Circuit City: A eulogy
So long, Circuit City.
(Credit: CNET Networks)Circuit City, the world's second-largest electronics retailer announced on Friday that it has been forced into liquidation after attempts to sell itself to a third-party failed.
Circuit City's liquidation is sad, but it shouldn't come as a surprise. The company has been facing serious financial issues for the past few years and was delisted from the New York Stock Exchange after filing for bankruptcy and witnessing its stock price plummet to near worthlessness. Moreover, the economic crisis had a severe impact on Circuit City, and fewer creditors were willing to offer the company attractive rates as it tried to purchase goods for sale.
But it wasn't always like this for Circuit City. The company once enjoyed great success, and it can trace its roots all the way back to 1949.
In 1949, Samuel Wurtzel, a resident of Richmond, Va., opened Ward's--his hometown's first television store. Ward's quickly gained popularity in Virginia, and Wurtzel started branching out and acquiring similar stores all over the United States.
During the 1970s and 1980s, Wurtzel experimented with different store ideas to see which consumers appreciated most. After a few false starts, he found that consumers appreciated "big box" retailers and the name "Circuit City." Because of that, he renamed his empire "Circuit City Superstores" and went national.
In 1984, Ward's officially became known as Circuit City and went public on the New York Stock Exchange. At first, the stock was relatively small, and few people knew if the company would be a success. But when Circuit City acquired Lafayette Radio in 1991, the company finally made its way to the heart of the business world--New York.
For the next 10 years, Circuit City would enjoy unparalleled success in the brick-and-mortar retail business, and with a soaring stock price during the tech boom, it seemed that the world's largest electronics retailer would enjoy success for years to come.
But once the dot-com bubble burst and shareholders started to lose confidence in the vitality of the tech sector, Circuit City found itself trying to fend off Web giants such as Amazon.com, as well as a direct competitor, Best Buy.
Failing to do so, Circuit City was forced to lay off employees in 2003 in an attempt to reduce expenses, and change its strategy to compete with Best Buy and online giants that were undercutting its price and providing a more customer-friendly experience.
In 2005, Circuit City executives were losing the respect of the shareholders, and a hedge fund named Highfields Capital charged the executives with not doing enough to maximize shareholder value. The fund offered to acquire the retailer for $17 per share, but the offer was rejected by the board later that year.
Although Circuit City was sitting on about $1 billion in cash when it rebuffed the offer, the end was near. Best Buy was enjoying unprecedented success, and Circuit City was knocked off the top spot in electronics retail.
In 2007, just as it seemed that things couldn't get worse, Circuit City witnessed unprecedented senior management turnover, which indirectly led to the company's decision in March of that year to lay off 3,400 employees to reduce expenses and re-examine its strategy.
It didn't work. Circuit City sales were declining at an even more rapid rate, and creditors started losing faith in the retailer. The end was near.
In April 2008, Blockbuster, another ailing company, announced a bid to acquire Circuit City for $1 billion. Upon engaging in due diligence and examining the logic behind such an acquisition, Blockbuster rescinded its offer in July 2008, claiming that market conditions wouldn't warrant such a maneuver.
Just two months ago, in November 2008, Circuit City announced that it was forced to file bankruptcy, and its stock price plummeted to a mere 2 cents per share. Company executives claimed that if the company could get through the holiday shopping season with strong sales, they might be able to salvage the business.
That didn't happen.
And now, as we sit here on the eve of Circuit City's 60th birthday, the company is being liquidated. I can't say that it surprised me--Circuit City has, for years, endured through tough times and poor management, and I'm actually somewhat amazed that it lasted this long.
Was it poor management that killed the company? That always plays a part. But more than anything, I think that Circuit City has met its demise today because, in my experience, it never offered the customer service that Best Buy did, nor the cheap prices one could find on Amazon. Suffice it to say that Circuit City was the also-ran in an industry where holding that moniker usually leads to financial ruin.
Am I sad to see Circuit City go? No. In my mind, it had become a derivative retailer chain that provided little value to the consumer. But I am sad today to see that 30,000 of its employees, many of whom entrusted their job security to management, will be without jobs. It wasn't their faul,t and yet they're being forced to bear the brunt of past mistakes. We can hope that they land on their feet.
As for Circuit City, there's not much left to say. It enjoyed a long life, and for a while, it led the way in electronics retail. But as its age started to show, and management failed to adapt, new and more nimble companies made their way to the front of the pack. Sadly, all that will be remembered of Circuit City are the mistakes its executives made that led to its ruin.
Goodbye, Circuit City.
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Don Reisinger is a technology columnist who has written about everything from HDTVs to computers to Flowbee Haircut Systems. Don is a member of the CNET Blog Network, and posts at The Digital Home. He is not an employee of CNET. Disclosure.
man, how long have you been waiting to use THAT excuse?
There are some things I disagree with you on (eg. I think eliminating commission was part of CC's downfall because CC simply became a CC simply became a BB wannabe with worse prices and less selection), but I do agree that DIVX was part of the eventual downfall of CC. While there is no question that CC could have turned their company around well in 04-05 by the time anybody started talking about turning the company around they had compounded so many mistakes as to make turning back from bankruptcy almost impossible. The Walmartization of retail and just the general trend of lower margins even at MSRP has made it critical for anybody doing retail to not sell stuff people don't want.
For example I think in the post P2P/iTunes/Netflix era I think that CC dedicate too much floor space to CD/DVDs, which even an somebody who barely follows the industry knew was a dying market. While customers don't want pushy they also don't want employees hiding from customers either. Maybe CC needed a commission system that reflected new priorities, but paying flat salaries almost never results in employees putting much effort into their work unless you pay them so much that they would have trouble finding a similar paying job.
