Wednesday, December 19th, 2007
Circuit City Bankruptcy?


I remember reading something in the spring about Circuit City firing anyone making 51 cents or more above an arbitrary maximum average. Because we all know how generic sales people are, I’d much rather have the “I don’t know what that is” high school kid helping me than the guy who’s been doing it for 10 years.
The good news is that the verdict is in and it’s a hard indictment of corporate idiocy. Circuit City’s stock price is down from almost $20 in March to just above $5 now. Of course this should mean a multi-million dollar bonus for the CEO shouldn’t it?
Now I believe it’s the responsibility of the free market to continue tearing Circuit City a new one, and if we’re all lucky they’ll be under new management and/or bankrupt by next Christmas.

  1. Anonymous
    4:35 am on January 21st, 2008 1

    Historically, CC was the leader back in the mid 90’s, then the CEO McCullough made some terrible decisions, and they went down to a break even sort of deal for years. In 2003, they fired all their prof. sales people making over about $35k/yr (if full time)(many made e.g. $55K and were real pros. They continued to wander in the valley of the shadow of death, and it took the board 4 years to get rid of McCullough, paying him off in many many millions, rather then suing him for his disasters. The new CEO, in 3/2007 fired all the sales people making over about $25k/yr(their pay had ranged from about 25k to 35k tops) (full time equiv), and replaced them with youngsters making perhaps $20-$25k/yr full time equiv. Next they fired supervisors who made about $30k/yr, and replaced them with people making about $20-$25k/yr, often 19 yr old kids.

    And the die was cast, and their trailing 12 mos earnings show a $300 million $$ loss.

    Now, as a sometimes customer I can see the place has become a pressure cooker on the sales people, as if it is their fault for CC’s disaster. One telling item is that turnover in the last 6 mos has been in the 80% range at some stores. The only thing at all they have going for them is their firedog services group shows signs of life, but you can’t imagine how many p. off customers they have who have. It’s not unusual to end up waiting a mos for PCs to be fixed, pc’s which get sent out to a third party, and CC doesn’t even send them out until they receive a free shipping box from the 3rd party, another weeks delay.

    To add insult to injury, people who buy extended warranties on pcs are finding out that the promise of free diagnostics has become a charge of $60, potentially rebatable, but you can imagine the length CC will go to in order to prevent giving back the money. No matter what, “software is almost always involved” and how can the customer prove otherwise.

    So they are in many ways pissing off their customer base re service and warranties, things that will be remembered in the future. Does BB do the same, I could rant on my one bad experience with them also. Screaming at the cust. svc manager worked wonders, though.

    Economically, CC serves only one useful function for the customers. They are seen as a lower price option vs Best Buy, and their marketing miscues have enhanced that image. Of course, besides the Internet & mfr to customer direct sales, they also compete with Staples, office depot, etc. And the one thing they kind of had going for them – better customer service, is going downhill due to inexperienced sales force and the turnover. Also,One of their great profit margin operations, the roadshop for car stereos, GPS, etc is often not even staffed on the sales floor. I had to walk out after waiting an hour re buying a GPS.

    So the rock and the hard place is that to break even they need to save 300 mil/yr. Assuming the average store needs about 12 equivalent full time people x 2 equivalent 8 hr shifts, and with .
    average direct wage costs of $10/hr, that is about $300mil/year.

    So, they can only break even by firing all but the store mgrs, and keeping their business at the same level. Is all that is left for them is to become a walmart of electronics, but walmart got their first. And by hiring perhaps 4 people to sell electronics at ea Walmart store, they can pick up lots of the ‘easy to seel, but customer needs some reassurance type of business.

    Real bottom line – it looks like they are a rusty, broken down ship with serious holes in the bottom. Yes, the vulture capitalists may find a way to make some money off the deal. I’ll also ask – what about all the people who bought extended warranties from CC – will they be honored? Will people start to recognize this and stop buying them, another big hole in the bottom of the ship.

    Then there is my friend who works at best buy. He does store planning, and BB has plans to put in more stores, specifically targeted to capture the traffic from suburban areas that currently goes into more mature areas to get to a CC. Gas is $3/gallon, remember? And BB is doing what I have seen in variant form by Home Depot – planning to open a second store in some locations near CC to further dominate the market. Also, some of these second stores will simply be Geek squad service stores for fixing etc PC,s TV,s etc, just to get more market share in that business.

    While I don’t have a view on how BB is going to move upscale e.g. with home theatres, etc, their ‘magnolia’ operation seems to be targeting the upscale market. This of course requires a professional sales team, not college kids, and how many good pro’s would bet their career on CC?

    I made a lot of money on CC in the past, but realized it wasn’t backed up by a sustainable business model. I’ve read that CC isn’t #2 in their market, but is actually #3, and I question if there is room for three in the retail market, especially as more and more people get comfortable buying over the internet. I’ve read somewhere that they do about $2B / yr on their website, but if the stores fail, that biz will decline also.

