Circuit City to close all U.S. stores

[NThomas]

Feel free to merge this. I couldn't find an appropriate thread.
Circuit City to close all U.S. stores
January 16, 2009
Associated Press

Bankrupt Circuit City Stores Inc., the nation’s second-biggest consumer electronics retailer, said Friday it failed to find a buyer and will liquidate its 567 U.S. stores. The closures could send another 30,000 people into the ranks of the unemployed.

“This is the only possible path for our company,” James A. Marcum, acting chief executive, said in a statement. “We are extremely disappointed by this outcome.”

Circuit City just closed five stores in the Dallas-Fort Worth area, including a store in Mansfield that had only been open since Sept. 25. The consumer electronics chain continues to operate 15 stores in the region. The average store size is about 30,000 square feet.

The company had been seeking a buyer or a deal to refinance its debt, but the hobbled credit market and consumer worries proved insurmountable.

[Mballar]

Kewel. . .I need to pick up a new digital camera and a flat screen t.v. Maybe I'll get a great deal here.

[cowboyeagle05]

Well there will be a fabulous retail space open at Firewheel mall soon since Circuit City will be gone. Just in case anyone is interested its a quaint spot with Radio City Musical Hall style architecture perfect for big box retailer on a budget or a visionary business man who wants to be a part of a growing shopping destination.

[totheskies]

I'm sure we all saw this coming a mile away...

BEWARE of Liquidation sales though. Circuit City no longer exists, and their inventory now belongs to Liquidators.

a) They advertise these sales with "tremendous savings" but you're probably going to find a better price at a still-existing store (Best Buy, Conn's etc.)

b) If ANYTHING is wrong with your item, there is no store warranty and no return. You just get to sit there and be mad.

Be careful.

[aygriffith]

Before we bash liquidators they are doing their job since they paid for all that merchandise that currently is in the stores...

Generally the liquidator will come in and mark everything back up to 1st day on the market MSRP (not the constantly lowered MSRP that you see currently) and then take percent pricing off of that. So yes, currently you can probably go to Best Buy and get it cheaper and no it does no good to go look really smart and tell the liquidator its cheaper at BBuy, they don't care.

This is nothing new to DFW, this is now the third consumer electronics retailer we've had liquidations for in the last 5 years... Ultimate Electronics... Tweeter... and now Circuit City.

The market is going to be worse for this in the long run, you can't keep taking competitors out of the marketplace and expect everyone to really fight for the business. As it stands right now Best Buy doesn't have to fight for business, it just gets it and they know it.

Conns still is around and will continue to be around for one reason only, they own their own financing company that caters to giving credit to those with low FICO scores. It sure helps when you sell a TV at 5 points and over the course of a few years it makes 30 percent APR.

[cowboyeagle05]

Before we bash liquidators they are doing their job since they paid for all that merchandise that currently is in the stores...

Generally the liquidator will come in and mark everything back up to 1st day on the market MSRP (not the constantly lowered MSRP that you see currently) and then take percent pricing off of that. So yes, currently you can probably go to Best Buy and get it cheaper and no it does no good to go look really smart and tell the liquidator its cheaper at BBuy, they don't care.

This is nothing new to DFW, this is now the third consumer electronics retailer we've had liquidations for in the last 5 years... Ultimate Electronics... Tweeter... and now Circuit City.

The market is going to be worse for this in the long run, you can't keep taking competitors out of the marketplace and expect everyone to really fight for the business. As it stands right now Best Buy doesn't have to fight for business, it just gets it and they know it.

Conns still is around and will continue to be around for one reason only, they own their own financing company that caters to giving credit to those with low FICO scores. It sure helps when you sell a TV at 5 points and over the course of a few years it makes 30 percent APR.


Best Buy though is losing to the biggest electronics sellers the Internet and as long as we all have internet access there is still competition for them. There is a continuing diluted need for electronics to be held in the hand before purchasing. Circuit City shot it self in the foot when they announced that they were firing all there current trained employees and hiring not trained employees. It sounds backward cause they basically said they didn't want to pay the high price for people who knew how to work the stuff they were trying to sell. So even more people jumped to the Best Buy ship.

