Wow, what a read that was. I was one of the sales counselors let go in the 2003 comm--hourly change.
I was told by my Store Manager that they calculated your last year and averaged out an hourly rate, if you were over say 15.00 an hr, you were gone. I was gone. 3900 of their best producers, never made sense to me. Then again let me illustrate a point made by a District Manager once--this spoke volumes about CC's demise to us way before the fall.
He had a white board and some markers he wrote Wal-Mart in one corner, and then Target in the opposite corner, and then wrote K-mart in between. he said, "Now K-Mart tried to be like WM and hit the low end and that failed. They then tried to be like Target and hit the higher end , and look where they are.
He then drew a line for a new section. and likewise put BestBuy in the same corner as WM--and then put Tweeter (a high end A/V chain) in the opposite corner. then he put CC in the middle, and he said, "Now," and I mumbled something about the fate of CC going down the same road as Kmart. HOw right that was.
I love how you nailed the locations issue. I think the two keys--if reversed we might be having a different conversation--is the loss of the best employees--both times 03 &07--and their arrogance in location ultimately were the final blows.
CC owned the location i worked at, and at this location a bank had built on the front of the property--of the MAIN STREET I should add--and after what 12--15 yrs people still came in and would ask me how long we've been here? As you so rightly pointed out, BB planted thier store directly across the street, and in full view from the road. BB parking lot was always full ALWAYS. Ours, usually had about no more than about 10--15 cars at one time. I had complained to our Managers that our location was very bad and hence the lack in numbers. they would judge by the Cd Dept traffic, and say you could have sold those people. I was in the top 5 of sales every month, and they were blaming me... you nailed it... Arrogance.
They refused to believe that BB could ever surpass CC. They did, and CC stayed standing there with their heads in the sand.
It was sad, I loved the experience of working there, and the customers, but CC did it to themselves. Had they kept their people and moved locations to better serve the public, they effectively told the public by keeping crappy locations and crappier staff, we dont care about your experience here at CC and we are so arrogant we still think that you'll buy from us. While BB was busting their humps to become number 1.
Everyone could see it but them. I'm sure they see it now.
Thanks for the book a good read, but more than that, a lay off is hard enough and mine in 03' hit me hard and left me feeling concerned about myself as a individual. I've always felt that being in the top 5 of sales really meant something to me, and that they were wrong in choosing to let the best of their best go. There is some closure in this book for me, in that you being an outsider confirmed what I as an insider knew to be true. It just never made sense. To end this story, the guy in the market in the next county held CC record for Big Screen TV sales Nationally. He made as a salesmen over 100,000.00 in Commissions. I find it hard to believe a guy who could sell that much wasn't making CC a profit. I loved my time there, but they never made sense in their choices and your book outlines those perfectly.
I own my own business now and I will be on the look out for those mistakes. I knew them to be true in my heart, but thank you for outlining them accurately for me. i will save this and re-read it many times to keep sharp.
Thanks again,
Geoff Adams
Mr. Eames hits the nail in the head once again! Having worked for CC in the past, I certainly concur with Mr. Eames's insight re: CC.
I agree with your points, but Circuit City for several years became known as the place that DOESN'T have what you want. Millions of people learned that Best Buy and others did. This - coupled with what you have pointed out - was absolutely fatal.
| Reply from Don Eames: |
It's a good point, Bob. I remember during my years at Best Buy, many customers who came to our stores complained about Circuit City's in-stock which I guess played well for us.
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Jerry Cerchia
10/19/2009
Good work, Don. Pretty much "nail on the head."
My core belief, is that it is usually the unmoderated arrogance that gets you into trouble, because when that behavior is present, it blocks out all other sensible reasoning. In the fifteen years I worked for them (late 60's thru early 80's) this wasnt the case. The culture back then was more like what we had at BBY in the 80's and 90's and forward. To see CC fail and liquidate that quicky was very painful to watch.
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Kristen Waychoff
10/11/2009
Your book was very insightful - thanks. I am doing research for my Strategic Management class; writing a paper on the factors that attributed to a failed company.
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Connie K. Smith
10/03/2009
Extremely interesting. I am learning about business currently, my assignment was to answer questions about Circuit City. There just wasn't enough information to make a sound statement so I looked through a few sites and yours was one of them. I'm glad I did because you confirmed exactly what I thought were errors in judgement. Basically they got what they deserved, but sadly took a few good people down with them; however, they properly already found great jobs despite their upset. Thanks for writing such a piece without charging students for learning these valuable insights.
