What happened to Circuit City?

why was circuit city so successful as to be featured in good to great? 
 

Circuit city was in the right market in the right time, the stores spread from 8 to 53 between 1983 and 1987, let alone the 37 smaller electronics only stores, in the early 1990s it was about 400 stores nationwide, and at that period of time, the personal computer sales were sky rocketing, consumer demand for electronics –video, TVs, vacuum cleaners, microwaves- by the end of the nineties and the year 2000 sales went to 12.6 billion from 1 billion as in 1986, earnings went up to 327 million compared to 22 million in 1986 and the slogan then was “welcome to circuit city, where service is a state of art” the staff were heavily invested in with

training, so sales people knew vast amounts of information that normal consumers don’t know, and they could answer any question and teach the customer about what they want to buy and convince them with other option, they were highly skilled, and I believe this is the way Circuit City made its way to Fortune 500 and the Good to Great.

 The strategic position right then for the company was cost leadership, it wasn’t only focused on the cost because they provided service plans..etc, so the prices were not extremely low, but lower than the list price for the product and featured with excellent customer service, that was also put the company in the lead, regarding the expensive merchandise it was selling at the time, the customer service and sales staff were a huge asset as well as the number of branches, customer wanted convenience and trusting the product they invested their money in, so you go to the nearest Circuit City store and get advice from the sales staff.

Why was the decline?

Circuit City committed to lay off 3000 of the highest paying employees and well trained and long experienced salespeople, that vast number of lay off was to gain a competitive advantage with Best Buy but what happened is that Circuit City lost its major asset that –ironically- most of them pursued a position in Best Buy.

Also Best Buy provided huge diversity, so it wasn’t only the high margin goods but also a wide variety of less expensive products that –in my opinion- works as a bait for customers who went in to buy a cheap product like a cable or something and they end up considering a very tempting deal on a new computer, with the help of a very experienced sales person.

Circuit City also lost the focus on the original service it was providing by distracting themselves into irrelative categories like used cars retail and DivX players, so they lost the competency in what they were originally doing.

What could they have done differently?

I think they could have focused on having strategic locations for smaller stores rather than huge stores with cheap rent –that’s what Best Buy actually did- also, they could have maintained their investment in the experienced staff rather than lay off, not getting distracted by other activities and keep providing home appliances, although it wasn’t profitable, but it had an impact on the fixed overhead and also the reputation of the company, as it was –originally- a supplier for home appliances.

The company didn’t seem to read the metrics, some locations weren’t generating sales, there were trends in the market and they didn’t keep up with what customers want –based on demographic demand- also they didn’t provide small margin merchandise, why go to Circuit City to buy the TV then go to Best Buy to get a cable while I can get both from Best Buy.

Now, I believe that Best Buy needs to focus on its biggest assets, the employees, well trained salespeople can make a difference by knowing how to deal with certain customers, also expansion in strategic locations and make it easier to go to Best Buy because I can get it now, rather than wait two days for Amazon to deliver it, focus on the idea that you can examine the product you’re buying before making a decision then return it online, and last but not least, develop the loyalty programs.