Skip to comments.Circuit City's Job Cuts Backfiring, Analysts Say
Posted on 05/02/2007 5:08:03 AM PDT by Hydroshock
Circuit City fired 3,400 of its highest-paid store employees in March, saying it needed to hire cheaper workers to shore up its bottom line. Now, the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.
The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.
Circuit City expects to report a loss for the first quarter because of poor sales of expensive televisions, which often require experienced salespeople. (By Steve Helber -- Associated Press)
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"I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates," said Tim Allen, an analyst with Jefferies & Co.
In particular, the televisions showing disappointing results are "intensive sales" requiring more informed employees, Allen said. "It's a big-ticket purchase for somebody. And if they feel like they're not getting the right advice or are being misled by someone who doesn't know, it would be definitely frustrating. They will take their business elsewhere."
Circuit City said in March that sales would be volatile for the next several months as the company adjusts to the changes. But yesterday the company said it was too early to tell whether the dismissals had caused any of the falloff in April sales b
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Once again, bean counters making decisions that are contrary to good business practices.
So you get rid of your most productive workers and wonder why things are not going so well. Maybe Circuit City should outsource all their sales jobs to India to save even more money before they shut the doors for good.
I’ve employed people all my life. For the most part you get what you pay for.
What most people do not know, or do not want to admit, is that a company lives or dies with it’s sales force. You cannot stay in business if you do not sell anything.
I went in last month fully intending to walk out with a big screen plasma TV, and after a half hour of no one speaking to me, I walked back out empty-handed.
Sears did the same thing in the ‘70s. Shot themselves in the foot.
About two weeks ago I went to the nearest Circuit City store, found what I wanted on display and decided to buy it. There wasn’t a boxed item on the shelf. I looked all over the store and couldn’t find an employee to help me. As I was leaving a young woman standing at the door asked if I found what I wanted. I told her that I was leaving because I couldn’t find help. I don’t know if this is typical but in this case CC lost a sale.
My wife and I went to a new one a 1/2 mile from our house, we could nto find a Harry Potter DVD, we asked them were it was, their inventory said they had it, but the manageer could nto even tell us what section it was in.
Not only is the loss due possibly to poorly trained staff. A lot of people who normally shop at Circuit City didn’t like these firings and have chosen to buy elsewhere.
That's one of the fundamentals of Capitalism...
High ticket television sets are rapidly turning into ordinary consumer products with much lower prices.
I recall that a 26 inch TV 50 years ago cost over $300. With a remote that might jump to $350. An equivalent cost today would be about $4,000.
That was a serious purchase in its time ~ $400 for a far larger thin screen projection TV is not so serious now.
A DMD device should cost less than $100 given its lack of complexity BTW.
I’m betting the boss is one of the higher paid people. Time for him to go!
duh! Circuit City’s problems arise from their business practices of pushing meaningless extended warranties they never honor without contacting the BBB or state attorney’s office, plus the bait and switch tactics used for years. This is the main reason for their sales drop IMHO. Their employees are generally knowledgeable and helpful but are forced to up sell BS.
The last few times I’ve gone into Circuit City, I’ve seen the employees acting like they don’t give a rip what happens in the store. It’s more like a party venue that happens to sell electronics.
They’d have done better if they got rid of the lower-paid employees, kept fewer of the highly paid ones, and concentrated on a more professional atmosphere.
Not to mention those of us who stopped shopping there because it was such a crappy thing to do.
A very good friend of mine is a mid-level manager in a public sector agency (he works for the state). While getting ready to counsel a lackluster employee one day, he ran cost/benefit analyses on the employee in question, and then on other employees, ones who were doing well. The results intrigued him, so he expanded the study to a large subset of the people who report to him.
He found that, without fail, his highest-paid people provided the best return for their salary...and not just overall, but on a per-dollar basis too.
I told him "Good. Those people are where you want to invest your payroll dollars."
He started as though something had struck him. "You're right," he finally said.
I remember those days well. Our first color TV was and RCA 25” console with a remote bought in 1966 for $250...... 1/2 months average pay then.
After spending a good deal of time in the corporate world, I came to the conclusion if the typical accounting grad student spent more time gettin' some lovin', or at least getting drinks, then none of this would ever happen.
One advertiser on a local radio station modifies that to "You get what you pay for, if you're lucky." Probably words such as cautious, careful, etc. could be substituted for lucky.
Who in their right mind would want to work for such a company? And if you did work for such a company why would you try to do a good job? If you do a good job you get a raise. If you get a raise, you get fired.
