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.