Circuit City downgrades employees and guarantees its eventual demise

Circuit City LogoToday’s Wall Street Journal is reporting [paid sub required] that beleaguered retailer Circuit City (NYSE: CC) is firing almost 3500 employees with the intent of replacing them with less skilled workers. As the WSJ explains:
“Circuit City Stores Inc. announced a new wave of cost-cutting efforts as it battles larger, more efficient retailers amid intense competition for sales of flat-screen TVs and other electronics. The Richmond, Va., retailer said it will replace 3,400 mostly store-level employees with lower-paid workers…”
This is a phenomenally stupid move for the company, I must say. Think about it…


When was the last time you went into a so-called “big box” consumer electronics store? I’m talking about Circuit City, but I’m also talking about Best Buy (NYSE: BBY), CompUSA and even some of the newer Wal*Mart (NYSE: WMT) stores too.
What do they all have in common? Customers who are asking questions and are overwhelmed and befuddled by the complexity of modern electronic gadgets, be they DVD players, personal mp3 devices or large-screen plasma or LCD TV sets.
Strategically, Circuit City is really shooting itself in the foot with this change and unless it’s handled ever so carefully, they’ll find themselves competing even more directly with the discount stores (think Sams Club) and online retailers (prime among them being Amazon.com). After all, if you can’t ask questions of their sales staff, you’ll have to do your homework at home, online and by talking with friends and colleagues. And at that point, yes, everything will have dropped down to being just a commodity and there’ll be no point in buying local when they’re all completely clueless anyway.
As I said recently to a reporter for USA Today:
“The most interesting thing about this isn’t the effect on the workers but the fact that Circuit City is basically sealing its fate by getting rid of the smart people. I mean, what would make you choose to go into a retail establishment to buy a large piece of consumer electronics? Someone who can *answer your questions*. Sounds to me like that’s going to be an exceedingly rare commodity in Circuit City down the road, and that’ll mean that they won’t be much better than, say, Sams Club or any of the zillion online CE retailers.”
How do I think you could handle this staff transition? By taking a page from the Apple Store (Nasdaq: AAPL) playbook and having “geniuses”, one or two employees available any time the store is open who are specially trained in the newest technologies, flown to the Consumer Electronics Show each year and perhaps even exposed to unreleased technology, all so they can be “the answer guys” for the store. Offer up someone who does have the answers and you can mitigate a lot of daft employees who are just filling shoes on the floor.
What do you think though, dear reader? Have you ever found useful, well informed and knowledgeable employees at a local Circuit City and do you think replacing them with lower cost / less knowledgeable staff is a good strategic move for the ailing firm?

15 comments on “Circuit City downgrades employees and guarantees its eventual demise

  1. The question in retail isn’t just how much do you pay your employees, but how motivated are they, how knowledgeable AND do they have the tools, skills and information needed to help the business make a profit.
    I worked at IKEA we doesn’t pay well but you can make decisions such as personel planning, floor layout (space management) , promotions etc. in the store which can make a substantial difference.
    Like Sam Walton said and wrote “Think small” and tell your associates everything, all the costs, margins, etc.

  2. The company I work for recently took a $250k hit on a healthcare increase. Without much notice, our healthcare was adjusted, taking a lot of the hit directly out of our pockets. It was disappointing given that we’re one of the fastest growing companies in th U.S. according to Inc.
    I asked my CEO why it was okay to take that money out of our pockets but the additional $1MM in hardware we needed to grow was simply an Operational Expense. Silence.
    The fact is, when you begin to treat your best resources worse than your hardware, you’re not going to be the next ‘Google’. It was an eye-opener for me. Circuit City employees shouldn’t be walking to the door – they should be running to it.

  3. In store retailing vs. on line retailing is only as good as the associate helping. Otherwise, might as well have a store like a museum so you can view th product and then meander over to a web terminal to purchase. No in store interaction needed if the sales associate can’t add value. On line reviews at CC are already more valuable than most in store experiences prior to the layoff.
    Hate to say that about CC as they have tried and their service is typically at par or above BBY but without an in store plan like Apple’s Genius’ as part of this announcement leaves me to think that this wasn’t as thought out as could’ve been. Live and die by TV sales….. the right model?

  4. This will likely have a trickle up effect. Retail Managers already work their tails off to get employees up to speed. Now they have the joy of retraining more employees and at review time they will probably have to walk on water just to give them a raise. I say not only is this going to effect the workers on the line, but Managers wil start looking for companies that think a qualified employee is an asset, not a line item.
    In 3-5 years it will be interesting to see where this all pans out for Circuit City. My guess will the shuttering of many stores and eventual purchase by a rival. What a great opportunity this will be for Best Buy, etc. to advertise the fact that they really have experienced employees to help the customer.

  5. Don’t get me wrong, I think it’s terrible that “smart” people are losing their job to “dumb” people.
    But, honestly, I don’t remember the last time I asked anyone in these kind of stores for their opinions about anything. All I want from these stores is a good price, to have the product in stock, and to get me through the checkouts quickly. And really, my favorite trips to these places are ones where I don’t have to interact at all with the staff.
    The point is, I do all of my research online before I go in. I trust Consumer Reports and the like more than the kid making $9/hour.

