Circuit City is now the largest retailer to bite the dust amid the worsening global economic implosion. While many analysts had expected the ultimate demise of Circuit City from the time it announced its Chapter 11 filing last November, it’s nevertheless a bit of a shock. As with anything else, life support is not the same as dead; once something is officially gone…no matter how much the passing may have been expected…it’s still a moment for noticeable pause.
It is at times like these that the analyses of “what happened” begin rolling in from all quarters. For example, some ascribe the closure to the retailer’s decision to lay off 3400 employees in 2007 and replace them with lower-compensated folks in an effort to keep costs down. It was suggested that company morale would suffer, and that customers would be turned off by at least the perception of a resulting downturn in customer service.
That move, however, was not the problem, and neither, really, was any other fundamental business policy implemented (or not) by the one-time retail giant. The problem remains what it has been for many months now: In a world where consumer spending habits are changing significantly and, it seems, permanently, there’s just not the same amount of room in the retail sandbox that there was once.
Indeed, all of the teeth-gnashing and hand-wringing over what should or should not have been happening in terms of managing the business is wasted energy. This comes down to the fact that in a period of historic consumer spending contraction, there’s just not room for everybody. I’m not saying there aren’t management –related reasons for why Circuit City was firmly rooted at #2 (behind Best Buy), but that’s not the same thing as explaining why a company like that goes all the way under.
Robert G. Yetman, Jr. Editor-At-Large www.ChristianMoney.com