making something out of its business.

Fried reports that the big box retailer will post another loss for its fourth quarter (its busiest) after a staggering $208 million loss over the past quarter. Even worse, the company's stock price is floundering at just $4.75 and once it posts these losses, look for that to tank even further.

Of course, the story doesn't quite end there. Circuit City's major competitor -- Best Buy -- is enjoying a $52.48 stock price and a $228 million profit last quarter alone. Amazingly, Best Buy posted a $1.377 billion profit over the 2007 fiscal year, while Circuit City is poised to lose about $200 million during its own year.

And while Circuit City is still a major retailer with about $12 billion in revenue, it can't sustain these kind of losses if it wants to even have a fighting chance to stand up to the Best Buy juggernaut. After all, take a look at CompUSA and try to tell me Best Buy isn't capable of outright destruction of any and all opponents.

It may happen sometime down the road, but trust me, if Circuit City doesn't change its ways, look for it to be just another victim of Best Buy.

If you've spent any time in both Circuit City and Best Buy, the differences are staggering. First off, the former's store is much smaller than the latter's and overall, Circuit City's experience doesn't quite compare to Best Buy's.

More than anything, the issues Circuit City seems to be experiencing have nothing to do with Best Buy and everything to do with an entirely different corporate culture. Instead of offering a huge selection of products at a reasonably affordable price (for a brick and mortar retailer), the stores are nominally better than CompUSA and it fails to create any sort of benefit over Best Buy and online stores. Simply put, why shop at Circuit City if you can go to the Best Buy down the street?

Of course, the company's CEO Philip J. Schoonover agrees: "We believe that these issues are primarily self-induced and are within our control to improve," he said.

So what can Schoonover and his cronies do to save Circuit City? Unfortunately, the answer isn't quite so self-evident. Generally speaking, he probably only has two options: change the entire operation of the store so it creates a more unique experience than Best Buy (one-on-one care of customers, special deals and more profitable products) or he can take most of the business online.

Sound a bit radical? Well, why shouldn't the company be thinking radically at this point? With a competitor kicking it in the pants at every chance it gets, why shouldn't the company close all losing stores and take all of that stock online? Think of it this way: it has the physical infrastructure in place and its online store is actually growing. By reducing overhead, the company should be able to reduce prices to more competitive levels and become a hub for electronics lovers on the Internet.

Even better, this would also help it differentiate itself from Best Buy, which currently relies more on brick-and-mortar than its online space and with profitable brick-and-mortars still up in cities all over the country and a profitable online store running on all cylinders, Circuit City could turn things around quite quickly.

Simply put, Circuit City cannot become content to stay as the second-place electronics retailer and let Best Buy run circles around it. Instead, it needs to find ways to jumpstart its business and take Best Buy for a ride for once. If it doesn't, look for it to go the way of CompUSA.

[JakeCamp12]

Why anyone would go to Best Buy is beyond me, they have terrible customer service, and they constantly are trying to hit you with useless warrantys that only pad their bottom line. Their stores are brighter, but the people at Circuit City generally know the products they sell and can give you good advice in how to install it. Best Buy employees run and hide if they see you have a question...I always go to Circuit City if I am looking to buy something immediately, but if I can wait I buy it from NewEgg as they are hard to beat on price.

[akirashimablue]