  6. When will self-important upper management with their inflated egos and salaries realize the real value of a good employee? I find it difficult to reconcile the pay rate of Circuit City’s middle-income employees as the significant impediment in its competition with other electronics stores. According to Business Week Online, the 52-week high for CC stock is $31.54. Today’s price (03-30-07) is $18.52. Also, according to Business Week Online, “In February, shares fell 23.9%, to $22.11, in the two trading days ended Feb. 19. Investors were spooked by renovation costs at the retailer, which has been redesigning stores to focus on small electronics.” The employees that have been fired were not responsible for that decision. In the short term, the firing of those employees while keeping the higher salaries of top management will create negative PR. Many customers may forget about that in six months, but it will be a great feat for the new middle management to instill any sense of loyalty to the remaining employees who will realize that there is little incentive to work hard for the company. The people on the front lines often make or break a company. Loyalty, teamwork and customer satisfaction may be considered as nothing more than meaningless rhetoric to them now. Prices at other electronics stores are very competitive. In light of this development, I would be wary of investing in Circuit City’s stock. I won’t be purchasing anything from them.

  7. I have dealt with CC on a few items and found the reps to be a little less than “in the know” on most items. I did buy a digital camera there I had researched and found they had the best price during the holidays. But now, after this plan they have to screw their employees, I will never buy another item from them. Bestbuy is just as good with competitive pricing. I feel for the employees of CC, but the overpaid CEO’s of that company can go down in flames for all I care.

  8. I feel I can speak of what�s going on better than anyone on this matter as I am currently lucky enough to still be employed and a 13 year veteran of CC.
    First of all, the 3500 employees let go were not necessarily all product specialists. They were customer service reps, warehouse employees, merchandisers as well as product specialists. Everyone automatically assumes all these employees were the most productive because they earned more which obviously is not the case when you read comments like the one posted here by Adam Brucker. There are times when employers think they found the golden goose, pay for it, in this case in wages, only to realize they were getting a duck (BTW, one should never generalize about an entire organization based on a couple of experiences at any local store as CC overall has always been regarded by most as a place to get good service).
    Secondly, Circuit City operates 600 stores which basically means they laid off on average 5 employees per store. I know in some stores it was more and others less. Generally speaking, a CC Superstore operates with a staff of 50 to 70 employees. Putting this in perspective you realize that there is still a formidable amount of talent in their stores and that the average store that lost 5 employees will see little if any impact on sales taken into account all the assumptions I’ve made thus far. To think 5 people took care of all the customers while the other 45 to 65 just stood around is obviously unrealistic. Take into consideration for a moment that if CC was a single store entity with 70 employees and laid off 5 workers for any reason, no one would have blinked an eye.
    Lastly, I feel that many people are underestimating the resilience of the managers / trainers at Circuit City and the remaining 40,000. Having to hire five willing and eager individuals with apassion for electronics and train those to be capable in one area of the store can be done in less than 2 weeks. Especially this time of year when traffic is down to levels less than lets say just before the holidays when Circuit City usually hires 20-30 seasonal employees and prepares them just that quickly (keep in mind that CC usually keeps the best after the holidays, and sometimes this means higher paid less productive people get replaced by lower paid more productive, willing and eager individuals anyway). I know this because over the years I’ve kept over 20 seasonal hires that were superstars. This very moment I have 4 of these superstars from the last 2 holidays that have made less money but performed as well or in some cases better than their presumably over paid, harder working piers but are not able to achieve the wages earned by the others because of previous wage control initiatives.
    Now before I get flamed let me make myself perfectly clear. I am in no way condoning what happened as I lost some good employees that were also close friends. Was there a better way to handle all of this? Maybe, but if I knew I�d be the CEO but alas I�m not. I knew their wives, kids, pets and their situations in life all which has made this entire ordeal very frustrating and angering. After 3 days though I started seeing them back in the store with stories of success on finding new jobs�some in retail others not. Happy again ,smiling and bringing up the spirits of those left behind to pick up the pieces. The support we had from retailers and other businesses as well as loyal customers in our local community calling us to see if they could offer jobs to our fallen associates was incredible and has helped all but 1 thus far get back on track. My entire post on this matter is simply to say�read what you�re typing�you�re so worried about the 3500, or 5 per store that you have completely forgotten about the 40,000 associate who also have families and bills to pay. They were as much the victims of this as the fallen and this was evident by their tears of frustration, anger and sadness. Boycotting CC or canceling a credit account or some of the other ridiculous things I�ve read(bad PR) certainly does not help anyone, least of all the 40,000 strong that are left. If you don�t like to shop at CC that�s OK, there are plenty of other good choices when shopping for electronics, but don�t make your shopping decision based on not liking the way a corporate entity feels it needs to run its business in order to stay competitive and keep the doors open throughout its entire chain of 600 stores nationwide for 40,000 employees and their families. Think of how many people will be affected by the planned 126 Comp USA closings this year.

