The Decline of Circuit City...What Happened?

foreign [Music] City used to be a major chain of electronic stores in the United States they were a Fortune 500 company with sales consistently above 10 billion dollars per year I most remember them for their distinctly shaped red locations in the commercials at this cool thing where it would be plugging into the ground at all electrified I mean even today you can easily tell if a building used to be a Circuit City and sadly there is a lot of them out there like that in November of 2008 Circuit City filed for bankruptcy it was the biggest retail bankruptcy filing since Kmart did it six years earlier over the next few months they closed all of their 700 stores and that was the end of Circuit City just like that one of the country's biggest retailers that had been in operation for 60 years was gone making this a great case study and easily one of my most requested topics I think it's interesting that Circuit City has clearly left an impact on people despite being gone for well over a decade now we are still thinking about them so in this long-awaited video I'm going to talk all about Circuit City while highlighting what I believe to be five of the biggest reasons behind their decline I'm going to ease into it with my first reason being their investment in a failed technology now I want you to realize that a big reason Circuit City was able to grow so large in the first place was its ability to recognize what would become popular Technologies while they were still in their early stages and that goes all the way back to the very beginning in 1949 a man named Samuel wurtzel was getting a haircut in Richmond Virginia the person cutting his hair happened to mention that the first TV station in the South had opened in that town earlier in the year and Samuel instantly saw that as a promising business opportunity he predicted that televisions were about to Skyrocket in popularity and logically believe that he could take advantage of that by selling televisions he opened a small TV store in town called Wards it was like an altered acronym for the members of his family and it proved to be successful as it turns out 1949 was an incredibly smart time to invest in the television business considering that over the next decade the number of U.S homes who owned a TV set jumped from nine percent to 86 percent by that point he had opened three more stores in Richmond that were also selling audio equipment and household appliances throughout the next couple decades the business was expanded by having public stock offerings and using the proceeds to acquire similar retailers throughout the country in 1974 they took a big risk by closing two of those original stores and using the money to open a 40 000 square foot electronic Superstore that was originally called the Ward's loading dock it was a revolutionary concept at the time that was able to attract customers mainly through low prices and in unbeatable selection by the 1980s they opened more super stores like that started calling them Circuit City renamed the entire company Circuit City and closed everything else they owned in favor of focusing on their most profitable concept that is when they became by far the biggest Electronics retailer in the country with sales of more than two billion dollars by the 1990s now throughout this entire time they were attracting customers and gaining sales by being among the first to sell new Technologies they started selling microwaves back in the 1960s before they were popular and sold a ton of them once they started gaining Traction in the 1970s they started selling VCRs in the 1970s and sold a ton of them once they started gaining Traction in the 1980s so in the 1990s it was uncharacteristic of them when they made a terrible investment DivX stood for digital video express it was a disc very similar to a DVD but it was disposable Circuit City sold it for 4.49 after you bought it you would be able to play it in your special DivX player for the next 48 hours and at that point it would stop working and you would throw it away now I realize that probably sounds like one of the worst inventions ever but the appeal of it was that it was similar to renting a movie but you wouldn't have to worry about returning it or dealing with late fees for a short time Circuit City was fully invested in this like it was going to be a major part of things moving forward the letters DivX can be found over 150 times in their 99 28 annual reports they even talk about how sales exceeded expectations during their holiday season but sadly things really took a bad turn from there in George for multiple reasons the DVD that we all know emerged to be superior and Circuit City gave up on the DivX in June of the following year in the end they did lose over a hundred million dollars in developing and promoting it but the real reason it's on my list is because it represents how Circuit City veered away from their Core Business and in a way that failed to see what the consumers truly wanted sadly those are two things that will continue to be themes as I go through the rest of my lists my next reason behind their decline is poor locations from the middle of the 1980s into the 1990s Circuit City was on top of the world as I said they were the biggest electronic store without even a single competitor big enough to make them nervous and since they felt so comfortable in that number one spot and unfortunately they made some foolish decisions one of the most foolish was the way they went about choosing locations of new stores Circuit City would actively search for cheaper areas that were commonly inconvenient for people to get to their thinking was why pay more for these Prime locations where all the traffic is when we can save money by having people come out to us I mean where else are they going to go do you see the flaw in that reasoning Best Buy was another electronic store that also changed their name and started opening big box stores in the 1980s though at a much slower Pace but I think they must have realized the error that Circuit City made because they would enter new markets in the exact opposite way by paying more money to obtain these amazing locations and so then in all of these markets across the country the Best Buy was generally more easily accessible than the Circuit City sure they were paying more for it but they were the ones getting the business in fact by 1996 Best Buy was getting more business than Circuit City making them the new biggest electronics store in the country the physical locations of the stores were a big reason for that but to be clear I'm not saying it was the only reason or even the biggest going back to my list probably the most significant part of any of the this would be circuit City's focus on customer service which I promise you is so much more impactful than it sounds dating back to the early days of wards TV their entire business model was centered around customer service when those first big box stores opened the service department was strategically placed at the front of the store so that everyone walking past it would be reminded of their ongoing service because that is what they were known for seriously if you were to ask a