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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Oddly enough, about ten years ago I bought an Apple computer at Circuit City. It was the demo box on the floor, almost the last Mac in the store. Apple had cut them off.
Every retailer pushes extended warranties. It’s the most profitable non-product in the store. Money for nothing.
What I hate even more with best buy is that they do not back their products. you can buy a laptop, take it to your car in the parking lot, find out it does not work ( happened to a friend of mine ) take it back to the store, literally 10 minutes after you bought it, and they will not exchange it or take it back, but they will send it out for repair ( minimum wait time is 6 weeks ) i will never buy anything from them
> 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.
What a shame! I haven’t been to Circuit City since the XMas rush. It was the *only* store where a salesman, cheerful and knowledgeable, came up to help me in under 30 seconds.
“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.”
I just went into our newly built Lowe’s a few weeks ago. Every sign, and I mean EVERY sign, in the store is in English AND Spanish.
Must be the same guys that ran “Service Merchandise”.
I'm one of those people. I know its fashionable to crap all over your fellow American, especially if he or she works for a living and makes a decent wage doing it, but I won't support Circuit City's move.
One time, when I was on vacation, I went into a Circuit City to buy something and everyone I talked to or asked for help looked at me like I was speaking a foreign language or something. Then I remembered I was in Mexico.
I’ve heard that from other people, too. DH bought a stereo there, the face of it went completely dark, stereo still played music, you just didn’t know what you were going to play. He went into the store and tried to return it and they refused. They sent it off to be repaired and it just got back a few days ago.
We bought our 65” big screen from them 2 years ago, purchased the extended warranty to cover cleaning of bulbs, replacement of bulbs, etc. Getting someone out here to take care of any issues with the TV practically takes an act of Congress! I am usually a pretty pleasant person, but I’ve had to get really nasty with a few of their people.
I suspect the entire retail industry operates on such a low margin that many of these big players are looking to drastically reduce -- if not eliminate -- their reliance on any sales staff. I can see a day in the not-too-distant future when consumers will have an expectation that retail stores that sell common products will operate like self-serve gas stations.
Still looking for a Palm Pilot. Any suggestions. I'm wary of buying online because of "return" hassles.
Had a similar experience, only on my way out the door I first found the store manager and let him know what happened and let him know that I would never set foot in HIS store again.
Check CC’s stock performance over the past six months - down close to 50%. The bosses’stock options are now worthless.
IMHO.. these corporations don’t understand while making those decisions ......is that people who work for a company have friends, relatives and acquaintances. Those people also have friends, relatives and acquaintances. When they see “a person” being treated in a shoddy manner... they will shop elsewhere out of loyalty or distaste. The repercussions are endless. Employees are not mere numbers on a piece of paper, but a viable and valuable asset.
my son bought a cell phone that is a computer also....this thing is awesome!!! it can do everything and more than a pda, all in one unit. he spent something like 600 bucks on it, but he can cruise the internet, keep his address book, hell, it even has stereo speakers built into it. and it is not very big at all...
Cutting your better paid sales people not only leaves you with poor quality on the floor, but also leaves you with no one with experience to train the newbies coming into the system.
Retail Sales has such a high turnover, so you have untrained and inexperienced people feeling their way blindly through the process, and in less than amonth or two, they are training the next batch... not a pleasant cycle.
Stepping over dollars to get to dimes.... same old story.
I've never had so much fun as raising my three boys.
Often, when they were very young, they would accompany me to some store that ignored my patronage. They were well behaved, and keenly attuned to the language of my subtle looks & gestures.
Once ignored for too long, all I need do was glance at them, and they would immediatly turn screaming hellions going three different directions across the store.
It never..never failed. I instantly had five people anxious to satisfy any/all of my shopping needs. God, I miss those days.
Ha-ha-ha-ha! Circuit City is so smart!
Of course corporate had all the right excuses, etc. but when you talked to the vendors that came by regularly the spiffs were still the same. Corporate however was cutting how much we were getting and pocketing the rest for other 'expenses' (namely that failed joke Divx they lost their tails on)
If the top level managers at Circuit City had selectively and quietly removed the worthless managers and employees, this problem would not exist. Some of those people would have been high paid, some not.