Its easier online to check on ratings for the quality of electronics, find numerous professionals who review the product from every angle and you have a guaranteed wide selection. Shipping is becoming free for numerous stores and with online institutions like Amazon offering free shipping on everything as long as you pay a simple annual fee the advantages are wearing thin.

[F4shionablecHa0s]

I've never understood the appeal of Circuit City or Best Buy. Fry's has dramatically better deals on everything AND a much better selection.

[mrgrieves]

All of this talk about sales on electronics, reminds me of Nero playing while Rome burned..

[monogodo]

I'm sure we all saw this coming a mile away...

BEWARE of Liquidation sales though. Circuit City no longer exists, and their inventory now belongs to Liquidators.

a) They advertise these sales with "tremendous savings" but you're probably going to find a better price at a still-existing store (Best Buy, Conn's etc.)

b) If ANYTHING is wrong with your item, there is no store warranty and no return. You just get to sit there and be mad.

Be careful.
It will still have the manufacturer's warranty.

[warden62]

I went to the Circuit City in Hurst yesterday.

I saw nothing spectacular. I did inquire about an LCD TV that had been sold out -- I asked if I could buy the display. They were fine with me buying the display, but they refused to take anything off. Obviously I'm not an idiot and left without the TV. I looked it up on Amazon, and they have it for less, plus free shipping.

My advice: Unless you're looking for small stuff (e.g. CDs, DVDs, other peripherals), don't waste your time.

[monogodo]

I've been through a company liquidation due to bankruptcy, so I understand how it works.


The bankrupt company sells their inventory to the liquidation company. The liquidators then get rid of all sale prices and mark the merchandise at MSRP & start with a 10% discount. They also cease to honor any coupons, either store or manufacturer. Some people will buy at 10% off of MSRP, but most won't. After a while, they'll drop the prices to a 15-20% discount. More will get sold, but most won't. They'll continue the cycle until they're practically giving it away. By that point, however, the only remaining items at Circuit City will be Zunes, and other items no one wants. What they hope for are people to buy at the higher price. The thing is, everyone has their own idea of what a good price is on a particular item. You may think anything priced higher than 40% off of MSRP is a ripoff, while the next guy will think that 30% off is a steal. You may see an item that you want, but the price is higher than you want to pay, or you're hoping the discount will increase the next time you come in. You have to decide if you're willing to gamble that someone else will want a bigger discount.

Another issue is the level of customer service to expect when shopping at a liquidation. When we were going through it, we were told that the highest level of customer service we were to provide was to point the customer to the area where the item was supposed to be, and to let them know that if we still had it, it should be there, if they can't find it there, someone probably moved it, or the inventory information in the computer was incorrect. If someone called to ask if we had it, we were to look it up on the computer, and if it said we did, we were to tell the customer that the computer says we have it, but that we can't verify that we have it, they'd have to come in and look for themselves. It sucked.

Essentially, the Liquidation Specialist's job is to sell everything for as much as they possibly can get for it. If that means keeping the discount at 15-20% longer than it was at 10%, they'll do it. As long as product is selling, they'll leave the discount alone. The employees never know when the next discount will take effect until the night before, when they have to go through and change the signage. So asking when it'll go down is pointless.

[galore]

I've never understood the appeal of Circuit City or Best Buy. Fry's has dramatically better deals on everything AND a much better selection.

Best Buy and Circuit City have many more locations (even in BFE).

[aygriffith]

I've never understood the appeal of Circuit City or Best Buy. Fry's has dramatically better deals on everything AND a much better selection.

Fry's is either a great experience or shopping hell... Its the physical representation of shopping at Newegg.com. They have so much inventory they often don't know what they have and the sales people are 2nd tier commission sales people that can be mind numbing.

