In case you missed it, Circuit City announced today that it is going out of business. Wow. At one time, I was a big fan of the chain. Not so much over the past five years or so, but back in the day, I very much preferred Circuit City over its "evil twin", Best Buy. Now I shop Best Buy often, but can't remember the last time I was in Circuit City.
What happened? Of course the consumer electronics market is brutal, but Circuit City made some bone-headed moves. While Best Buy adapted to the changes in the marketplace, CC didn't. Best Buy expanded (or at least maintained) its product selection, CC cut theirs. Even in a down economy, people need to replace washing machines and refrigerators. Computers and big-screen TVs? Not so much. Best Buy acquired Geek Squad to beef up their service; Circuit City fired their senior salespeople.
A lot of the blame goes to the Wal-Mart factor. But there's always room for competition that provides service and knowledge, as well as the bare-bones Wal-Mart cost approach.
I hope that Home Depot and Circuit City have demonstrated that cutting service is NOT the way to compete with Wal-Mart. At one time, both were known for knowledgeable and helpful associates, but their respective CEOs opted to sacrifice service to beef up the bottom line.
R.I.P., Circuit City.
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The decision to fire the senior sales people and scrap the entire commission sales systems struck me as an MBA decision. I can imagine the report from some dewey eyed 28 year old who is ripping through Power Point slide after Power Point slide discussing how the commission sales systems harms the income statement.
ReplyDeleteWell, duh. It was also their unique selling point.
I also wonder though about the role of the sales force. Sales rep exist to educate consumers because sales rep should hold more knowledge about the marketplace than consumers. How much knowledge did consumers require about computers in 2005 compared to 1995? That is, consumers now know hold a lot of knowledge about plasma television sets, high definition, Blu Ray, etc.
Perhaps the Circuit City approach had lots its relevancy and demand long ago.
I agree 100% with your analysis. Maybe it wasn't so much that the CC approach lost its relevancy, but just needed to evolve.
ReplyDeleteIt may be the case that consumers don't seek knowledge from salespeople during the sales process, although I would argue that I did need some help in selecting an HDTV.
However, Best Buy has done a good job of integrating value-added service into the process. When I bought my laptop, I had the option of having the Geek Squad transfer files, preload all the software and "optimize" the system. I didn't avail myself of these services, but they're available. Similarly, the sales guy was able to answer my questions about HDTV and help me out. BB has put a lot of effort into training and retention, and in my limited interactions with them, it has made a difference.
CC went in the opposite direction, trying to compete on cost efficiencies. Wal-Mart will win that one every time.