The real indication here is that higher management does not have a clue how to properly run a business. Invest in Best Buy.
I've always had this experience at Circuit City. The last time I tried to buy something there was about 10 years ago. I've always thought that somehow, in that store, I was invisible.
Business and consumer economics commentator Bruce Williams has said it many times: “Your best salesman should be your highest paid employee.” And he meant higher paid than management if that person is contributing more to revenue.
Seems that while competition in large screen TVs grew more fierce CC got rid of the folks that were best at moving that product line. Penny wise.
Well their sales are off by 80%.
When they took over I told them what they needed to do to boost sales but they were college trained and they didn't listen to me.
I went to a rival company and they snapped at the chance to boost their sales and I am making twice the money.
I won't shop there because I've been burned too many times by their rebate scams.
A experienced, highly knowledgable employee who is well paid is an asset, not a liability.
Back in the early 90’s, I worked for Motorola in Huntsville, Alabama. This was a non-union facility, so the people who were retained long-term were good employees.
They decided they needed to move all of the 15-20 year employees (you know, the ones who know how everything works and where everything is and how to build ALL the products) out of the production area and go to contract/temporary labor to staff the production lines.
We cut costs. Of course, the engineering support staff was CRUSHED with an unbelievable work load. We basically had to prepare every work station for a 5th grade level employee. And when you had a screw up, it usually was a HUGE screwup because the people who would have immediately recognized it were “too expensive” to be working in that area.
After a few years of that, the plant closed.
Circuit City didn’t shoot themselves in the foot, they shot themselves in the head.
Home Depot is just as bad in my experience.
Circuit City won’t get any business from me due to this decision.
Terrible, isn't it. Our local True Value is thriving. The employees know me (and all their regulars) and they always help me find what I need. Amazing how good salespeople generate good business.
“God, I miss those days.”
Start a daycare business and take the little tykes shopping with you....:)
I feel bad for the employees, but I always liked Best Buy better anyway.
My brother says the same was done at Home Depot.
Who's running Circuit City? He/she/they really need to go back to Corporate Management 101, as (believe it or not, populists) this is what they tell you NOT to do in B-School.
Circuit City has 38% greater SG&A expense as a % of sales compared to Best Buy.
That’s why they did what they did.
CC was 21.2% last quarter.
BBY was 15.3% last quarter.
I purchased one of their worthless top-of-the-line warranties on a $3,000 laptop computer. I was assured by the salesperson that the warranty covered everything short of an act of war. Wrong. It was no where near what the salesperson had described.
They refused to even send the laptop in for repair at my cost. I would support criminal charges against them, but frankly I think the economic consequences of their poor business practices are going to be more effective!
I will never shop there again. Period.
That's a fine summary of a common business management practice.
What's truly amazing is the number of managers who still collect a paycheck (and often bonuses) after implementing it, since it is a recipe for disaster.
Instigating/advocating frenzied games of 'knock over the manequins' at the JC Penny, food fights at the grocery store, and barking like a pack of dogs at the mall Santa(a tradition we still observe); apparantly puts just a whole lot of parents off.
I know how you feel. Nothing irritates me more than a bunch of employees who know absolutely nothing about the products. I went to purchase some shocks for my truck a while back and the salesperson brought out one shock. She did not know that there were four of them on a vehicle. One of her coworkers had to explain it to her.
Just..just...damn!! Truly stunning.
My next big ticket item is coming from Sams.
It sounds as though your friend may be overpaid.
The low priced help can’t s#it on the customers as well as the high priced help can.
Could also be the fact Circuit City is the most UNINVITING sales floor.
LOUD, Rap music blasting, buffoon employees who are too busy playing with the floor models to give customer service and are really there to babysit the store.
Was it Reagan or Rush that said no country ever taxed its way to prosperity?
Nah. He's making around fifty grand, but he'd make twice that in the private sector. He doesn't believe that, but I do. He's one of the most conscientious people I know. He'd make a good freeper, but not from work. Not like me. =]