NYT: Circuit (City) Breaker

[Omaha Steve]

http://www.nytimes.com/2007/04/09/opinion/09mon2.html?_r=2&th&emc=th&oref=slogin&oref=slogin

Editorial
Circuit Breaker

Published: April 9, 2007

The announcement that Circuit City was laying off some 3,400 of its better-paid workers to fill the same positions with cheaper labor has become the latest chapter in the new rulebook for corporate America. There are significant social questions for policy makers in these new norms, but businesses need to consider whether this is really the answer.

As American consumers turn ever more to online shopping, it would seem that customer service provided by knowledgeable salespeople would be the highest priority for face-to-face interactions. The best shopping experience has to be the goal if people are going to keep slogging through the elements and marching through the sliding doors.

Circuit City seems to have missed that point. It also seems to have missed the trend, described by Michael Barbaro in The Times recently, toward so-called experience stores.

In experience stores, companies let consumers hang out, relax and use the products — watch television, play video games, make phone calls — until they decide they want to own them. The Apple stores, with their free Internet connections on high-powered computers, attract droves. Samsung, Sony, Verizon and more are in on the act.

Times are tough for Circuit City. The company went from a $140 million profit in its 2006 fiscal year to a $12 million loss in its recently completed 2007 fiscal year. But it may have to find better ways of cutting costs and finding efficiencies than offering an inferior shopping experience. The more that stores turn to underpaid, and often surly, short-timers, the more appealing the pick-and-click of Internet shopping becomes. Circuit City and its brethren need to ask whether they are trimming the fat or sowing the seeds of their own obsolescence.

[regnaD kciN]

1. Circuit City is still reaping the whirlwind from DIVX...

...their attempt to impose a pay-per-view DVD format on consumers back in the late '90s. I know a lot of enthusiastic "early adopter" types -- the consumers that spend far more on home electronics and techie gadgets than the average American -- who still won't buy anything from CC because of it.

BTW, an interesting note about that Wikipedia article. It mentions

The terminology "Open DVD" had been used by DVD supporters in response to DIVX's labeling of DVD as "Basic DVD" and DIVX/DVD players as "DIVX-enhanced."

In fact, I was the first person to come up with the term "Open DVD," on E-Town.com's DVD forum on the day DIVX was announced. It was quite satisfying to see the anti-DIVX movement pick up my term and make it part of their standard vocabulary.

[Warpy]

2. They should have taken a look at Home Depot

The last CEO stripmined the labor just like this. Instead of keeping the old ex contractors whose brains you could pick if you had a project to do, they hired a bunch of bored twentysomethings who didn't know their thumbs from their bums.

Now this may have brought in a little short term profit by lowering labor costs, but sales started to drop like a rock.

The old guys are back, if any of you haven't been to the belly of the beast.

People will not go to any specialty store like building materials or electronics or even paint unless the sales staff know what they are talking about.

Hell is going to freeze over before I'll enter a Circuit City store until this particular CEO is turned out to pasture and his war against the workforce is ended.

[regnaD kciN]

3. Yes, but...

The old guys are back, if any of you haven't been to the belly of the beast.

...are they back at their old salaries, or at the same minimum wage being paid to the "bored twentysomethings who didn't know their thumbs from their bums" who replaced them. :shrug:

If the latter, the Home Depot CEO's decision looks like something that will pay off in the long run (same expert help for less pay), and be fertile ground for emulation by other companies. :-(

[Warpy]

4. I have no idea what they're being paid

but I sincerely doubt Home Depot is getting them on the cheap after the way the last CEO treated them.