Five Things to Learn from Circuit City

Sixty years of electronics retail, all gone. Thousands of employees without jobs, empty retail boxes and tons of parking lots. That’s what we are left with after what used to be the best place to learn about and purchase electronics closed its doors for good. As with all closures, I want to know what we can learn so the same thing doesn’t happen to us. As small business owners, we can adapt quicker and quickly correct some of the big mistakes that circuit city made along the way.

1. Don’t get rid of your best salespeople. Granted, CC was already having troubles when they did this, and it was a move of desperation. However, they made some terrible assumtions in this move. They figured that they could get just as much sales with new hires as with experienced high-earning sales people. The move was a disaster, and we should all take a lesson. If we feel like our sales staff earns too much, take a closer look. The best salespeople cost a lot, but are worth the extra money for the kind of sales they can make. Don’t assume just anyone can step in and accomplish the same thing.

2. Don’t sit by and let competition kill you. In their case, they sat and watched best buy build bigger stores in better locations and ultimately a better brand. By the time they knew what hit them in the late 90s, it was really too late to catch up playing the same game.

3. Don’t pin your hopes on copycat moves. Firedog? Really? Best Buy had Geek Squad for four years before Firedog showed up in Circuit City. What was different about it? Many, including me, would say NOTHING. Management really thought that copying Best Buy would be their best bet.

4. Control yourself. Circuit city was unrestrained in debt. They took on as much as the investors and banks would give them, building more and more and more stores. There was no checkpoint to see if it was really working. Circuit City was certainly not alone in this mentality, but it was definately part of their downfall. Just because people will loan you money doesn’t mean you should take it. Be careful and deliberate about your plans, and take on new debt thoughtfully. You will have to pay it back with interest, after all.

5. Don’t invest in Divx. OK. This one doesn’t apply directly, but anyone who knows anything about Circuit City knows this was one of the biggest bonehead moves of the late 90s in retail. They spent 100 million on this technology and thought it would revolutionize the industry. $4.50 discs that you can only watch once? A player that calls corporate to tell them what movies you watch? Sounds like a great way to lose trust and credibility that took 50 years to build.

Look around. Many businesses are closing and blaming the struggling economy. Take lessons from these companies. It doesn’t take long to realize that the failures have more to do with decades of mistakes than a 15 months of economic recession.