When Jim Collins published "Good to Great" in 2001, he identified only 11 companies as being great. Circuit City was one of these companies. Eight years later, Circuit City announced that it was entering Chapter 7 and closing all 567 stores.
So what happened? The Corner Office, highlights some of its thoughts on what led to its demise in this post. Reasons they identified included bad real estate deals, lack of focus on being the low cost seller, mistakes with its sales force and straying from its core. All of these no doubt played a role in its demise, but I think there are a couple of other points to consider as well.
Collins largely attributes Circuit City's greatness from its ability to create a great operating system and then having store managers with a wide range of accountability in that system. As Collins noted in the book: "In a sense, Circuit City became to consumer electronics retailers what McDonald's became to restaurants - not the most exquisite experience, but an enormously consistent one." To me, that quote speaks volumes about why Circuit City will become a historical footnote.
Circuit City and McDonald's both lost track of the consumer as they were more focused on what had made them great (the system) than what was going to extend that greatness. Circuit City's model were designed for a time when competition wasn't everywhere and scale was hard to achieve. It was also a time when the product wasn't a commodity (which electronics are today). Competition today for electronics is far different. I can find the same gear at any store that sells electronics and I can likely buy it at the same or nearly same price everywhere. To compete, companies need to differentiate themselves in the eye/mind of the consumer. Circuit City failed to do that.
As an example, Holyoke (WMass's shopping mecca) has both a Best Buy and a Circuit City. In the past five years, I have spent thousands at Best Buy and probably not a $100 at Circuit City. Until recently I never thought about why I shopped at Best Buy instead of Circuit City but it does make sense as I look at it.
So what happened? The Corner Office, highlights some of its thoughts on what led to its demise in this post. Reasons they identified included bad real estate deals, lack of focus on being the low cost seller, mistakes with its sales force and straying from its core. All of these no doubt played a role in its demise, but I think there are a couple of other points to consider as well.
Collins largely attributes Circuit City's greatness from its ability to create a great operating system and then having store managers with a wide range of accountability in that system. As Collins noted in the book: "In a sense, Circuit City became to consumer electronics retailers what McDonald's became to restaurants - not the most exquisite experience, but an enormously consistent one." To me, that quote speaks volumes about why Circuit City will become a historical footnote.
Circuit City and McDonald's both lost track of the consumer as they were more focused on what had made them great (the system) than what was going to extend that greatness. Circuit City's model were designed for a time when competition wasn't everywhere and scale was hard to achieve. It was also a time when the product wasn't a commodity (which electronics are today). Competition today for electronics is far different. I can find the same gear at any store that sells electronics and I can likely buy it at the same or nearly same price everywhere. To compete, companies need to differentiate themselves in the eye/mind of the consumer. Circuit City failed to do that.
As an example, Holyoke (WMass's shopping mecca) has both a Best Buy and a Circuit City. In the past five years, I have spent thousands at Best Buy and probably not a $100 at Circuit City. Until recently I never thought about why I shopped at Best Buy instead of Circuit City but it does make sense as I look at it.
- The asthetics of the stores. The Best Buy has these bold blues with a very open feel. While there is plenty of merchandise, its not cramped and its easy to find. Circuit City has these dull red/grey color scheme and the store always feels claustrophobic.
- Brand Recognition. I can't think of a single Circuit City commercial and while I hate most of the Best Buy commericals, you at least remember a bad commercial. Basically, Circuit City did nothing memorable to create a brand.
- Wow Factor. When you walk into a Best Buy, you get to see the technology at work. The entire back of the store is dedicated to big screen tv's and if you walk down the video game aisle, you'll have the opportunity to play Rock Star on the Wii or some other system. Circuit City never put its products in the position to sell themselves - Best Buy does.
- Complimentary Services. Best Buy has the rewards points so you can get coupons for purchases. I'm not aware of a Circuit City plan. Best Buy rolled out Geek Squad to help people install/service these incredibly complicated electronic gadgets. Circuit City never countered. A critical point when you consider the buying power of all those boomers who still can't figure out how to set up a VCR.
- Location. It always seems that Best Buy got the better location as they always seem to be in the mall. Circuit City always seems to be just outside the mall, so its not as convenient.
So there you have it, my quick take on Circuit City. Let me know your thoughts on why Circuit City is no longer a shopping alternative for you and also what you think its demise means in the long-term on consumer electronics.
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