    The whole biz reminds me some years ago of a cousin who worked real hard with 1-2 employees building fiberglass boats. 60-70 hours/week. We went through his numbers, and showed him he could make more money renting out the building he owned, then keeping the biz. No kidding, the guy was great with boats, but lousy with numbers. So he retired, and his hardest job was cashing the checks that came in monthly for the building he owned. Is there an analogy here??

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  3. Myself
    2:41 pm on May 2nd, 2008 3

    I worked for CC back in the early 90’s at a white goods DC, when I went into stores then, it wasn’t a bad place, although I was only shopping there for the discount of job security.
    There is a new (2 year old) store near me now and I cannot believe how the model has changed. What a waste of space. There is nothing in that store that I couldn’t get at Target or Wal-mart. Last time I was there I needed a more professional sound card. The first nOOb who blindly asked if he could help me was clueless as to where he would find sound cards, I was passed off to someone else who couldn’t tell me the difference between thing one and thing two.
    All I’m interested in now is just WHAT the stores will become. Too big for a McDonald’s and too small for a CarMax.

  4. KenWillet
    6:32 pm on May 2nd, 2008 4

    I LOVE to hear this. We were given a gift card to Circuit City in 1999 or 2000 and it had an expiration date on it (Who knew? Never heard of this before!) We missed it by a WEEK and they refused to honor it, EVEN THOUGH it was a card bought and paid for! We never stepped foot in the place again, and we’re electronics fanatics! I hope it really does go under! With that kind of decision-making, it deserves to!

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  6. Jo Blow
    8:44 pm on May 7th, 2008 6

    As a current employee (one of those young just out of high school kids mentioned above) I can tell you I am dying to find a way to gain the bare minimum experience to get into a best buy. If I, a kid not even old enough to go buy a beer, can be in the top 3 in my district as a part time sales person… Its clear that this company is going nowhere.

    The amount of shady things that go down from the excessive stealing occurring from the youngsters they hire (over 100k just last year even though they knew who was doing it but had to wait until the process went through before they went after them), to the supervisors giving their associates coupons so the they can lower the price of televisions so that they can ‘give away’ firedog services so that those numbers look promising, it is hard to imagine that we can pull our selves out of this mess any time soon.

  7. Rupert Murdoch
    8:11 am on May 9th, 2008 7

    Now that Circuit City is run by a bunch of kids, to boost sales they should get a myspace page and then pimp it out?

  8. Knowitallhtiguy
    5:04 pm on May 9th, 2008 8

    Im an indie contractor doing firedog hti stuff. If you (joe blow) think that the grass is greener @ best buy you truely are a greenhorn. I dont have much in particularly good to say about cc, but the lack of knowledge that best buy csr’s have, coupled with the lack of drive and good service they have makes cc guys look like a million bucks. stick it out joe cause do u really wanna be called a geek. even worse, a retarded geek.(geek squad)

  9. badassseller
    11:37 pm on May 9th, 2008 9

    i actually have worked for both, the big blue box and circuit city. I am actually still with circuit city and have been there for about 2 yrs. One thing i will say is it is no better at best buy. Its the same old stuff. I used to destroy best buys district and i do the same at circuit city as far as sales go. One thing i did read was about the warranties and how circuit city will not honor them. that is a false statement. Our city advantage plans are actually through GE. Now i dont know about you but i dont think GE is going out of business soon. Another thing is everybody is looking to open up new stores. Circuit City opened up 65 last year and even more are being built this year. So yeah you are right Circuit is growing through some tough times but the best buy i used to work at is making less amount of money then the circuit i work at is! Not to mention the best buy is a new store in a much better location.

  10. Mr. D
    5:47 am on May 10th, 2008 10

    I work at Circuit City…You don’t get put into an area unless you know your shit…sorry to be blunt- but I get sick and tired of you people…coming into the store with no idea what the shit youre looking for…It’s not our job to explain everything to you- and THERE ARE HUGE SIGNS all over the store that direct you to where you need to go. You can point fingers at the employees all day- but its the corporation thats the problem…Too many managers, not enough employees. I was in customer service, now Im on the tech bench. It’s a relief just to get away from pissed off people all day. When people bitch and moan all day and then get pissed off at employees like us who work our asses off for a ungodily $7 dollars an hour! TRADE PLACES and we’ll see what you still think…Retail sucks and anyone who complains about shopping at circuit city shouldn’t keep coming into the store and bitching about it- SHOP ON THE INTERNET PEOPLE. Especially for most of you pricks who never even worked in the store- shut your mouth.

  11. Circuit City Employee 45832342
    5:54 am on May 10th, 2008 11

    Jo blow is an idiot…clearly you suck best buys dick

    as a circuit city employee- I can tell you that all day I hear how much people can’t stand best buy (which happens to be across the street). Our store constantly recieves praise about its customer service and we actually give a damn about our customers so we bust our asses. Stores aren’t all the same- Our store despite its fallen revenue is actually a good store despite the occasional asshole that feels otherwise and causes a scene. We don’t recieve commission on anything we sell and we still bust our asses to help you people. You failed to realize that some people actually do care. I’ve been there for 1 month and have been promoted…not because I’m young and a position opened up…but because I have knowledge, skills, and services that I use everyday to help people and sell inventory. Put yourself in our shoes- your going to end up public enemy number 1. It’s too easy to point fingers these days…especially since everyone has something to complain about. In conclusion…you all have no idea what we go through, nor the strain or amount of work (long hours) we do…all for a measily $7.00 an hour…you wouldn’t last one day- I’ll bet that.