random person what is the biggest difference between Best Buy and Circuit City their answer would likely have something to do with the customer service Circuit City had a system where knowledgeable salespeople would guide you through your purchase get the item for you from the back room take it to the counter for you kind of like the experience you get when you go to a car dealership whereas Best Buy was very much like it is today you're pretty much on your own though there are people there if you happen to have a basic enough question Circuit City sales people were more aggressive being paid on commission whereas Best Buy employees were more relaxed being paid hourly now I'm imagining that most of the people watch watching this today would much prefer the Best Buy method which helps explain how they caught up to Circuit City and have outlasted them but take a step back for a second try to imagine you're someone in the 1980s buying your very first VCR that right there was an intimidating purchase first off it's expensive you would be spending the equivalent of thousands of dollars today and secondly it's so unknown a VCR was an entirely New Concept for most people they didn't know what they were looking at you couldn't learn about it beforehand and compare brands on the internet people would walk into that store in desperate need of guidance from a sales associate but clearly as consumer electronics became more common the prices became more reasonable and information became more available at that level of customer service became much less necessary if not annoying to an extent it could easily be argued that Best Buy's more hands-off approach was preferred by many customers going into the 1990s and Beyond and that is a big reason they were able to catch up to Circuit City but it still gets so much worse Circuit City held onto that mod all the way until 2003 when they finally adapted a more modern self-service approach but they did that by firing 3 900 of their highest paid sales people and converting the rest to an hourly pay which I'll say it seems like a strange way to go about it it did save them over a hundred million dollars in payroll but it upsets almost everybody and eliminated their most productive employees the people who left were essentially penalized for doing a good job and the people who remained were people who didn't do as good of a job so now the people working at Circuit City weren't nearly as effective and due to everything that just happened were much less motivated than ever before and that is not even the end of it in 2007 they did almost the same thing again by firing 3 400 of their highest paid workers again it saved them over 100 million dollars but left them with a lower quality Workforce at that point they were seemingly trying to copy what Best Buy was doing because it was working so much better but it wasn't handled very well and in the end it was too little too late it was the same thing with the Geek Squad you know the Geek Squad overhead Best Buy they help you with installations in your computer and stuff like that well they were established in 1994 and acquired by Best Buy in 2002 long before Circuit City tried to launch their own equivalent called fire dog in 2006 with their famous slogan that I'm sure we all know we make Technologies Tail Wag oh my goodness again obviously they were trying to copy something that was successful at Best Buy but again it was too little too late okay my next reason behind the decline of Circuit City is Carmax which I'm sure has just confused many people what in the world does Carmax have to do with Circuit City well quite a bit actually in 1993 CarMax was started by Circuit City it seems unrelated and it mostly is but earlier I did compare the Circuit City sales approach to a car dealership if you don't know it CarMax is kind of like a chain of used car dealerships the people at Circuit City felt that it was a promising opportunity given there was no significant National competitor much like DivX it was a side project for them but even bigger and even more unrelated I should say that even though it did take years for it to be profitable CarMax was mostly funded by its own stock offering so it never drained too much money from the company but it took a lot of their focus it started as a single test lot in 1993 and grew to dozens of them over the next decade because it turns out scaling it was the most effective way to make the concept profitable in 2002 it was spun off into its own company and many of the best Managers from Circuit City left along with it and to make matters even worse they took a lot of the money that they ultimately made from CarMax and used it to buy back their own stock in Circuit City that tied up their money and proved to be a terrible investment when the stock price Came Crashing Down in 2008. overall the CarMax Endeavor would be considered a success in itself but the lack of focus lost managers and poor investment in the proceeds have made it more of a setback for Circuit City my final reason behind the decline is a quick one and probably the least impactful the recession clearly so much damage was already done before it even started but it was unfortunate timing Circuit City filed for bankruptcy in November of 2008 right in the middle of all the craziness happening with the economy the external factors caused the vendors to give them tighter credit terms and of course reduce spending at their stores they were on a downward Trend either way they had already attempted to Rebrand smaller stores as the city I don't know about that but if the economy hadn't been so crazy at the time my guess is that their decline would have been extended or less severe let me know in the comments have you ever been to Circuit City and if you have how does it compare to Best Buy better or worse or just different in some way I do want to mention that another bad move is that they stopped selling appliances in 2001 which had previously made up about 15 percent of their business there was new competition coming from Home Depot and Lowe's so instead of fighting back Circuit City kind of decided to throw in the towel there I don't have too much to say about this one but it was bad timing because it was right before a big real estate boom that caused the appliance Market to go way up and also it just confused people considering they'd been selling appliances for almost 50 years meanwhile Best Buy was still selling them giving customers even more reason to go to Best Buy instead of Circuit City so yeah not a great move there either Circuit City made so many bad moves but the way I see it when it comes down to it they lost the eye of the tiger much like Rocky 3 they became comfortable in their winning position and lost the drive that got them there in the first place meanwhile a new competitor pops up with more determination and they're Simply Better instead of holding on to their outdated model and investing in side projects they should have been planning for the future and trying to improve their main business while they still had the chance so any thoughts you have about Circuit City leave them in the comments I'd like to hear what you have to say thank you for watching [Music] thank you

