Why did Circuit City Fail?
CIRCUIT CITY is one the most glaring examples of mismanagment in today's market which is why we are writing about them here.
After seeing the rise of big box stores like Best Buy, HH GREG and Bradsmart, we started taking a deeper look at the only retailer in the electronics retail space that wasn't growing sales. The problem with Circuit City wasn't their prices or their locations. It was simply the layout of their stores. We tried addressing that problem with their staff only to have our advice fall on deaf ears.
The biggest difference between BEST BUY and Circuit City was in their store layout. BEST BUY designed their stores in such a way so that you had to walk through rows of DVD's and Music CD's (the cheapest item in the store) to get to the BIG TV, which why most people in the early 90's went to the Box stores. BEST BUY stores were designed so you had to walk through the less expensive merchandise to get to the more expensive items and you also had to walk back through that area to exit the store, giving you more of an opportunity to purchase something, even though it wasn't the $2000 TV you came to see.
With the introduction of the Flat Panel TV's, the Boom to upgrade every living room in America was on. Instead of taking advantage of this boom, Circuit City decided to put their photo dept. front and center of the store. Obviously they did not realize that with the advent of the digital revolution, cameras were becoming a low margin item in most electonic stores. Not to mention that with the introduction of the iPhone, now everone had a free digital camera in the pocket.
Another missed opportunity in the Circuit Cty management was the rise of the used game and DVD business. Circuit City already dedicated floor space, albeit in the back of the store, to selling movies. It would have been very easy to implement the trade model used by GAME STOP and MOVIE STOP into their already opened stores and take advantage of the "shift" in the social preferences. My point is simple. there were so many unseen mistakes and so many missed opportunities by the management at Circuit City that they were doomed to fail. The right advice (had they been willing to listen) would have saved them millions, would have saved the jobs of thousands of people and would have saved the company.
