Journal of Management Engineering and Information Technology (JMEIT)
Volume -2, Issue- 4, Aug. 2015, ISSN: 2394 - 8124
Website: www.jmeit.com | E-mail: editorjmeit@outlook.com|jmeit@outlook.com
Booming of Electronic Industries: A Case
Analysis of Circuit City Retailer Going Out of
Business
Jet Mboga, DBA
Jet Mboga, DBA, Marketing & Management Sciences, William Paterson University, 1600 Valley Rd, Room 3064,Wayne, NJ 0747
jmboga2003@yahoo.com
Abstract— at the prime time when electronics were
taking off and consumers were starting to get intrigued
by the convenience of what the electronics can offer
circuit city stores closed its doors for good. This paper
discusses the closing of Circuit City Stores in the United
States. What and where did it all go wrong with Circuit
City? Why did the second largest electronic retailer
behind Best Buy go bankrupt and close its doors for
good? Did the competitive electronics market in
traditional and online retailing play a role in Circuit City
officially closing? The results entail compiled statements
from employee, executives, and the retail experts with an
objective to create awareness that even retail giants can
close their doors for good when key personnel do not
monitor trends and integrate their organizations with
future-focused strategies.
Keywords—bankrupt, Best Buy stores (BBY), Circuit
City stores (CCY), consumers, electronics, management,
retailing, shopping.
I.
INTRODUCTION
In today’s thriving electronics era Nielsen’s Total
Audience Report confirmed that people of the ages 18 and
older in the United States spend 11 hours of their day using
electronics to listen to radio, watch television, use game
consoles, and use Smartphone’s among others (Richter,
2015). The electronic industry contributed to the change in
consumers’ shopping trends and retailers offering convenient
shopping with online sales growth of $231 billion in 2012
and a prediction of $370 billion by 2017 (Abramovich
(2014). In these sales the top electronic retailers in United
States as ranked by Market Realist included Best Buy (BBY);
Wal-Mart; Amazon; Apple retail stores; Target; Costco
Wholesale; Gamestop; Dell; RadioShack; and Sam’s Club
(Bailey, 2015). BBY was ranked as the top specialty retailer
of consumer electronics ahead of Wal-Mart that also sells
other products and services (Bailey, 2015).
Despite the consumers increasing demands in electronics
the retailers have continuously faced multiple competitive
avenues with sales moving to an online based environment
such as Amazon. Additionally competition from stores
offering low prices such as Wal-Mart and Target forced some
stores like Tweeter, CompUSA, and Sam Goody among
others out of business (Bailey, 2015; Crowe, 2008; Kavilanz,
2009). The purpose of this case analysis is to review existing
newspaper articles to determine the elements that contributed
to Circuit City Stores (CCY) closing its doors for good.
II.
BACKGROUND
Richmond Virginia was the home of the first CCY store
opened by Samuel S. Wurtzel in 1949; CCY operated 765
dealer and retail outlets in Canada and was once known as
one of the largest retail giant behind BBY (Kavilanz, 2009).
CCY was at the top of its game with over 700 stores when all
came crumbling down owing a compiled sum of $625 million
to 30 largest unsecured creditors that supplied their retail
products (Associated Press, 2009). CCY filed bankrupt in the
United States Bankruptcy Court for the Eastern District in
2009 after 60 years of service; finally closed its 567 stores
that encompassed 18 million square feet and employing over
34, 000 employees in United States (Associated Press, 2009;
Kavilanz, 2009). The general public shared their regrets of
closing CCY stores; others shared positive memoirs with an
excitement of CCY’s continued pledge to honoring gift cards
during the liquidation process (Kavilanz, 2009). The picking
up of bargains for a $1.00 a piece for games, originally priced
$30, digital SLR camera for dummies priced at $2.99,
Panasonic HDTV digital receiver for $80.00, and wooden
entertainment centers for $400 from its original sale cost of
$2000 among others were valued by consumers (Keys, 2009;
Associated Press, 2009).
III.
METHOD AND STUDY PROCEDURE
This qualitative single descriptive case analysis reviewed
existing newspaper articles to determine the elements that
contributed to Circuit City Stores (CCY) closing its doors for
good. The objective was to provide insights into the closing
of Circuit City Stores in United States and the context in
which they occurred. The researcher had the following
questions in mind: What and where did it all go wrong with
Circuit City? Why did the second largest electronic retailer
behind Best Buy go bankrupt and close its doors for good?
Did the competitive electronics market in traditional and
online retailing play a role in Circuit City official closing?
Was it the increasing viable market, demands from vendors,
and consumer spending that contributed to CCY closings?
The compiled results in this study were from various
published newspaper articles that consisted of feedback from
documentation of various analysts, CCY’s internal staff, and
executives. The study was limited to the published
newspaper articles that documented CCY final liquidation to
extract the experts and internal staff reasons behind the
closing of the second largest electronic store behind BBY
stores.