I don't think that it is fair to criticize an entire corporation for instances of bad service. Like many service driven retail establishments, the service is only as good as the employees they can attract. If you live in an overly youth populated area where the employable adults are not capable of making a living off the wages Best Buy or any company provides you have to populate your staff with less than the best. Hiring practices can reflect the type of staff you get. Take McDonalds...if you want a job, there is a place that is always hiring because they have such a terrible turn-over not because the pay is always terrible, but you could get paid the same to do less. I will say that those who have ever had a problem with their merchandise that purchase with a Best Buy warranty were probably happy they did because manufacturer's warranties protect you from every thing that but the thing that is acutally wrong with it. Best Buy will replace it if they cannot repair it, and when they replace it it is at the original cost of the item. You don't lose money and you may remain up to date with your purchase for the little snafu. Here where I am from even a flagship CC really never looks as fresh an inviting as BB. You go to Best Buy because you know that they will have the greatest and latest. It is like the next stop for a product after CES. BB was able to make an Apple Pilot Program successful where CC could not. Above all if you don't like the warranties just politely say no because they are just doing your job. The kid at McDonald's is not asking if you would like to supersize it because they don't think you are getting enough potatoes and grease in your diet. The kid at McDonald's is doing it because it is their job. It is expected, and if you have never trained a kid then you should know upselling a product is not easy and they here no all the time. Rejection is not easy. Maybe an extended warranty would be useful or maybe you have never needed one. They are just making sure they made you aware. I only ever want to see the newest and greatest stuff. Not really interested in last year's TV... 120Hz 1080p LCD TVs.

[peter99k]

I've had only the opposite experience and have shopped at both since they opened. CC consistently attempts to bully us into warranties and it's infuriating. I'm sure service levels vary geographically, but after the last few screwups at CC I'd never bother, even though it's 3 blocks away (vs 4 miles for BB). The last straw: with my credit card in hand ready to make a $400 purchase, I was told I had to wait until the (only) salesperson in the section was finished with the previous customer, who had been talking to the saleperson since I'd arrived (at least 15 min). The manager type I'd complained to saw this happening and also saw that salespeople in nearby areas were mostly idle, but claimed he couldn't help. Only after protesting to another manager type was I waited on. As I left, I saw the previous customer STILL at the register jabbering away. And yes, I'm a fool for waiting.

[john55440]

Circuit City fired all of their experienced store employees, and replaced them all with inexperienced, lower paid, employees. I haven't bought anything from them since.

[mneiss]

I agree with John...I purchased a lot from CC in the past, mainly because I loved their shopping online and picking it up local. But they did irreparable harm to their brand with their treatment of their employees. I vowed not to add one dime to the exec's pay or shareholder returns until they dump this group of clowns that understand nothing about shopping experience and brand.

[Barto246]

I am an employee at Circuit City. while i know for a fact that we do have a much smaller selection than best buy, i pride myself on my customer service. i am only 17 years old, and i have customers all the time telling me that i helped them out so much, alot more than those "smurfs" over at best buy. i 100% honestly dont care if i sell something to somebody, i try to make sure that the person goes home with enough information and the tools to get what they need done. of course i reccomend our firedog tech support and all of the extras, but if a customer really isnt into it i stop asking. i like to make sure that a customer goes home knowing everything he needs to know whether he's spending 300 bucks or 2000.

around this time of year there are tons of seasonal employees working, they are just trying to get a permanent spot. but when i went through training that was the main thing they stressed. Our customer service policy is called "north star" and it is all about four main points. to "engage the customer, simplify things for the customer, teach the customer, and respect the customer."

so yeah, i could write a book, but i'll leave it at that for now :)

[jake2468]

I have heard a lot of negitive comments about Circuit City both online and in person concerning the way they fired a ton of employees last spring because they simply "made to much money" and then offered to hire them back at a reduced salary.

They lost a lot of good long time employees and a lot of customers because of this.

This has hurt them greatly in the eye of the consumer and all the people I have heard from no longer will shop there simply because of the way the employees were treated.

Their lost is Best Buys gain. I know I will never buy anything from them again. Ever.

