Circuit City is done. Everybody knows that.
What they don’t know is why.
It’s simple. Poor sales … in more ways than one.
I’m reading today’s issue of the NYTimes online and am reading an article authored by Stephanie Rosenbloom.
Some of what she writes makes perfect sense, some of it is perfectly wrong and lacking in shopping and common sense.
The downturn comes after years of growth, when retailers — responding to a flood of demand from consumers spending borrowed money — opened thousands of stores. Now that the housing downturn and economic crisis have turned off the credit spigot and sent frightened consumers into hiding, it is becoming evident that many of those stores are not needed.
Why Did Circuit City Fail?
Let’s see, Circuit City- you sold stuff they didn’t need, but really wanted, to people high on credit cardmania. You played on that and built stores you didn’t need, but really wanted, to play it even harder.
Here’s what you get Circuit City – a sad goodbye for being greedy and stupid.
Wall Street analysts said in November that the prospects of long-term survival for Circuit City were bleak. Months of declining sales sent the company over the edge, although its problems go back a decade. They include buying cheap real estate leases in inferior locations and laying off the company’s most experienced sales staff. The latter saved money, but at the price of employee morale and countless customers.
You bought cheap, ugly real estate, when you were overbuilding, out of sheer greed, and you bought in inferior locations, even though the three most important tenants of retail are location, location, location.
Again, you reap what you sow. Ignoring the basics and violating the fundamentals of a process will catch up to you … every time. No ifs, no and’s, no but’s. None.
Why Do People Actually Buy?
Sales staff, especially an experienced sale staff is the number one reason I, and millions upon millions of consumers shop at a given retailer. Not price.
Retailers, are you listening, we’re not out there shopping on price. We’re out there shopping on our emotions, looking for a salesperson to speak to us and help us justify the purchase. We want to be made comfortable about the decision we made. When that happens, we open our wallets and purses. Experienced sales staff do that.
I shop at the same places over and over again because of a single, particular salesperson in that store. Not price.
I eat at the same places over and over again because of the wait staff or management. Not price.
The loss of Circuit City will probably be felt throughout the supply line as electronics manufacturers find themselves less able to negotiate prices. The biggest electronics retailer left is Best Buy. Circuit City’s liquidation sales are likely to put pressure on Best Buy in the short run, but retailing analysts say the company will ultimately emerge with more market share.
Why Isn’t Best Buy Ready?
Best Buy isn’t ready for a massive influx of consumers looking for electronics, because they lack people who can actually sell. The 18 to 25 year-old’s who make up the bulk of Best Buy’s staff have had no formal education in sales or human interactions. They generally try to fake their way thru the process and they tend to exaggerate and lie.
How do I know? I shop there, or attempt to, on a weekly basis. I’ve resorted to only going in there, to my local store, when a particular manager is on duty. I only shop there when he can assist me. Sorry Best Buy, but the rest of your staff, in the stores I frequent, suck.
Best Buy needs to have dedicated sales staff, who make commission from their sales, who’ll educate themselves about the sales proces, since Best Buy seems to think it’s unneccessary to do.
Would You Really Shop At Wal-Mart For Electronics?
Analysts say they believe the biggest winner will not be Best Buy, but Wal-Mart. Ms. Widlitz said consumers who shopped at Circuit City were more likely to defect to Wal-Mart than to Best Buy, especially at a time when Wal-Mart has aggressively built up its stable of name-brand electronics at low prices. “This is perfect timing for them,” Ms. Widlitz said.
Here, Ms. Rosenbloom is quoting Stacey Widlitz, an analyst with Pali Research. I’m guessing Ms. Rosenbloom and Ms. Widlitz don’t frequent Wal-Mart.
No self-respecting electronics shopper would venture into Wal-Mart.
Two whole aisles do not an electronics store make.
Why? It’s worse than Best Buy by a multiple of 7 or 9. Can you get a cheap DVD or CD? Sure you can.
Can you get a trained salesperson to assist you in making an educated decision about HD TV’s, computers or other high-ticket electronics? Not a freakin’ chance. None.
If you were a well-trained electronics sales professional would you work in Wal-Mart? I didn’t think so.
Well guess what, I’m a well-trained electronics consumer and I won’t go there either.
