Wednesday, March 28, 2007

Circuit City

Circuit City announces to today that they are going to let go of 3400 workers who make more than the market range and will replace them with cheaper workers.

While I understand, too well, the need to have operations that are profitable, moves such as this only impairs quality. So these workers who make more are presumable experienced personnel who will now be canned for new hires.

Circuit City will not be getting any of my business, and I will be writing them to tell them so. There is something more broken with their model if they cannot be profitable otherwise. In my opinion, of course. I recognize that there is room for other opinions and I could argue the opposite side. But firing people to make way for cheaper workers cheapens Circuit City's image. Would I want to go to work for them? I don't think so.
03.29.08 addendum: Mish has a more detailed post here


Anonymous said...

In Nov 06 we had to deal with customer service in SF of Circuit City, it was a total mess. Many workers behind the counter, no one knew how to handle our transaction. What should have taken a few minutes took over 30 minutes. Most of the workers (likely new and poorly trained) just walked away and turned it over to someone more experienced.

John said...

Low pay results in low skill and low interest in the customer. That is what I found each time I went into Circuit City. I do so no more. I heard Jim Cramer make a similar comment about the company. Too bad, they don't read, or pay attention to, Cramer--at least in this regard. Upper management must have its head in the sand. They want to improve profits by reducing customer emphasis. Such a model for their kind of high tech, electronics, etc., business just won't work.

Leisa said...

I did send them an e-mail. I'm still disgusted.

They are from my hometown, and they used to be called Sight and Sound way back when!

Stu00 said...

Maybe this is a direct result of business conditions. The retail electronics business is VERY tough right now. They made their living on big screen tv's but the margins on them are so thin now that any loss in volume may have forced their hand on this issue. It may not be the right thing to do in the long-term but maybe they are concerned about getting through the short-term.

I follow sales tax receipts very closely and all indications are that they have fallen off a cliff in Jan and Feb. California for Feb is actualy down from the prior year in nominal dollars. This is after having added 40,000 new govt workers last year.

With loan guidelines tightening and home values flat to declining, I think MEW (Mortgage Equity Withdrawal) is taking a big hit and we are seeing it in consumer spending. That is why I follow sales tax receipts as it captures not only increased wages but also borrowings.

Leisa said...

Stu, I don't dispute what you say. But my point stands that there is something wrong with the business model (meaning there are too many competitors for one!) that requires your axing your experienced workers for less experienced workers. If you have to close your doors otherwise, then you offer your employees a choice of taking a lower pay package--and you say so. There's a big difference in that. If you have current associates underperforming in their duties, you get rid of them.

In the end, we do have the opportunity to transact business with organizations of our choosing. Whatever the reasons, it was poorly communicated and handled.

I will probably look at what their executive pay comp is.