Bankrupt electronics retailer Circuit City Inc. announced yesterday it will close its remaining 567 U.S. stores and liquidate all its merchandise and physical assets. Doing the math, that leaves ~34,000 Americans out of a job.
“We are extremely disappointed by this outcome,” James Marcum, acting CEO for Circuit City, said in a statement. “We were unable to reach an agreement with our creditors and lenders to structure a going-concern transaction in the limited timeframe available, and so this is the only possible path for our company.”
The Circuit City website and service call center will cease operations today.
Liquidation operations are beginning today and running until March 31st of this year. The company said it will redeem its gift cards through the liquidation sale, but the cards will have no value once the stores are closed.
For those hoping to score a super-cheap clearance big ticket item, check yourself fool. When liquidators buy merchandise, they are taking a gamble. While getting that inventory at pennies on the dollar, they don’t have any guarantee of selling it. So they revert to MSRP for their price points, which is almost always way higher than retailers price items for. Once at the MSRP, they have their huge 25% clearance sales, which often result in prices higher than what the store was selling them for originally. Just something to watch out for, don’t get scammed.
Anyone who was watching the company for, let’s say the past three years, could see this coming from a mile away. First they stopped giving commision to their salespeople. Which in turn resulted in poor customer service. People just didn’t give a damn about selling you a TV. One guy actually told us to go to Best Buy once straight up. What did he care? His commission was gone, he had his hourly rate and he was helping us. And then once revenue slowed, they laid off so many of their best people to save costs and started hiring just about everyone. CC’s customer service started to resemble Wal-Mart in people that had no clue what they were doing or talking about in terms of electronics.
Then Best Buy started sprouting brand new stores with high ceilings and more flourescent lighting than humans are supposed to take in. The stores were clean, bright, and flooding with shiny goodies. CC’s were dark, dingy, unorganized, and quiet. Checkmate right there.
Love Goel, CEO of Growth Ventures Group, a private equity firm focused on retailers says, “Circuit City isn’t a viable business in its old incarnation when half of electronics sales have moved online,” Goel said. “CompUSA and Tweeter also didn’t make it for the same reason,” referring to two stores forced to close most or all of their locations.
The only hope for CC could be if one of their leading bidders comes along and decides to make the company more of an online business with very few physical stores. This would eliminate overhead costs, vendor conflicts and other issues. Seeing as CC had over $1B in online sales last year alone, there has to be some sort of future in that regard for the brand.
But regardless, this is bad news for everyone. For the 34,000 newly unemployed people, for the retail industry (to lose such a massive company and show everyone that retail is hurting more than people think), and for the consumers. We lose another choice and another competitor. Expect a bump at Best Buy. They will bring in Circuit City’s most knowledgable people and increase pricing. Then they can refocus as the ‘expert’ big box electronics store. This would give them a decisive strategic competitiave advantage over Target and Wal-Mart while also taking dead aim at local ‘Ma&Pop’ electronics stores in terms of service and knowledge.
