"Short-Circuit" City Admits Defeat

Last week’s headline screamed, “Circuit City to Cut More Than 3,500 Store and IT Jobs, Cut Wages!” The opening paragraph of the AP Report says it all – “…implying that its wages are as subject to discounts as its flat-screen TVs.”

Except, that its (former) employees do not come with a “money-back” guarantee or any “extended warranties.”

Now, of course, I understand that no one can be guaranteed a job for life – nor should they. And, competition is cut-throat – there is a “race to the bottom” to see which store can sell electronics for the cheapest price. This has turned the electronic equipment business (Flat-screen TV, Home Theater AV, portable audio, computers, etc.) into a commodity business. At the same time – for many of us – this is also a highly-complex business. One that requires a knowledgeable sales staff to advise us as to the difference in specs, prices, set-ups, features and benefits of the products offered for sale. Not to mention, a trained staff to sell us extended warranties and extra peripherals (BOTH of which carry high-margins that make them very profitable for the store!)

So my problem is not that Circuit City laid off so many employees. They must have felt that they needed to bring down their payroll in order to offer competitive (extra-low) prices on their electronic equipment. No… my problem is with Circuit City’s criteria (rationalization) for which employees were let go:

…the workers being laid off were earning “well above the market-based salary range for their role.” They will be replaced with employees who will be paid at the current market range, the company said in a news release.

But wait… there’s more:

…the laid-off workers, about 8 percent of the company’s total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

Additional reporting of this story on the Dow Jones News-wires yielded this comment from Wayne Cascio, an author of business books and professor of management at the University of Colorado:

“If pay bears any relevance to performance, why are they laying off the best performers?” he said. “Maybe at Circuit City it doesn’t.” “It sounds like a death wish,” he said.


A business can compete in three areas: Price, Products and People.

It is very difficult to compete strictly on Price alone. Wal-Mart holds a commanding lead in this area. This is due in part to their very efficient back-end operations, quick inventory turnover and their buying power – they purchase goods at the very lowest prices and pass the savings on to their customers. Circuit City can not hope to match Wal-Mart on price. They can lower their selling price (and profits) in an attempt to be competitive. But they will not succeed. This sounds like a death wish.

When it comes to (selection of) Products, Amazon.com is the “gold standard.” Amazon has harnessed technology to offer the easiest way to search through a truly impressive range of choices to find exactly the right product. They offer customer-generated reviews for most products and employ mind-boggling algorithms to suggest appropriate additional products for purchase. And… they always greet me by name. And… they remember exactly what I have purchased in the past – and am likely to wish to purchase in the future. Circuit City cannot compete in this arena. This sounds like another death wish.

Any other retailer must learn how to compete with their People! They must learn to properly manage and motivate their staff. They must invest in training for their staff. A business with a knowledgeable, friendly customer-focused staff can be competitive! (Click here to read a short article, “10 Ways Small Businesses Can Compete with the Big Boys”) Prior to this (ill-conceived) major lay-off, Circuit City was attempting to train and reward the sales and customer service staff to offer a better level of service. They had even invested heavily in remodeling most of their stores.

But now it appears that “Short-Circuit” City is abandoning these strategies – they are throwing in the towel. They are admitting defeat in so many words and actions. But, if their outlook is so grim, they did not cut not nearly deep enough. They only took a half-measured step in a feeble attempt to hold off the inevitable – a bankruptcy or a sale. This sounds like the final death wish.

Earlier this year I wrote about another mass-market electronics retailer – CompUSA. My article, “Was it Internet-pricing or “Soulless Stores?” highlighted that retailer’s total contempt for people – both their customers and their employees. We all appreciate low prices and we demand a good selection of quality prices. However, few of us restrict our purchases to the Internet or Wal-Mart. When we give our patronage and our loyalty to a business we do so because that business is a customer-focused business. They have trained their staff to truly serve their “core customers.” A successful business has determined its “competitive advantage” and has made sure that their customers see the value – because it is valuable to them!

Circuit City truly has a death wish. If you are a business owner or manager, do NOT follow their example. Invest in your people – they hold the key to your success. They are your “competitive advantage!”

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