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1
Journal of Management Engineering and Information Technology (JMEIT)
Volume -2, Issue- 4, Aug. 2015, ISSN: 2394 - 8124
Website: www.jmeit.com | E-mail: editorjmeit@outlook.com|jmeit@outlook.com
loss of $239 million in September of 2008 while BBY
IV.
RESULTS
celebrated increase in sales and profit of $200 million in
A.
The general results from external experts of the
August 2008 (Hamilton, 2008). The changes included CCY
factors that contributed to the closing of CCY
later arrival in their involvement in music and movie business
(Associated Press, 2009).
• Mistakes by management that included substantial
Marshal Cohen, NPD Group’s Retail analyst shared that
slip-ups of doing away with sales employees,
retailers were not sacred and could be vulnerable to loss of
minimal aggressiveness in integrating gaming, and
consumers if they didn’t study the market and create a
initiating the improvement of online retailing
product or service that stood out from other competitors and
• Unstable economy that included recession thus
maintaining upkeep with the changing consumer needs
lowering consumer spending
(Kavilanz, 2009). Cohen noted that CCY didn’t strategically
• Ineffective inventory management system
plan, lead, and control their organization thus was forced out
contributing to a backlog, inability to purchase
of the electronics market with competitors such as Best Buy
trendier products, and faced with credit market
leading the industry and Wal-Mart advancing with the low
freeze
price model (Kavilanz, 2009).
• Lacked pursuit of positive crossroad ventures thus
leading to a loss of $239 million in missteps of
B.
Results from Internal Associates and
slower pace in changing the current consumer
trends and parting the appliance business in 2000
Executives
• Delay in setting up strategies to engage with
customers where CCY did not study the market and
The documented results from the Associated Press (2009)
create a product or service that stood out from other
revealed that employees and store managers stayed away
competitors.
from media to avoid interrogations of why the stores were
closing their doors. The address to the media by James A.
B.
Specific Results from Experts
Marcum who was vice chairman, acting president, and chief
executive particularly thanked the associates for their work
A combination of factors that led to the failure of CCY
during CCY’s difficult time (Associated Press, 2009).
included bad economy, lowered consumer spending, bad
The specific results from executives as shared by CCY’s
management of not aggressively integrating gaming, and lack
former chief executive Alan L. Wurtzel, confirmed that CCY
of initiating the improvement of online retailing (Hamilton,
had short-term strategic focus instead of long-term strategic
2008).
President and CEO of Retail Management
goals and values (Associated Press, 2009). In addition, Alan
Consultants George Whalin noted that as the retail industry
McCollough, Circuit City's chief executive shared that
faced hard times, CCY lost a hold of its business and their
despite CCY’s 14% in appliance sales the executives
failure was tied to a combination of recession and the
accelerated their decision to cease carrying appliance because
mistakes made by the management team (Kavilanz, 2009).
of the limited profits and the competitors such as Lowes,
Specifically Whalin shared those CCY substantial slip-ups
Home Depot, and Sears talked on taking over the appliance
that entailed CCY management decision to do away with
market (Ramstad, (2000). McCollough shared that the
sales employees and going through the credit market freeze
executives’ objective was to close appliances and focus on
with no direct funds to pay for merchandise were huge
creating space for computers and digital electronic items that
contributors to store closings (Kavilanz, 2009).
included renovating stores with new designs at $2.5 million
Similarly, Stephen Baker an industry analysis vice
per store and expecting a turnaround profit of 30% per store
president in The NPD Group Inc marketing researching firm
(Ramstad, 2000). Additionally, vice chairman, acting
shared that CCY made several slip-ups leading them to close
president and chief executive James A. Marcum shared his
their stores for good (Associated Press, 2009). Baker shared
frustration in regards to the lack of reaching to better terms
that CCY didn’t pursue the positive crossroad ventures and
with lenders and creditors thus taking the only option out
were involved in management missteps such as being at a
which was shutting down for good (Kavilanz, 2009).
slower pace in changing the current consumer trends that
included parting the appliance business in 2000 (Associated
Press, 2009). For example, CCY had a delay in setting up
strategies on how to engage with customers while BBY was
ahead of their game in the startup of their Geek Squad
department to handle consumer service concerns (Kavilanz,
2009). Additionally, Helen Bulwik from New Market
Solutions (the retail consultant in Oakland, California)
commented on CCY’s inability to manage effectively their
inventory system contributing to a backlog; contributing to
failure to purchase trendier products or pay accumulated debt
to companies such as Sony $60 million, Samsung $116
million, and Hewlett-Packard $118 million (Hamilton, 2008).
David Schick an analyst at Stifel Nicolaus compared BBY
to CCY noting that the downward trend in sales was
attributed to the lack of changes by CCY thus leading to a
V.