I remember walking into a CC and asking about Penryn based processors almost 6 months after they came out and nobody knew what I was talking about. Standalone BD-ROM drives were nowhere to be seen. Unless you can afford to have the best instore prices you better offer really high quality service because cloning another store's model only works well if you either one up them in some respect (CC certainly wasn't one upping BB in price or service) or if you don't overlap much geographically (most CC stores were <5 miles from BB stores). Either one has to be a niche retailer (eg. Microcenter, Pacific Sales, etc.) that focuses on a couple of things and attempts to do it really well or you have to go the route of Fry's and attempt to one up BB in selection to the point that you are so all encompassing that unless it is a common item you don't bother to go to BB because you know Fry's has a better chance of carrying it.
* No, our Canadian operations will continue. They are not affected by the liquidation of Circuit City's U.S. operations. The Canadian operations employ approximately 3,000 associates.
http://www.circuitcity.com/closed.html
If you are going to try to be snarky, at least be correct. It is "a eulogy".
Let's go back to English 101:
http://owl.english.purdue.edu/handouts/esl/esliart.html
"An" goes before all words that begin with vowels:
* an apricot
* an egg
* an Indian
* an orbit
* an uprising
with two exceptions: When u makes the same sound as the y in you, or o makes the same sound as w in won, then a is used.
* a union
* a united front
* a unicorn
* a used napkin
* a U.S. ship
* a one-legged man
Eulogy is pronounced [yoo-luh-jee] so the "a" rule is correct.
Did Don correct the article title after the comment was posted?
Journalists have deplorable spelling and grammar these days. Depending too much on spell checker I'd say.
Thus, "A eulogy," or the counter-example, "An honor."
I hope other companies not just Best Buy take note
As someone said in another forum CC had neither good prices nor good customer service so it is no shock they bit the dust. I will agree that BB didn't have terribly great service either, but at least they had better ad items than CC. CC for the most part didn't know how to advertise anything without a rebate(ie. actual price cuts). I think a lot of people tolerated BB's poor service because while it wasn't much better than CC at least they had decent prices from time to time. You can't ignore other competition either.
I worked for Fry's for a while and I know somebody walked in asked for a someway to hook up two computers to one printer and I bent my knees and picked up a Siig 2 to 1 USB switch and showed him that it included all the cables and how the buttons on the front worked. He remarked that CC claimed such a device didn't exist! BB wasn't the only store stealing CC's customers one by one.
Best Buy on the other hand is no doubt jubilant, they now have _no_ direct competition. They be able to raise their prices while continuing to suck at least as much as they do now.
II knew the Manager and several sales people on a first name basis and they were helpful to the max. My neighbor worked for CCity. He bought a house locally. Bought his cars locally. I wanted to buy from them as they helped to support the local economy. Internet purchase dollars go who knows where. Maybe why we are were we are economically.
I don't understand the comments that Circuit City was overpriced. If what they were selling was less at a competing brick and mortar store, it was called a price match. Same as with Sears, Best Buy, Wal-mart, and others do.
No way could a brick and mortar store compete with an internet only store. (There are things that employees all expect to receive like a pay check, vacation pay, sick pay, and health benefits.) But on the flip side you could walk in get what you wanted and if it was a problem or not what you expected you could take it back too. No having to contact, get an RA#, pay for shipping (sometimes both ways), etc.
I will miss Circuit City, not because they did everything right. But because they were a face and a place in today's market. Not an invisible sit on your butt and push a key to order from who knows who service.
As long as BestBuy doesn't do something stupid like removing higher-paid hourly employees (I know of a few in MN that have been), they should be set. One thing that I think that has added to Circuit City's downfall is BestBuy starting to carry higher-end electronics in their Magnolia Home Theater sections of their stores. In Minnesota, if you wanted consumer electronics, but higher end, you went to Circuit City or Ultimate Electronics since the stores carried the nicer things.
Wal-mart sells lower-end (lower-quality) than other retailers, BestBuy was always set to sell the largest ammount of the middle of the road electronics, which most people wanted. Circuit City sold to higher-end consumers.
It's nothing different in best buy. You have a question and you have to wander around the store to find someone to answer your questions. I guess if Best Buy and such don't learn the importance of customer service from this sad end of circuit city, they never will.
I hope we see a new nationwide electronic retail chain grow up as we come out of this recession.
- by 1eye1 January 16, 2009 2:53 PM PST
- If only they could have sold a few more HDMI Cables....They would have been okay.
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- by BigGuns149 January 17, 2009 4:51 PM PST
- Somehow I think it was more than not attaching enough $100 HDMI cables to their TV sales. When they were hundreds of millions of dollars in the red in one quarter alone you are talking about *millions* of extra HDMI cable sales. Furthermore, even the expensive brand names like Belkin aren't quite as lucrative to resellers as they used to be because I see quite a few resellers even brick and mortar stores are reselling Belkin Pure AV HDMI cables for <$50. Heck, I have seen they for as little as $20. It is pretty hard to sell them for $100 when I can buy the exact same cable for $30-40 down the street. CC was simply buying too much stuff that sat around too long. Except for accessories you can't afford to have stuff sticking around much longer than a month because the price may drop to less than what you paid for it in which case you are either not drawing enough customers or you are buying too much of that item.
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- by TotallyMadeUpName January 19, 2009 8:23 AM PST
- All of the big-box stores I know of sell their cables for extremely jacked up prices. I buy ALL of my cables online, where they are typically 1/4 or less of the price at local retailers.
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Showing 1 of 3 pages (73 Comments)I'm glad CC is gone. The company got what it deserved. It reminds me of the demise of Comp-USA, another company that really needed to go out of business.