  12. lindsey
    1:51 pm on May 11th, 2008 12

    as a customer service specialist at best buy, I’d just like to say that screaming at employees won’t get you very far. also, why would you or anyone be so rude? we don’t come to your place of employment and yell at you, do we?

  13. LuckyLindy
    10:25 am on May 12th, 2008 13

    Circuit City is the dumbest place I’ve ever worked. I started last year in september, and I got to know everyone in the store within about a month. Then, another month later, people were being fired and were leaving left and right. Within about three months of me being hired, they had let go every person I knew, and had replaced them by a bunch of slacker idiots, with the exception of the managers, who were idiots to begin with. I did a kick butt job there, and was even on the recent news broadcast for the secret shoppers asking about the digital television conversion. I knocked it out of the park and the CEO called our store to congratulate me. A week and a half later and I’ve been forced to resign by the store manager because I made a joke about our ops manager (who doesn’t do her job according to SOP). So yeah, CC is a retarded company. Oh and the district managers would stop by every week to see how we were doing, tell us we weren’t doing a good job (even though we are #1 in the district), and try to show us “better” ways of doing things. Those “better” methods were outrageous and stupid and didn’t make any sense or make anything more efficient, and this is due to the fact that all the higher-ups in the company have never worked in a circuit city in their lives, so they don’t understand how it actually works. My store was store 3227 in Cary, NC. Somebody should go by and egg the place royally.

  14. Richard
    5:57 pm on May 22nd, 2008 14

    Comment by Mr. D ? May 10, 2008 @ 5:47 am

    “you all have no idea what we go through, nor the strain or amount of work (long hours) we do…all for a measily $7.00 an hour…you wouldn’t last one day- I’ll bet that.”

    ————————————————-

    then who the hell told you to stay at a crappy job that pays you $7.00 an hour? if you really had all that to say then maybe you should quit your job Mr. D no one is forcing you to be a work slave. God, some people are just annoying, they talk like they have it hard at a certain job, then quit! you dont have to stay there and get paid so little. Go look for a different job.

    Although its sad to hear that alot of people might lose their jobs, hey maybe its an opportunity to those like Mr. D who keeps on complaining about no commision and getting paid a measly $7.00 an hour to finally leave circuit city and get a better job and stop complaining about their crappy lives. people in the 3rd world countries have it harder than the people here in the US, stop complaining, This goes to all those current and ex CC employees who complain about how someone goes to their store and doesnt know anything. You guys are pathetic.

  15. Tim Majors
    8:08 pm on May 23rd, 2008 15

    I worked at Circuit city from early 99 to Xmas of 02 then went on to Good Guys ( California equivalent of Magnolia pre-Best Buy) for another 2 years and can tell you that it was hell, but no where near what it seems like now. When I started Circuit city had Major Appliances, and then watched as my store paid 3 local Hispanic men 50 dollars each to tear down the department in one day to win some kind of bet between managers. After being moved around to 3 different stores in as many years due to theft and terminations , I heard from a store manager ( not at my location ) that the stores would be letting go of commissioned employees making over $20 an hour and getting rid of commission in itself. While I was working the system and installing car stereos after selling them I learned a lot about the company but more about the product and the proper way to sell. All this is lost on the new breed of Big box robots. I had to fight for every sale with 5 other full time associates, and I will tell anyone that has never worked retail it sucks not knowing if your paycheck is going to be a minimum wage or 2000 for 2 weeks. But knowing that you put a large paycheck together based on knowledge and service is satisfying. We had to get to the store at 4 am day after thanksgiving and got no full lunch breaks ( only 5 minute get some food sitting out in the break room) and had to claim registers in order to get the sales of all those people waiting in like for the free with rebate products. Then we left after the store closed at 10pm and if you were lucky and sold the most you got a choice of leaving first. Basically all this ranting is to show that CC lost a lot by killing commission to follow BB’s model, and that they did a poor job and I hope that they Chapter13 themselves which will allow Wal-Marts to get better products at lower prices and the price wars can ensue.

  16. name
    8:23 pm on June 19th, 2008 16

    Nice…very very nice,

  17. Gunther
    10:42 pm on July 3rd, 2008 17

    Well, you’d know pathetic, Richard.

    You’re a hero, Mr. D!

  18. Erik A
    5:15 am on July 10th, 2008 18

    Just hearing some rumors around town I tried to call the CC stores around Charleston today. All I got was either no answer or “that number has been disconnected”

  19. George
    6:38 pm on August 15th, 2008 19

    I’ve heard this too. I’m not surprised. Best Buy has been beating them for years.

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