The purpose this qualitative single case analysis was to
provide insights into CCY’s store closings in the United
States while presenting the context in which they occurred.
The results extracted from existing newspapers revealed that
at the prime time when electronics were taking off and
consumers were starting to get intrigued by the convenience
of what the electronics could offer CCY closed its doors for
good (Kavilanz, 2009). The crashing of CCY was connected
to the 1990’s when the electronic retailing shifted as other
competitors took over the market that included the expansion
of electronics department in Wal-Mart Stores and Best Buy
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CONCLUSION/DISCUSSION
Journal of Management Engineering and Information Technology (JMEIT)
Volume -2, Issue- 4, Aug. 2015, ISSN: 2394 - 8124
Website: www.jmeit.com | E-mail: editorjmeit@outlook.com|jmeit@outlook.com
[4] Bailey, S (2015, January 19) Best Buy: The largest consumer
among other retailers (Associated Press, 2009; Kavilanz,
electronics retailer. Retrieved from http://marketrealist.com
2009).
[5] Crowe, S. (2008, November 13). 10 failed electronic retailers.
The findings of this analysis confirmed that CCY’s
Retrieved from http://www.cepro.com
substantial slip-ups of doing away with sales employees;
[6] Gomez, M. I., McLaughlin, E. W., & Wittink, D. R. (2004).
ineffective inventory management system contributing to a
Customer satisfaction and retail sales performance: an empirical
investigation. Journal of retailing, 80(4), 265-278. Retrieved from
backlog and lack of funds; lack of pursuit in positive
www.researchgate.net
crossroad ventures in adapting to changing current consumer
[7] Hamilton, A. (2008, November 11) Why Circuit City busted,
trends such as slow integration of gaming and online
while Best Buy boomed) Retrieved from http://content.time.com
retailing; lowered consumer spending during recession; and
[8] Isidore, C ( 2014, March 4) Radio Shack closing 1,100 stores.
parting the appliance business in 2000. Additionally, the
http://money.cnn.com
[9] Kavilanz P. B. (2009, January 16). Circuit City to shut down.
delay in setting up strategies to engage with customers that
Retrieved from http://money.cnn.com
entailed studying the market and creating a product or service
[10] Keys, A. (2009, March 08). Circuit city stores set to close for
that stood out from other competitors was the ultimate reason
good. http://www.npr.org
for CCY closing their doors for good.
[11] Porter, M. E. (2008). Competitive strategy: Techniques for
analyzing industries and competitors. The Free Press: Simon and
Recommendation for electronic retailers is to align their
Schuster.
strategies and make a distinction between themselves and
[12] Richter, F. (2015 March 13). Americans use of electronic media
competitors (Kavilanz, 2009). The primary objective for
11+ hours a day. Retrieved from http://www.statista.com
organizations to keep in mind is their ability to monitor
[13] Ramstad, E (2000, July 26). Circuit City unveils plans to exit
consumer trends, understand the trends, and take action to
appliance business, take charges http://www.wsj.com
upkeep consumer loyalty and sales; because lack of strategic
planning leads to loss of market share (Gomez, McLaughlin,
& Wittink, 2004; Porter, 2008). To minimize loss of market
share retailers should constantly address the consumers
change in trends; for example the updates done to traditional
stores that included 24 hours convenience online shopping to
appeal to the population that spends 11 hours a day using
electronics (Richter, 2015). The stores that stagger behind
newer trends face losing market share, with a current example
being Radio Shack; where the CEO Joseph Magnacca
advised the closing of 1100 among its 5,200 locations in the
United States (Isidore, 2014). Magnacca shared that the
closings were in association to low sales performance that fell
19% during the holiday shopping time frame (Isidore, 2014).
The study was limited to the published newspaper articles
that documented CCY final liquidation; with a focus of
extracting the experts and internal staff explanations behind
the closing of the second largest electronic store behind BBY.
The findings confirmed that in our competitive market no
store or organization is immune to loss of existing market
share and that monitoring and constantly updating strategies
could help the organizations upkeep with consumer demands.
VI.
FUTURE WORK
In this limited analysis, the recommendation is for future
researchers to conduct a comparison of CCY and BBY to
identify the strategies used by BBY to stay afloat during CCY
closing and the strategies BBY integrates to be among the top
electronic retail stores today.
ACKNOWLEDGMENT
Jet Mboga, Author extends special thanks to
Engineer/Senior Manager - electronic corporation for the
inspiration and unswerving support provided at the initial
stages of this research analysis.
REFERENCES
[1] Abramovich, G. (2014, May 07) 15 mind blowing stats about
online shopping. Retrieved from http://www.cmo.com
[2] Associated Press, (2009, March 8). Circuit City closes its doors
for good. Retrieved from http://www.nydailynews.com
[3] Associated Press, (2009, March 08). After 60 years Circuit City
finally powers down. http://www.nbcnews.com
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