Serves them right for being greedy.
Gee, this is a tough one. Could the retail business possibly have something to do with the quality of customer service?
Note to whatever CEO might be reading this: Your most valuable assets walk out the door at 5:00 pm, then place themselves in a steel and glass box with a controlled explosion in front of them and highly flammable liquid behind them in order to hurtle down the street at 60 mph.
Not unlikke replacing American workers with lower paid illegals.
“you do a good job you get a raise. If you get a raise, you get fired.”
That happens at a lot of companies, like some weird version of the Peter principle. It really does pay do be very average often. Places looking to reduce costs will often look at who makes the most and and start the cutting there. It sucks.
Yup. See it often at work. Apple seems to be the only company that escapes this trap.
The price of things may go up over time, but the value does not. In George Washington’s time, a gold coin, about an ounce, would buy you a nice tailored suit of clothes. Today, an ounce of gold is around $675 an ounce, or about the price of a nice tailored suit of clothes............
CC started going downhill a few years ago, when they eliminated washers, dryers and refrigerators from their stores. These common items increased traffic, even though they were low margin. Now everything is low margin, I think.
Whoever was behind the dumbest corporate move I’ve heard of in a long time, should be named and held up for riducule.
Same thing happened to me at BJs. An unskilled salesperson would be a step up from no salespersons.
It sure does..........Happened to me once.........Worked for a place 10 years, worked my way up to a mid level management position, company got in financial straights (ie, they weren't selling anything), and so they "let go" of all their highest paid workers. And of course, we were the ones that had been there the longest, some 20 years or more..............The company did not last long after that, they were bought out......
The consequence was the total destruction of their dealership network and the loss of all of their knowledgeable people in the sales force.
They've subsequently accepted bribes/donations from Microsoft and others just to keep the Apple logo on the market.
Circuit City would have been well advised to see what happened to Apple shortly after their remarkably stupid mail order decision.
Must be that “just in time” inventory management I keep hearing about.
Try the CC in Winchester VA.
It’s populated [almost] entirely by Goth-types and other kids with flourescent hair.
They will literally take you by the hand and lead you to whatever you’re looking for, often with several others tagging along, just in case.
Yep, once agin US business looks only to the next quarter.
Circuit City couldn’t compete with Lowes and Home Depot in selling that type of stuff. You only have a limited amount of space in your store; why take up a significant amount of space with a product that you can’t move?
I never liked Circuit City because lots of the products have the old-fashioned checkout, where it has to be pulled from the back of the store. Annoying. Anyway, it seems like all these electronics store—other than Best Buy—are on their way out, anyhow.
Circuit City needed to take drastic steps to stay in business, so it took a big gamble. I guess it didn’t pay off, but I can’t blame them for trying. That’s the way it goes.
Wow, what a shock.
Lesson number one in Remuneration 101
You pay peanuts, you get monkeys.
What they did was fire all of the commission sales people and hire hourly workers that know almost nothing about how to sell or the products.
What they lost was the sales the good salespeople closed that would have walked otherwise.
Amen! Like that saying goes: "A worker is worth his wages." You hire minimum wage, you get minimum wage results.
When you are only a handful of quarters from bankruptcy, the near-term seems pretty important.
*And* you have a 90 day return policy with Sam’s.
CC has 30 days and I went through *4* plasmas from there, 2 from Sam’s and then finally a 42” LCD from CC before I got one that wasn’t defective or became defective quickly.
Right after Christmas, I bought a 32” Sharp Aquos LCD from CC on clearance.
It was a $1500 monitor for $600.
I’m using it as a PC display via the HDMI input.
LOL! Where'd you go...Lowes? It's like trying to find a needle in a hay stack trying to find someone -- anyone!-- to help you there.
Keep hitting the “HELP” buttons installed in every department.
After 6 or 7 “Customer Assistance Please....!!!” alerts bellowing over the store speakers in rapid succession, *someone* will come, if only to tell you to knock it off....;D
Then hafta Run msconfig to dump whatever they plant in startup menu.
I had a friend of mine who used to work as a salesman for Circuit City years ago. He made good money but that was because he generated good sales.
Best Buy is the store I hate the most. You cannot just walk through the store without being accosted by employees asking, “Did you need help finding anything?” “Can I help you?” “What can I help you with?” The last time we went there, we were in the store less than 15 minutes and were asked by 4 employees if there was anything they could help us with. Very irritating.