[rsg2003]

I worked for Circuit City from 1998 to 2002 and left just before a dramatic change in the company culture. It was apparent that the company was in trouble from the Best Buy down the street when the "no interest" promotions they ran very often disappeared. When I left, they did away with commissioned employees altogether shortly thereafter. High-earning sales associates were given the option to stay a a considerably-lower hourly rate or to leave the company. The same was done for high-earning management. Soon the one-to-one service it prided itself on as a company disappeared. Now every time I walk into the store, I can know that 1) I know more about the products than the college kid behind the counter who's just punching a clock and 2) I'll only get a good deal if I bring the competitor's ad in. It's too late for Circuit. The old brass won't change it's ways and is just trying to follow Best Buy's footsteps. The stores were "redone" to compete with Best Buy but they only look like poorly-retrofitted relics that cannot house enough merchandise to appease the American palate. The stores were designed with SERVICE in mind. They got rid of that service when they got rid of commissioned associates who would at least PRETEND to be nice just to get the sale. Now you have some kid who knows nothing and just wants to get home so he can be with his girlfriend/boyfriend. They should close a few stores, revamp their online site, and maybe use their brick-n-mortar spots to sell a few key/high-end items in a few select markets. Here in the NYC area, we have one such vendor (6th ave electronics) who's done just that (minus the online presence). Since Best Buy and Wal-Mart seem to have cornered the market on value items, it may be smar for Circuit to focus on the "niche" crowd.

[vitamincm]

I hate BestBuy, but you have to admit, it just "feels" so much better than Circuit City. It's light, open, and neat. Circuit City always just seems dark, messy, and craptacular.
BestBuy is a great place to go test out all of the products that I'm going to evenetually buy at NewEgg or Amazon for a whole lot less.

[CreedFeed]

I agree with the first poster. How can anyone shop at Best Buy is beyond me. On top of the poor customer service, they also scam people out of advertised discounts. See: http://consumerist.com/337161/best-buy-still-embracing-deceptive-in+store-kiosks

[kennyyak]

I understand why Circuit City is failing. I recently went to purchase a Cannon 40D camera from them a couple weeks ago. After waiting in line forever at one of the few checkouts in the store, I purchased the camera and waited by the front pickup where the camera was supposed to be coming down from the back room. After waiting about 25 minutes the woman finally came out front and said they couldn't locate the camera. They naturally said we will refund your purchase and without any other comments from me they just handed over a $20 gift card for waiting. So I went and purchased my $1,600 camera from Best Buy, was checked out within 5 minutes, and made $20 at circuit city for doing nothing.

[spfldnet]

I once tried to purchase an extended keyboard from Best Buy. There were only two available of the kind I wanted at the time, one was the display model, covered with smudges from the dirty hands of browsing shoppers, the other that was in the box, even worse that the first. Instead of cleaning the display model, they simply replaced it with the one in the box. Good thing I checked. So should you.

[jon3421]

Hello : I also found CC service to be the worst in las times. But I found this site very good to buy electronics : www.electronicspurchase.com

[reddog2020]

i don't go to circuit city because they do rebates, rebates suck! best buy ditched 99% of rebates.

[markypolo]

It's important to remember that Best Buy had very little to do with CompUSA's demise. If ever there was a clinical example of a fatal, self-inflicted wound, CompUSA is it. When your business model is flawed and your strategy is to "be more like Best Buy", you are doomed. Sad story, but a great lesson for survivors on the brink.

[richmaccabe]

With the demise of the Good guys, Tweeter, and CompUSA, the retail electronics space (brick and mortar) is getting increasinly more one-dimensional. Who's left right now? where can you buy stuff? BestBuy, Frys, and Circuit City.. also target, costco, sears, walmart, staples, and office depot...notice anything missing? all (with exception of magnolia in best buy) are low-end. magnolia is almost the only game in town when it comes to retailing higher-end electronics and speakers... Circuit City should get a clue in a hurry: the low end is taken, offer an option for the higher-end buyer, find your niche, or die...

[whjacobs]

I am not impressed by either. I bought a microdisplay tv at CC about a year ago and made the mistake of buying the Firedog installation package. What a pathetic nightmare! Ended up redoing the entire set-up myself and got my money back. You deserve to go out of business when your installation folks plug the subwoofer into the center channel jack! But I'm not really sure BB is any better. Bought a hi-def Series 3 TiVo there recently. The salespeople said they didn't have any, but I found 8 on a storage shelf above the floor displays. They had to get a ladder to get them down. Still have not received the $200 rebate.

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