Wednesday, December 16, 2009

3 Misconceptions About Circuit City

Months after the Circuit City consumer electronics chain closed, misconceptions continue to pop up in the media about what happened. These are three misconceptions I’ve come upon this week:

  1. Consumer spending is down because major chains like Circuit City and Linens N Things closed. Stores can’t pull people off the streets and make them come in and shop. These chains closed because consumers were already not spending very much in their stores.
  2. Circuit City made a mistake in laying off its “top sales people” to cut costs. The real mistake at Circuit City came five years earlier, when Circuit City strongly encouraged its sales people to sell overpriced extended service plans and accessories. That’s the reason customers stopped coming back. By the time the layoffs rolled around, Circuit City’s reputation was already ruined, and it was too late to save it.
  3. Former Circuit City customers are all shopping at Best Buy. To Wall Street, Circuit City and Best Buy were in direct competition, but that’s not the way consumers saw it. There are dozens of places where consumers can buy electronics. Consumers don’t care that KMart and (just to name two) aren’t considered consumer electronics stores, if they can buy what they want there.