Circuit City: Another failed retailer

The closer of the nations second largest electronic retailer results in the loss of 34,000 employees, 567 store closings, and an approval to file bankruptcy as of January 2009 (CNNmoney.com). The number 2 electronics retailer next to Best Buy has agreed to start it's liquidation process. This company has made too many massive mistakes according to the CEO of Retail Management Consultants. With their decision to get rid of sales people and failure at management on top of a financial crisis, gives reason to why this company failed as a retailer.

With $3.4 billion in assets, $2.32 billion in liabilities and 150 broken leases by August the down fall to bankruptcy had begun. With the credit freeze no manufacture wanted to sell merchandise to a retailer who could not afford to pay for it.The slim chance that a buyer would want to, or even show interest in buying the business out of bankruptcy left Circuit City with no hope.

As early as 1990 Circuit City's brand value was already diminishing as it faced tougher competition from Best Buy, as they built larger stores in better locations and saturated the market. Not only did the company fall in the shadows of Best Buy but, the decisions to stop paying commissions to their experienced sales force and tight commercial credit gave way to the failure of the business as well. As they made more decisions to change management and store expansions, it resulted negatively. There were too many stores in unwise locations that were too big and impersonal. Their failed turnaround efforts led to less cash flow and more layoffs of employees. Their lack of innovation caused them to scum to the online sales of electronics and the boom of Best Buy, ultimately resulting in the flow restriction of merchandise, closing of stores, and liquidation of the company.

Circuit City's inability to adapt to the market and keep up with constant changing needs of consumers and the pace of their competitor,s gave way to the failure of one of the nation's largest electronic retailers. They became trapped in the middle as Wal-Mart moved into the electronic market continuing to implement their low price concept, while Best Buy dominated the industry. "Circuit City got stuck in the middle for too long" (Cohen, CNNmoney.com)


Article sources:
CNNmoney.com, P. Kavilanz, January 2009
Msnbc.msn.com January 2009