Circuit City woes: A cautionary tale


The Associated Press headline reads, "Circuit City tries to reinvent itself." The electronics retailer is losing its head-to-head battle with Best Buy, and is looking for ways to put the red ink bottle away and use that black one for a change. It’s looking to concept stores, cost cutting and new services to turn things around.

RBR/TVBR observation: We don’t really have a dog in this fight, but we would observe that Circuit City began reinventing itself last year with it lopped off the cream of its sales crop to cut employee compensation expense. Besides generating a barrage of negative press, the company rid its sales floors of its most knowledgeable employees precisely at the moment in history when the DTV transition — the largest and most complex government-forced consumer upgrade in home electronic equipment ever — is poised to take off. When consumers most need knowledgeable point of purchase information, the company’s most knowledgeable employees are out on the street, or likely in many cases, have caught on with and are moving product for the competition.

The lesson applies to all types of businesses. You cannot save your way to prosperity; you cannot kiss your top talent good bye and expect the remaining kids to pick up the slack.

We admit that we don’t know all the ins and outs of Circuit City v. Best Buy, but we would venture that Circuit City’s decision to concede the talent factor to its competition has more than a little to do with the current situation.