Circuit City failed because of many of the reasons mention previously like the firing of their best commission sales people then firing their best hourly people. But the real reason is they were using the Service Merchandise model of look at it and bring a ticket to the counter and we'll load it for you. In all reality Circuit City always had a higher level of service than Best Buy. But as the market widened Best Buy came on the scene and told everyone they could do it better and it was a much more of a sensory experience going to their stores. Circuit had older stores with a very specific layout that they could never really make into Best Buy's. They suffered through years of identity crisis up until their current concept came out which was too little too late.

As a retailer you have to have clearly define your market and what you offer and why you are different and better. Circuit City went from being the industry leader to a company who was just trying to keep up with Best Buy. They should have either stayed the course with their old concept or evolved it without trying to be a Best Buy store with red instead of blue accents. People would appreciate their better level of service and knowledge if they had let people know thats what they stood for and developed that angle, if price constantly won out there wouldn't be Modia/Home Theater Stores and Starpowers out there.

I've worked with Circuit, Magnolia, Good Guy's and Tweeter when I was working in Retail Consulting. They were all great companies and for one reason or another Best Buy directly affected all of them going out of business.

[Spjz]

^I worked at Fry's while I was in college. When Circuit City was removing the commission pay structure, several of their guys tried working for Fry's. If I recall correct, Circuit City was having difficulty even way back then.

Fry's business model is basically copied off of Walmart's. The owners revered Walton to the extent that I'd expect some sort of shrine at the home office in San Jose if I were to ever go there. Another aspect of Fry's that will probably serve them well throughout the next few years is their "pay as you go" philosophy. They don't, or at least didn't while I worked there, borrow money to open new locations. That's highly unusual from what I understand. They were also one of the last retailers to offer store credit cards and when they did, they were stingy as hell. I recall customers complaining about how much more credit they could get at Best Buy.

[Double Wide]

this sucks for Park Lanes development!

[cowboyeagle05]

Well that's not the only empty space Park Lane will have when it opens but it won't help.

[aygriffith]

Well that's not the only empty space Park Lane will have when it opens but it won't help.

Have other published retailers pulled out of the development?

[aygriffith]

^I worked at Fry's while I was in college. When Circuit City was removing the commission pay structure, several of their guys tried working for Fry's. If I recall correct, Circuit City was having difficulty even way back then.

Fry's business model is basically copied off of Walmart's. The owners revered Walton to the extent that I'd expect some sort of shrine at the home office in San Jose if I were to ever go there. Another aspect of Fry's that will probably serve them well throughout the next few years is their "pay as you go" philosophy. They don't, or at least didn't while I worked there, borrow money to open new locations. That's highly unusual from what I understand. They were also one of the last retailers to offer store credit cards and when they did, they were stingy as hell. I recall customers complaining about how much more credit they could get at Best Buy.

Thats interesting about their pay as you go philosophy... I'd almost wonder if there is another unspoken underlying reason they have that setup. I'm sure they tie up a substantial amount of credit having in so much inventory in all their stores. I'm thinking they might be slipping sedatives in their account department's coffee pot because their inventory levels at one store could satisfy 10 Best Buys. Its great to have every brand, in stock all the time but the overhead kills you and if you don't sell enough before it goes DISCO you are in big trouble. Buyers will make or break a company and it takes a good accounting department to keep them in line because the buyer always wants to take the next great deal on product B just to get an extra discount on widget A... never mind widget B is such a lame duck it couldn't get sold on a cold day in Hell.

But Circuit knew this all too well, and once you declare bankruptcy it gets real hard to get adaquate levels of merchandise from you suppliers. It doesn't matter what that rosey article in the NRF newsletter said about how your suppliers are working with you to give better access to higher margin product durring bankruptcy, thats just a nice way of saying youre not getting the good stuff because you won't pay us back!

[Spjz]

Thats interesting about their pay as you go philosophy... I'd almost wonder if there is another unspoken underlying reason they have that setup. I'm sure they tie up a substantial amount of credit having in so much inventory in all their stores.I'm sure they're there was SOME credit involved with inventory. The pay as you go thinking was mostly for the physical locations. The company didn't lease any real estate. All of their locations are outright owned and paid for with cash. I will say though, it's a very secretive company and because its not publicly traded, nobody really knows the full extent of it all. I'm pretty sure it's still family owned (three brothers and their lawyer).