  9. You beat me to the blog on this one Dave. I could not agree more. Personally I visit big boxes for one primary reason, to check out a product before I then search and almost always find it for less online. If by some chance these stores had real salespeople, trained to actually help me, give me product information and demonstrations, then indeed, I probably could be enticed to make my purchase there. You’re right about Apple, their people are helpful and informative.

  10. Well, Circuit City, is looking to hire a Walmart type employee. Little knowledge and often times with teeth missing, because of low pay and no Dental Plan.
    Circuit City, is just following the George Bush Doctrine, “Those who have nothing, shall have less”

  11. Circuit City getting rid of its best and brightest is not new. It began 11 years ago when they started slashing commissions and raising performance metrics as they moved to drive away all their commissioned salespeople.
    I quit Circuit City in 1996 when I saw the writing on the wall. The few times I’ve been back, the general quality of sales help and sales knowledge has declined each time.

  12. Hello all,
    Very interesting comments indeed. Personally I have never been aided by staff,other than to redirect me in the maze of unstocked/sold out merch. If that counts, then I have found them helpful & in the know, but to me, that doesn’t count. Every single time I’ve gone to a CC, what I went for is sold out, except for the last time I went. I now refuse to go w/o checking online avail. & calling 1st-which has led me down the path of which you all speak, online shopping.
    My biggest detractor of web buys, is the shipping costs which usually dwarf gas prices. Annoyingly enough, it seems only the box stores offer free shipping regularly on orders of $24 & up etc.Also, only the box stores seem to have telephone alternatives for all those fearful of typing every known # of a credit card account onto the web. This in itself bothers me.
    CC has always made me feel like they’re more interested in ripping me off, than selling me some killer deal-regardless of city, or state. So though one should not blanket a whole Inc, by one store, it does hold true with CC. So too with its rivals, so I donno what is to be said here. BestBuy is as much of a lying,underhanded cheat as CC, so is CompUsa, thus the same should be said about ALL their staff. One example for each is that a CompUsa “manager” (nor anyone under him hence his involvement) did not know, nor how to find out, the difference between a WesternDigital HD EIDE & a SATA drive. They sold me the WRONG one during the sale, & when I returned 2 days later, they offered no way for me to leave with what I had previously asked for along w/ a valid rebate. Which was a $150 differential. I had to wait 4mo for the sale, & have waited 4mo since for another-all the while having NO HD space for anything. Best Buy lied to me over the phone regarding both price & which products were included in the weekly ad-TWICE! Those trips were separated by 6 mo, business as usual as far as I can tell.
    As far as I am concerned these stores are utter scum in every way!! This is no different than debating the evil between 7 dictator driven nations. They are all scum, not having enough alt. choices does NOT make any one of them less evil, or less scum. This is now changing with the web, but so is identity theft & stolen credit #’s. So most revert to what we know, which is driving to a box, & paying in cash, & hoping this time everything is functional.
    What I loathe most is the obvious reality that if it can be sold next week only at 80% off the reg price, then it can be sold at 80% off EVERYDAY!! I don’t want to hear this garbage about quotas or being in the red/black, or credited unsold stock etc. They are too busy being scumbags to do this, cowering about lost revenue-blah blah b.s.- rather than realizing we would all STILL spend that 80% on OTHER devices in their store!! I hate this culture for that. This capitalism fraud front. These electronics could be had by us all at SO MUCH CHEAPER-meaning more stuff for us, & our $$ could be spent on important things. Which includes all of them when they are not working & are reg consumers themselves. If this trickled out to all facets of life, the stores wouldn’t lose $$ cuz they’d have less bills, etc. They won’t do it though, so I just wait for the SuperDuper Sale & mock them all the way to the bank. I won’t support them,& NEVER buy anything from any of them anymore that isn’t at least 50% off. It’s all it seems I can do short of ceasing all purchases.
    Alas intelligent approaches avoid our species like intelligent life avoids contacting us. Why step in a pile of poo when you can just walk around it & keep going? Meanwhile, we all play along slinging dung at eachother while our brief lifespans winker out & the next crop of suckers hits puberty & a pay check. The only REAL answer it seems is self education, to the point that all those mysterious components become clear, & obviously far cheaper than the constructed devices on the shelves. We must make our own, but once they catch on, they’ll shift their shifty agendas to overprice the components in the name of “supply & demand”!
    Did I mention I loathe this culture?

  13. The CEO says the 3500 employees are overpaid. Well think about this. CEO’s can screw up a company, and walk away with a golden parachute worth millions. If a airline pilot screws up, he, as well as the passengers dies.
    Every CEO is Overpaid! His job could be better performed using an Artificial Intelligent program in a computer. Now that is efficiency. That is what is called overpaid. Now Circuit City will be embroiled with lawsuits throughout the country. They will have saved a few dollers in workers pay, but they will be paying out beaucoup bucks to their lawyers.
    I revise my statement about Artificial Intelligence. A blindfolded CEO could throw darts and do a better job than is being done now by the Schoonovers of the world.

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