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A Hundred for Circuit City

A guest post (the first!) by my good buddy, Anthony , who after a couple of minutes of brainstorming with me on what companies to offer $100 for and what we’d do to save them came up with this little bit:


Hi everybody, I’m Anthony, Ben’s partner in low-ball offers to disastrous companies. A couple of weeks have gone by and unfortunately it appears that no one has been willing to accept our $100 offer to run the next failing bank or company division (Damn that Dogbert…).

Now Ben and I are realists, we understand that companies may be reluctant to take advantage of our offer, but when you change CEOs only to find yourself looking at a share price of $0.20 (down 95.24% in 2008) and scrambling for ways to avoid Chapter 11; it just might be time for a major change. Yes, we’re talking to you, Circuit City.

Circuit City’s financial situation has deteriorated steadily since 2006. Revenue gains have been marginal in comparison to Best Buy’s rapid growth. In 2007 Circuit City incurred a loss of $8 million in stark contrast to Best Buy’s $1.37 billion in profits. If that weren’t bad enough in the most recent quarter (ending Aug 2008) Circuit City racked up over $200 million in losses. Total debt has increased steadily over the past three quarters and same store sales (a number showing sales that don’t come from new stores, making it a good sign of how well Circuit City is managing sales growth) fell 7.7% in FY2008. Adding insult to injury Bernard Sands recently pulled its recommendation for vendors to sell goods to Circuit City over concerns the retailer would be unable to pay. On the other hand, their top competitor, Best Buy, is flourishing with its revenue growing by double digits over the past four years. Clearly, something needs to be done.

This is where Ben and I come in. For the low, low price of $100 (probably worth more than the company should be right now), the two of us propose nothing less than a complete revamp of Circuit City’s store format and business strategy.

Since “business as usual” is simply continuing to take on Best Buy on its own home turf, we believe the best method for reinvigorating sales is to provide consumers with a new consumer electronics store experience — one that acknowledges the rapid pace of development in consumer electronics and provides the consumer with a practical while flexible buying experience. This new store setup will differentiate Circuit City stores from the plethora of typical electronics retailers by emphasizing “platforms” rather than individual devices. The reason for this is that the rapid pace of technology makes it difficult for the typical consumer to always make fully informed purchasing decisions. This means that consumers may buy products which aren’t compatible with or don’t work well with one another (e.g. HDTVs and various speaker receivers). The wide range of electronics that these stores need to carry also make it very difficult for the store clerks to understand all the options that consumers may want.

What do we propose? Take a page straight out of IKEA’s playbook — instead of organizing the store by device (e.g. a TV section, a MP3 player section, etc.), organize the store into “platforms” — here is a hardcore gamer’s living room setup, here is a budget home office setup, here is a student setup, here is a always-on-the-go setup, etc. In each case, instead of highlighting specific devices, we would encourage Circuit City and its employees to highlight a particular electronics experience customized for a specific use. This would help Circuit City’s relations with its suppliers, as the suppliers already are attempting to target different products to different types of customers, and would serve as a useful service for customers who have no clear idea of which devices are tailored for them, nor how the devices can work together. Also, in much the same way that IKEA lets you customize specific pieces of the furniture, this store experience gives customers flexibility by presenting choices which don’t interfere with how the electronics work together (e.g. different colors, a slightly higher-end or cheaper device to substitute, etc.).

This new customer orientation also suggests a structure for a new, more useful website. Ben and I propose to integrate Circuit City’s website into its store business in a way that no store has ever done before. Whereas most companies operate their stores and websites separately, we would force Circuit City to not only organize the website in the same way that the store is (to help simplify things for customers), but to also tie them so closely together that a customer could quickly and easily use the website to schedule repairs and pickups, check on the availability of products in their local stores in real-time, download product information (e.g. manuals, flyers, drivers, etc.), and even check out ways to customize or replace specific pieces (e.g. a different color game controller, a slightly higher performance sub-woofer, etc.).

Neither of these initiatives are easy, nor do they represent all of the ideas that Ben and I have, but they are a good first step in how to save Circuit City’s sinking ship. As Circuit City spokesman Bill Cimino told the WSJ, “[t]he management team, board of directors, and its strategic financial advisers are conducting a comprehensive review of all aspects of our business to determine the best methods of accelerating our turnaround”.

They haven’t gotten back to us yet, but I’m sure, if they want their company to succeed, they’ll give it some thought.(Image source)

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2 Comments

  1. […] Made a standing offer with my homey Anthony of $100 for any troubled firm or division out there (we’re still looking at you, Circuit City) […]

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