Commentary: A/V Retailers Race to the Bottom
Big-box A/V retailers are cutting staff and closing stores. Columnist John Caldwell isn't surprised.
Circuit City
John Caldwell says Circuit City’s recent troubles can be traced to an over-reliance on TV sales and a failure to invest in its own people. Photo: Circuit City Stores.
April 20, 2007 by John Caldwell

At the end of last month, Circuit City issued a press release stating that they were firing 3,400 people and closing a number of store locations. The official release described the 3,400 as “associates who were paid well above the market-based salary range for their role.” It seems reasonable to draw a connection between “paid well” and “top performer.”

The Circuit City announcement came on the heels of a similarly gloomy announcement from Tweeter, which in March closed a third of its stores and initiated massive layoffs. This news followed earlier closings of Good Guys and some Ultimate Electronics stores.

Why all the gloomy news at these traditional brick and mortar big box consumer electronic companies?

Each failed to do many things right. The particulars of each company’s situation fills volumes in our industry’s trade magazines and Web sites. But common to all of them is the following:

  1. They all got caught in the middle. They were lulled into largely selling mid-brand mid-fi stuff at too low of margins to a market that had the same stuff available to them on the Internet.

  2. Besides getting out-flanked in the middle selling mostly low margin flat panel TVs, in their race to compete in the replacement of every TV in North America, these doomed companies failed to adapt an attachment-selling strategy that sold a better class of audio products and systems to go with all those shiny new flat panels. HDTV is also multi-channel audio. There have been numerous studies of late that have shown that much of America doesn’t have their new HDTVs hooked up correctly. That includes the audio half of HDTV.

  3. They failed to invest in their people. I know. I regularly visited all of these operations as part of my job and was dismayed at the lack of service and general knowledge of product and industry knowledge over the last decade. Sure, my reference is high. But good service and better performance are things that I and a large segment of the market still place a high value on.

The announcement from Circuit City was particularly disturbing to me in that it specifically mentioned that they are canning their top-paid sales staff. Wha? Why make something like that public? Sure they are a public company and have to disclose for stockholders and potential stock holders. But why spin it that way? Why admit that your commitment to service was going out the window? The subtext of this announcement is that they’ve given up on service. Sure, many public companies have had to face layoffs as a means of staying in the black, but rarely, if ever, do you hear them mention the quality of the staff they are laying off. One can only surmise that they will now be staffed with something less than the best when it comes to service and knowledge. Not a good thing for our industry.

Memo to Circuit City: Fire your PR agency. These guys obviously missed the class on how to spin. Second, check yourself in the mirror. Why are you bent on taking away the one advantage (your people) you arguably still have left in the marketplace? The Internet and catalog operations can’t provide it. Best Buy can barely provide it. You’d think that with all the poker shows on TV, certainly someone in Richmond would know how to play the hand you’ve been dealt? Why are you so busy seemingly bent on racing to the bottom?

Recently, I mistakenly left my cell phone charger at home on a business trip so I decided to drop into a Circuit City store within a week of the company’s black Friday. Yeah, I slow down at accident scenes and rubber neck like the rest of you. I wanted to see just what the vibe was around a typical store. I headed to the cell phone dept and asked Manuel for help. He said that he’d have to go in the back to see if he had a charger. A good sales person would have given me a couple of cool things to look at and experience while he had to step to the back room. Not this day.

This gave me time to look around on my own at a rather empty store with less sales staff than I recall seeing at their stores in the past. The rows of computers and audio equipment were lined up like the forlorn used car characters in Disney’s “Cars” DVD that was playing throughout the store.

After what seemed like more than 10 minutes, Manuel returned with the phone charger I needed. No, I didn’t need a multi-year warranty on a phone charger. The insufferable computer check-out was act 2. Just what was Circuit doing with my zip code and other data points they asked for? More follow-up customer service? Right on cue, Manuel was having problems operating his terminal’s software. Uff dah. I wanted to ask Manuel just how the lay-offs were affecting morale. But I’d already spent close to 20 minutes there. He had a lot on his mind with the computer giving him fits and all.

The good news is that there is a thriving segment of the market that is more than picking up the slack when it comes to the customer service failings of these Jurassic A/V dealers mentioned above. Many of Circuit’s “best” will undoubtedly find jobs with the growing number of specialty A/V integrators and their suppliers. These dealers not only sell HDTVs, but they take the time to fully explore your needs. They offer products and services like real home theaters, distributed audio systems, data networks and security, lighting, telephony and automation services. They do so with a better class of gear and possess superior knowledge resulting in a better experience. Many of these dealers have showrooms. Many work out of small commercial spaces in concert with local architects, designers and builders. Their common denominator is that they belong to CEDIA, a trade organization with tough standards for operations and customer service.

Check out a CEDIA dealer near you. Rather than racing toward the bottom, these businesses are thriving and they’re itching to show you just how cool the consumer electronics experience can be.

Good listening and viewing!

John CaldwellJohn Caldwell is a 28-year grizzled veteran of the A/V business
and co-founder of StJohn Group, Inc.

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John Caldwell - Contributing Writer, St John Group, Inc
Caldwell is a 28-year grizzled veteran of the A/V business and co-founder of St. John Group, Inc.

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