Channel: Company Man

Views: 608,270

Keywords: Circuit City, Best Buy, Electronics, Retail, Company, Business, Decline

Id: l2BuRy3e_xU

Length: 13min 2sec (782 seconds)

Published: Wed Dec 21 2022

Reddit Comments

[u/JackFisherBooks]

I'm glad Company Man finally made this video. I actually lived near a Circuit City for a while, shortly after I graduated college. I had fond memories of just going there, browsing the electronics, and talking video games with some of the people there.

But there was a point where you did sense something change with the store. After a while, I noticed the sales people wouldn't talk as much anymore. The selection of products got lesser and lesser. And the prices seemed to spike at the worst possible time.

The last thing I ever bought from Circuit City was an MP3 player. That thing lasted just a couple of weeks before it broke. After that, I didn't go back to that Circuit City. And I wasn't too surprised when it went bankrupt.

Still, there was a time when it was a genuinely fun place to be.

[u/wisdom_and_frivolity]

I worked at Circuit City when it died!

What happened was: historic mismanagement of a superior product led to knee jerk reactions which lessened the brand to the point where the only choice was to liquidate. They somehow decided to delete their advantage by making commissioned sales go to hourly and then couldn't compete in the already saturated market they were aiming for with their new business style.

Circuit City had loyal customers and focused on people who actually needed help. You know, everyone that now comes to you for advice on computers. Those customers still exist, but there's no business catering to them anymore. Repeat loyal customers were the goal, so being honest, helpful, friendly etc made a top salesman better as they would be asked for by name and recommended to friends. Think a national chain full of Louis Rossmann types who just aren't ready to start their own business yet.

[u/orbitaljunkie]

That elongated up-talk at the end of each sentence though.

[u/alfonsomore]

I worked for circuit city through college and the pressure to sell everything plus a warranty was more than it needed to be.

[u/dankdooker]

It was always a pain going into the circuit city. Sure, the aggressive salesman would assist you and load you up with products. But when it was time to go to the checkout line, get ready to spend the afternoon in line.

[u/Bob_Kay]

I got my first laptop from a Circuit City, and the speakers that I am still using today were also purchased from that very same Circuit City. I also remember picking up Crysis Warhead for about 10-15 bucks when they were having the liquidation sale.

[u/hgaterms]

Damn, I still have a receipt from Circuit City when I bought my TomTom GPS just before a long cross country road trip. It's all nestled nicely in the leather carrying case for that 16 year old technology that I can't seem to throw away.

[u/creaturefeature16]

I worked at Circuit City for two years when I was 18 to 20. It was straight commission, although it did have a baseline pay of $7/hour if you went into a draw. It was a blast, honestly, even though it was high anxiety. Some salesmen were ruthless and out & out lied to the customers to get a sale. Others just seem to have some kind of magic to sell anything without manipulating people (at least, they didn't tell bald face lies to them). I didn't do too well, because I just can't be that pushy.

I loved my coworkers though and the work parties were always a good time. But the absolute best part was that we got everything "at cost" (what the company pays for the products themselves). Getting a $900 amplifier for $100, and a $1,500 home stereo receiver for $450...was a delicious experience.

[u/ClutchMcSlip]

Hated the high pressure sales in circuit city.
I always thought this scene fro Ruthless People was a dig at circuit city.

https://youtu.be/EAyJmIXcyMg