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Russell Morrow
10/03/2009
What a highly enjoyable read with some great lessons to be learned and some really good advice for leaders in any business.
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Eric Coggins
09/16/2009
It is masterfully written. The points you make are very appropriate to Circuit City's situation. I completely agree with the assessment of the way Circuit City went about cutting out the appliance section of their business. Related to your comment about continung with an old strategy, I recently read Leading the Revolution in which the author Hamel speaks loudly about formulating a new strategy or business concept model before the old one is dead.
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Robert Joseph
09/13/2009
I found your eBook through a link on Wikipedia and really thought the points you made were dead on. I worked for Circuit City for six years as a Customer Service Rep, a firedog Technician, a Technology Supervisor, and an Assistant Manager. The six points that you made are exactly what I and other Circuit City managers talked about for the last two or three years of operation and are exactly what I believe made the business go under.
People constantly ask me what happened to Circuit City, and all I can tell them is I worked with some of the best people I have ever known in the stores themselves, but the corporate decisions made less than no sense and usually hurt the company. The result was at the store level we were always forced to overcome built-in obstacles to success, and of course never allowed to give any real negative feedback about what was happening. It is so odd now that I have moved on to another company where process work consistently - I look back on my experience at Circuit and wonder how we ever got anything done. I would actually say that it was only because of the exceptional people that I worked with on a daily basis that the company was even able to stay afloat for the final couple of years. They may have not been the best trained and most knowledgeable (as you said those people were eventually all let go) but they all had a drive to succeed and an ability to keep working even when it was obvious that the corporate strategy was failing.
The only thing that I would suggest that you add to your book is this - it is necessary that your upper management understand what is happening "on the ground" and be willing to adapt a current strategy when it is failing. To often in the retail world pressure flow from the top down to just get the job done, legitimate reasons for a lack of success are just written off as excuses and people are told to just "make it happen." I think that with the strong brand that Circuit City still had up until about a year before it closed that if this principle would have been followed then not only would Circuit still be open but they would have been able to realize the mistakes being made and overcome them.
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Rick Wingender
09/07/2009
Hi Don,
I just read "Six Fatal Mistakes", which was pretty interesting. After working at Best Buy, I also worked for Circuit City from 1996 - 2000, as a store manager, as a buyer, and finally as the category manager for Circuitcity.com.
I thought it was interesting that you called out their inclusion in "Good to Great". I read that book a few years ago while I was in grad school, and thought their inclusion was quite ironic, since I saw the beginning of the demise firsthand. Mind you, I thought Circuit was a great company when I joined it. I worked with some pretty exceptional people, and learned a great deal.
First, your comments about retail locations were spot on. I started with Circuit in early 1996 as a store manager in Ohio, and visited all the stores in the Cleveland area. I was amazed at some of the locations - in some cases, they were almost impossible to see from the road. Circuit's Thalbro store in Richmond was in the middle of the city, and also nearly impossible to find. This store was adjacent to some corporate offices, was an "original" store, and fully paid for. I always thought that sentimental feelings kept it open - despite the fact that the store was always empty. The comment about a weak "remodel and refresh program" is also right on. During my time in Richmond, I made many trips to our "secret warehouse" where we developed our new concept layouts. Unfortunately, we could never seem to make a decision, and so, outdated stores often went years without being retrofitted, and ended up looking dated and dingy. By the way, I also spent a year and half working for CompUSA, a time in which I opened five new stores for them. Similarly, their stores also looked no different in 2008 than they did in 1994. Same result.
The home appliance business observations are fascinating, if not surprising. It was a Kennedy-assassination-esque moment for me - I remember where I was and what I was doing at the moment of the announcement. Within an hour, I had sold 90% of my Circuit City common stock. This was not long after I had read Jack Welch's first book, famous for his comments about being #1 or #2 in a business, or get out. Well, after Sears' 37% market share, we were a fairly respectable 11%, with Best Buy and Home Depot both behind us at around 8% each. What I do know is that appliances brought a lot of our core customer traffic into our stores - traffic that we lost once we switched to more digital products.
