*See if you can see any similarities between Circuit City’s slow march to death and our favorite bank:
Why Circuit City Is Bankrupt and Best Buy Thrives
You could blame it on the bad economy or decreased consumer spending, but the real culprit was good old-fashioned bad management.
Circuit City was incredibly successful back in the 1980s and 1990s, but they never adapted to the fast-evolving and fiercely competitive marketplace. Circuit City was stuck in transition mode, cost cutting and trying to get a grip on the basics of retailing. During that time, Best Buy was executing their well thought out business strategy and gaining market share. Best Buy was certainly able to navigate a difficult environment much better than Circuit City.
Observations and contrasts and contrasts:
- Management versus Employee compensation: The CEO of Circuit City made in the neighborhood of $8 million per year. The CEO of Best Buy made $4 million. Perhaps more importantly, Circuit City made a cost-cutting blunder a while back by firing more expensive and experienced employees and replacing them with lower paid people.
- Investing in Employees: While Circuit City was dumbing down their frontline people, Best Buy was investing in training and employee retention strategies. One example is their investment in blueshirtnation.com, the internal social networking site that has reduced employee churn and gets employees to motivate and help each other learn how to serve customers better.
- Customer-focus versus discounting: Best Buy made a number of strategic shifts over the years. One, they purchased the Geek Squad, so they could provide better post-sale support both in the stores and in the customers’ homes. They use customer scenario planning in an effort to customize the shopping experience to key customer groups. This, while CIRCUIT CITY FOCUSED ON DISCOUNTING AND COST- CUTTING.
Best Buy figured out that customers want value and value is not just the lowest price. Customers want to deal with businesses that help them make informed decisions whether via a customer-friendly website or knowledgeable and enthusiastic employees. Best Buy put their efforts towards earning the trust of both their employees and their customers.