By Steve Smith on Jan 16 2009 - 12:46pm


Aftermath Of Circuit City’s Demise

The news this morning of the decision to liquidate Circuit City’s assets was not a surprise to anyone who has been in the CE industry or watched the chain’s demise over the past decade.

Our thoughts first go to the 30,000 employees who will lose their jobs amidst the worst economic downturn since the Great Depression.

But Circuit’s demise is not another story of a company victimized by the bad economy. Lousy decisions and leadership over the past decade made this day inevitable. The economy just made it happen a little faster.

Still, if you have been around this business for a while, you kind of hoped — even during CES when the news of an auction was going to begin — that a white knight would come along to save the chain.

That romantic idea violated any logic. When a chain like Circuit falls as far as it did not even a government bailout could have saved it.

In the past decade Circuit’s decisions to invest heavily in the Divx video format, get out of major appliances and replace it with “grab and go” handheld electronics, and fire its best sales associates (not once but twice) probably helped regional and independent CE retailers more than just about any buying group, distributor or supplier did during the same time period.

That being said, over the short term, the next six months or a year, Circuit’s demise will help regional and independent CE retailers.

Manufacturers will turn more to those smaller retailers because they don’t want to be beholden to Wal-Mart and Best Buy.

Speaking of those two retail giants, Wal-Mart will be a big winner here because … it’s Wal-Mart. That will strike fear into Best Buy because it always said that the chain based in Bentonville, Ark., was its main competitor. (And let’s not forget Amazon.com, which had a tremendous holiday season in CE.)

Manufacturers have to be concerned about being dominated by Wal-Mart, Best Buy and even Amazon.com who have begun to more heavily dictate terms to suppliers.

When we asked top manufacturers last summer at industry meetings whether they would consider opening Apple or Sony type stores they all denied it.

Yet this morning one well-placed industry exec with retail experience said he was contacted by a couple of major CE brands to see if he could help them research such stores.

The CE industry will survive, and eventually thrive once more, after Circuit is liquidated and after we are through with this recession. But the rules have definitely changed.

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