A lot can be said about the change to a non-commission model, but I'll just say that I thought it was a horrible idea. Paying commissions, in my opinion, wasn't the problem. Managing the commission structure and levels, and managing career progression of the best salespeople was a bigger problem. Circuit City obviously was well-aware of Best Buy's change to Concept 2 back in 1991 (when I became a "Senior Product Specialist". Circuit City also changed its small electronics staff to non-commission prior to the rest of the stores' departments. That change wasn't as dramatic - which they should have understood better. That change wasn't as dramatic because the difference in income and in salesperson quality in that department didn't change very much with the pay structure changes. However, when you take a video sales counselor and put him on hourly, that is a much more significant drop in pay (if you even kept him on). I think the earlier (uneventful) change in the small electronics department gave them a false sense of hope.
It was at this point that I started becoming famous for saying that we were trying to "out-Best Buy Best Buy", a strategy I didn't think Circuit could ever pull off. I later mentioned this to Todd Magnuson, then the Wireless Buyer at Best Buy while I was the National Accounts Manager for AT&T Wireless, when we were comparing companies late one night. We also agreed that decision-making at the two companies was vastly different. Best Buy's decisions were often made at lower levels, were made more quickly, and often involved more risk-taking than was found at Circuit.
The Firedog comments are interesting, but I have to believe that the reason they didn't do something much sooner was simply due to the failed Divx business. That business ended up costing Circuit City well over $100M, and probably created some gun-shyness.
I also believe that the "retirement" of Rick Sharp and promotion of Alan McCollough was a significant inflection point for the company. When I was a Buyer, I had to prepare and bring a monthly report to Rick Sharp on the state of the computer business, a practice continued under Alan. The difference was that Rick would talk to me for a few minutes about its contents, whereas Alan never did. It's a small thing, but it's one reason I thought Sharp was a better CEO.
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Enrique Fernandez
09/04/2009
your ebook is very interesting, honestly. it's short, concrete and understandable. it's a very good lecture for any business man in our and others industries.
Enrique
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Jürgen Pohl
09/04/2009
the eBook is brilliant! GREAT JOB.
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David Hamula
09/04/2009
Don,
Read your e-book with great interest and my humble pedestrian opinion is that you nailed it. If I may be bold and offer the Seventh Deadly Sin that they failed on was "Keep your Friends Close and your enemies closer". They seemed to have gotten this one wrong in that:
The very Arrogance that you cite clouded their ability to accomplish this. Their "friends," in the vendor community at Circuit's height were very dependant on Circuit's leadership and volume capabilities. Instead of making their bonds with their vendor community stronger, partnering to find new innovative products and ways to bring those products to market, they alienated them. Demanding more in their programs in both lower costs and higher back end monies while not living up to the covenants in the programs cost their vendor partners real money and eroded any partnership and trust the retailer had built over the years. Obviously this was done post appliance dumping when they had to find dollars to make up for the lost margin $$.
Then in keeping the enemy closer, they spent years teaching their employees and believing themselves that Best Buy was weak and their plan was folly. Instead of infiltrating and bring on mid level Best Buy employees who could bring the Best Buy plan knowledge, they chose to hire the biggest guns they could in the hope of hurting or possibly crippling Best Buy. Why this was a failed approach was because the leadership that moved over to Circuit from BB only had the BB lens. They also came with contempt for anything that Circuit was doing. Anything that may have been working at Circuit was dismissed by these executives. No attempt to ensure that the BB plan could be successful at CC was made. Instead, full steam ahead with implementing BB programs, reality be damned. At the same time, the very fragile employee culture was further compromised. The line level and field leadership who were led to believe that the BB business model was folly was now being asked to implement it. Adding insult, they were being asked to implement it by new leadership from that enemy. People in roles that they felt they deserved.
Just my 2 cents, I am sure that had you expanded more in each of the sections you world have made these connections.
Happy consulting Don,
David
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Christopher Reilly
09/03/2009
short, concise, but deliberate in getting to the "guts" or thesis of the story. Well captured the overall pitfalls of CC. Failing to create a unique individual customer experience vs. Schoonover attempting to Xerox the BBY playbook and cram it down a funnel to newbie hourly CC employees was the pitfalls. Well written, well put together, and well stated Don!
-Chris Reilly (former T3 Director and Texas territory alumni)
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Sheldon Church
09/02/2009
Don,
Great job! It is clear, CONCISE and to the point.
Sheldon
