Why Circuit City is not a lesson in bad management...

Via this fw thread comes an article that claims that Circuit City's recent financial troubles are due to it's decision to fire experience workers and replace them with cheaper workers.

I don't think that it's that simple. People want to believe that there is a direct relationship, because firing your best, highest paid workers because they cost too much is kind of an asshole move. While it obviously didn't help as much as they hoped, I'm not convinced that it hurt them either.

I'm not sure how many people expect customer service when buying electronics anymore. I can't honestly comment about the service at Best Buy or Circuit City, because when I go to either store (or any store), I seldom ask the salespeople any questions other than "do you have this in stock" and "can you check the price on this". As a deal shopper, I often look for stores that have bad customer service, bad locations, inconvenient hours, or are poorly stocked - those are the stores that will have a pile of clearance stuff lurking in the back that nobody bothered to put out, or something with a price tag that is way higher than the price in the system because nobody changed it, or the store with no parking and shitty hours, because they will have stuff left in stock that other stores don't.

When I am making a big purchase, I don't depend on salespeople. First of all, for electronics, I work in IT, so I'm familiar with quite a bit of stuff. When I don't know much about a category, I research online, or I ask a friend/coworker who is more knowledgeable about the area what they recommend. Now, not everyone is lucky enough to work with 50 really smart geeks, but most people know someone they trust who they can go to for advice about technology. I don't know how many people really expect the salespeople at a store to be experts, or trust them.

I think the problem of Circuit City is less that they have fired their best sales people and more that they are stuck in the middle when it comes the market. I recently read Trading Up, which theorizes that the market is splitting and that the successful businesses are either targeting the high end or the low end, while companies that serve the middle market are screwed. Circuit City falls into that middle market.

On the high end, stores like Tweeter, Best Buy's Magnolia, and lots of mom-and-pop stores and small high-end boutique chains (like in the Baltimore area, the Big Screen Store and Gramophone) are grabbing the people for whom money is no object. On the low end, stores like Target and Wal-Mart are selling tons of electronics, both the small stuff like MP3 players and the big stuff like flat panel TV's. Plus, lots of stores that traditionally didn't sell lots of electronics have started to - you can buy GPS devices, MP3 players, and TV's from stores like Office Depot and Staples, and even at grocery stores like Aldi.

And then there is the web. Price-conscious shoppers - both at the low and high end - can go online and find the products that they want at the cheapest price, without even having to put on pants. Furthermore, stores like Circuit City make most of their money on accessories, like printer cables and audio cables. With sites like Monoprice, people can price-shop the brick and mortar stores for the printer on sale at cost, and then buy the USB cable online for $3 instead of $32.

So why has Best Buy been succeeding? Part of it is that they have been aiming more to the high end customer than the middle market - with Magnolia, as well as with their announcement a few years back that they were trying to discourage "devil customers", getting rid of rebates, and otherwise just not competing on price. They have stores that are newer than Circuit City's, often in better locations, and that are bigger and just seem more "fun" than CC. Their Geek Squad acquisition gives them a degree of trust among people who actually want hand-holding from a store.

Personally, I shop based on price. Most of my big purchases are from non-tradtional outlets - my pc is from the late CompUSA, my mp3 player is from woot, my flat panel monitor is from Office Depot, and my flat panel TV is from Target. I shop at Circuit City occasionally, when they have a good deal, mostly with rebates. I can't remember the last time I shopped at Best Buy, since they killed off their rebates and stopped having good deals. But I'm far from typical.