I'm thinking they might be slipping sedatives in their account department's coffee pot because their inventory levels at one store could satisfy 10 Best Buys. Its great to have every brand, in stock all the time but the overhead kills you and if you don't sell enough before it goes DISCO you are in big trouble.But remember that a considerable amount of their inventory is OEM or refurbished. When it comes to brand new in a box inventory, they don't have that much more on hand than an ordinary Best Buy. Also consider that Fry's keeps the VAST amount of products returned by customers due to dissatisfaction and resells them. That's a pretty big money saver. From what I understand, Best Buy, Circuit City, Comp USA, and others send most of their customer returns back to the vendor (where it is "refurbished" and sold to Fry's?).


Buyers will make or break a company and it takes a good accounting department to keep them in line because the buyer always wants to take the next great deal on product B just to get an extra discount on widget A... never mind widget B is such a lame duck it couldn't get sold on a cold day in Hell.Most of the buyers at Fry's have been internally promoted and began their Fry's career as sales associates. That seems kind of incestuous to me, but then again, Fry's isn't in Circuit City's shoes right now, so what do I know.

[Mballar]

Kewel. . .I need to pick up a new digital camera and a flat screen t.v. Maybe I'll get a great deal here.
I went by a Circuit City on Monday to check for deals. I was NOT impressed. Even withthe "discounts," Best Buy beat them on a lot of items.

[RobertB]

There's a big difference between accounting and reality, I think. Since Fry's isn't publicly traded, they don't have to play cute accounting tricks, like the rules that would penalize them for having a lot of in-store inventory. How much of the "Just-In-Time" model, which has its own overhead, is just a shell game to make the balance sheet look better to investors? And look at what we know now about the fancy consumer credit schemes, where bad credit looked like good investments. It was a shell game at best, but it turned out to be more like a pyramid scheme.

It sounds like Fry's looked at other companies' rosy SEC-approved financials, and saw that they were no more substantial than the Emperor's clothes. By being privately held, Fry's could use whatever accounting rules made sense to them. They're still in business; Circuit City & co. aren't. It's hard to argue with that accounting.

[mjblazin]

Companies can't make up their own accounting rules. The SEC might not care, but the IRS definitely does. As outlined, the difference is the use of your credit: receivables (credit card) and inventory vs. long term leases/infrastructure improvements associated with expansion. It sounds like Fry's minimized the latter while tailoring the former to stay within a sales ratio. That is a time worn method of maintaining financial flexibility used by public and private firms. Just In Time is a manufacturing concept that is more about reducing waste/clean work areas/producing only what customer wants. In retailing, everything is already the the finished product.

Fry's looks to me to be the physical version of its Outpost website. Instead of someone else going to the warehouse to grab the order, I do it and avoid the shipping charge. That's a different model than what was Circuit City's.

[Double Wide]

Well that's not the only empty space Park Lane will have when it opens but it won't help.

empty spots can be expected at any new development.

[TheMapman]

Never mind, sorry.

[warden62]

Never mind, sorry.

That's okay.

[RobertB]

FWIW, from the Houston Chronicle: Many find Circuit City liquidation sale not such a deal (http://www.chron.com/disp/story.mpl/hotstories/6231822.html)

[trolleygirl]

thanks Robertb- my s/o mentioned just last night that we may wanna mosey on over to CC to see about a new TV. Looks like we'll wait for another month or so.

[RobertB]

thanks Robertb- my s/o mentioned just last night that we may wanna mosey on over to CC to see about a new TV. Looks like we'll wait for another month or so.
Or just go to Fry's. Somebody will go to CC and fall into the familiar trap, buying something at an inflated price because it's on "sale". By the time the discounts are actually worth making a trip for, there won't be anything left but replacement bulbs for projection TVs, a few boxes of 5 1/4" floppy disks, and some buggy whips.

[tamtagon]

... some buggy whips.

that's what she's looking for

[trolleygirl]

THanks guys. Too busy laughing make a clever comment.