Where Will We Buy Electronics in 2009 And Beyond?
So if we’re not going to flock to Wal-Mart for electronics, where will we go?
Amazon or another onlne retailer.
I build computers as often as I buy them and Amazon is now THE place to buy parts, pieces and whole systems, along with other electronics items.
Why? Because of the feedback, reviews and other info available. THAT’S the new sales staff. If we can’t find a salesperson to trust, we’re going to start trusting each other even more than we do now.
Best Buy, if you want to grab the people who left Circuit City, the one’s who used to hear their favorite salesperson say ugly things about you, you need to step up and train your salespeople immediately.
We’re not going to Wal-Mart for our stuff. We’ll go online and not to your site.
Why? If we don’t trust you enough to shop there in person, we damn sure won’t buy from your website, which isn’t all that good anyway.
You need to Amazonize your website … like right now.
Give us trust. Give us a short video of a blue shirt of geek telling us all about the product we’re looking to buy.
Give us audio explanations.
Audio and video is cheap to make and cheap to deploy. In fact, the cheapest place to host video is … Amazon 
Look’s like we have a winner.
PS – Best Buy, if you’d like some expert advice on how to win this war, contact me and I’ll be glad to help. Otherwise, Amazon will steamroll your ass and you’ll be gone as well.
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Harsh.
And Best Buy cannot start by hiring good sales people.
They have to start with a store manager that understands why success depends on measuring more than whether an employee shows up on schedule. Success depends on making *good* use of *good* people. Growing talent, insisting on standards and performance, using training more often than the pink slip to address issues larger than a single employee.
How can any enterprise be so deluded, they think that customers will be more loyal than management’s loyalty and effective use of their employees?
The point that you mention I find the most telling, is that they laid off their senior sales people. That was the point where they should have been hiring experienced and aggressive district managers.
Thanks for your thoughts!
Thanks for adding your thoughts Brad.
You raise another issue that I hadn’t bothered to cover, which is:
Everything rises and falls on leadership.
Thanks for stopping by and taking time to comment with actionable thoughts.
Mike,
You nailed this one. I never understood the business model. Hiring cheap labor to sell complex (and expensive) solutions to a clientele that has infinite access to information is a recipe for disaster. When your clients can’t get any added value from the person on the floor, then what else do you have to offer besides price? And if your only advantage is price, then you are ripe for picking. Excellent post.
Jamie
Thanks Jamie! Your explanation of what I said is better than what I said… I think
Stop by more often, my ego needs you !
I used to be loyal Circuit City customer, then I had a horrendous customer service experience with a camcorder. The manager actually told me he’d have to take a $160 markdown if he allowed me to return the camera. This was when their motto was, “Where service is state of the art.”
I like Best Buy. I’ve found their sales staff knowledgeable and have purchased an HDTV, a computer, digital camera, and other electronics there. I like the fact that their blue shirts are not paid on commission.
Maybe the store I frequent has a manager who provides more effective leadership.
Regards,
Glenn
I’m sure, Glenn, that it all rises or falls on leadership … like almost all places of business.
I’ll have to respectfully disagree with you on the non-commissioned help.
In general, I’ve found that people who get paid to sell with try to master their craft and will try to learn all about their industry.
In general, hourly workers will spend their free time looking for a .25/hour raise, instead of using their off work time to expand their knowledge of their profession.
Notice the term …”In general … “. It would be foolish of me to make a statement like that and try to make in gospel and not leave room for exceptions.
Whattaya think?
Mike,
Great article!
I knew the end was near when Circuit City fired a lot of its experienced floor personnel because they were making too much money. Told them they could reapply in six months for $7 an hour or so.
Your article illustrates why, when Lowes and Home Depot have huge inventories and (probably) lower prices, Ace Hardware is still kicking. When we lived in Houston, there was one right up the street. They knew your name, could help you find exactly what you needed, and throw in some free tips to make it go easier! Believe me, my time and a good customer service experience was worth WAY more than the few pennies I might save in the box stores.
Debbi Bressler
PS. Just read your other post. Sorry I missed your birthday; hope it was a good one!
Thanks Debbi !
You’re absolutely right about personal service versus low prices. I can make more money to buy things, but sometimes you can’t find what you need without a real salesperson/expert.
Personal service will never go out of style.