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Circuit City CEO talks Bankruptcy

By - Source: Tom's Hardware US | B 13 comments

While Circuit City has already seen over 150 of its stores close, more closures and even liquidation may be in the company's future.

I remember the old Circuit City ads, where the giant red electrical plug would come crashing down on top of a retail building, and the motto "where service is state of the art" would come across the bottom of the screen.

Those days are gone, and all that's left is a once-prominent electronic retailer, 155 outlets weaker, and on the brink of extinction. In a letter to employees (and now, everyone), CEO Jim Marcum outlined the company's strategy for the coming weeks, which will hopefully end in Circuit City avoiding liquidation.

"This week, the company filed with the Bankruptcy Court a motion that seeks Court approval for a process that formally puts the company up for sale," said Marcum. "A sale could include as a "going concern" (meaning that the acquirer would continue to operate Circuit City as a business), pieces of the company as separate business units (such as markets, regions, or operating units) or as individual assets (such as the sale of inventory). The motion was made public today in advance of a hearing to approve the motion later today."

According to the CEO, a sale must be made by January 16th, and while Mr. Marcum believes this is indeed possible, there is no guarantee of a sale being made. In the event that no sale is made, Circuit City heads to the auction block, and will be at the mercy of the highest bidder.

While Marcum lays the company's fate at the feet of our weak economy, he does spread the blame around a little. "Poor macroeconomic conditions are further impacting our business and our vendors' confidence," said the CEO. "Some of our vendors, including some key merchandise vendors, are still unwilling to relax their strict terms and have not provided meaningful credit. Securing better vendor credit and terms is essential for Circuit City's survival."

While the future of Circuit City is cloudy, one thing is certain: come January 16th, Circuit City will be under the umbrella of some other company, be it another retailer like Best Buy or some liquidation firm who wants nothing but to sell of the inventory and then do with the name as it pleases (think CompUSA). Hopefully, Circuit City will survive, leaving consumers with something more than a two pony (Wal-Mart and Best Buy) show.

Read Marcum's letter in its entirety here.

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  • 2 Hide
    aevm , January 12, 2009 12:08 AM
    It's not just Wal-Mart and BestBuy. I think the future will see Newegg and becoming leaders. I do feel sorry for circuit City employees and shareholders,but the truth is that the world has changed and it's time for the online retailers to win.

  • 4 Hide
    wymer100 , January 12, 2009 1:02 AM
    My brother-in-law was just let go as an assistant manager from a closed store. From our conversations, Circuit City was going down the tubes even before the economy tanked. The CEO can blame the economy and suppliers, but the big problem was the horrific management of the company. The management has made mistake after mistake. The CEO and Board will no doubt be let go with their golden parachutes. It's a shame the employees have to pay the price for their incompetence.
  • 1 Hide
    DXRick , January 12, 2009 1:34 AM
    Am I the only idiot in America that preferred CC over BB? I can see why CC failed, due to online, Costco, Frys, and others, but I can't see why BB succeeds.

    I bought my latest DVD player at CC, my HDTV and NHT speakers at Andersons, and my receiver at Frys. My computer is built from stuff bought at NewEgg and Frys. The only thing I bought at Best Buy is the Creative 2.1 speakers. I got the APC UPS at CompUsa (no dead).

    My next computer will be built from Frys and then (if prices are much higher at Frys for some parts) NewEgg. Since I am in CA, I get to pay sales taxes at both anyway.

    BB will not be getting any business from me, just because I like Frys more.
  • Display all 13 comments.
  • 0 Hide
    falchard , January 12, 2009 7:49 AM
    Best Buy makes its money from appliances and people who don't know about better alternatives like Online Shopping, Direct Buy, and Fry's Electronics.
  • 0 Hide
    zodiacfml , January 12, 2009 9:45 AM
    amen. add to that, competition is fast getting stiffer everywhere.

    aevmIt's not just Wal-Mart and BestBuy. I think the future will see Newegg and becoming leaders. I do feel sorry for circuit City employees and shareholders,but the truth is that the world has changed and it's time for the online retailers to win.
  • 0 Hide
    Pei-chen , January 12, 2009 10:54 AM
    CC usually have better after rebate deals than BB.
  • 0 Hide
    thomasxstewart , January 12, 2009 1:17 PM
    Circuit City didn't keep up to date computer parts.

  • 0 Hide
    frenchy , January 12, 2009 2:14 PM
    Don't think BB isn't hurting either. They're getting ready to do another round of layoffs at their HQ. (this is after the buy out option given to employees a month ago). On a side note, BB suffers from incompetent managers as well and have made there fair share of huge financial mistakes.
  • 1 Hide
    mdillenbeck , January 12, 2009 5:45 PM
    I think many of these companies are failing due to the online competition. To date no business has matched Newegg's responsiveness and quality of service. With their expansion into general consumer electronics, I am sure the competition they provide is fierce.

    However, I will occasionally shop Best Buy if they have a good deal or I need something immediately. Why do I prefer Best Buy over Circuit City? Mainly because of instant rebates. Seriously, why would any company want to do a mail in rebate over discounting the price unless they are counting on being able to reject a certain percentage of claims? I've noted an increase in rejection rates on mail in rebates, so I avoid them like the plague. After all, how do you re-provide your original UPC when they claim you didn't send it in? You can't.

    Of course Circuit City is going to fail. The same events happened with K-mart and CompUSA. Stock is decreasing on their shelves, more items are marked with "special buy" tickets, and over a hundred locations have already shut down. Since Best Buy and Circuit City are in the same locations, why would Best Buy want them? Maybe to get their inventory if it is cheap enough. However, with the shrunken economy it will most likely be bought by a liquidator and sold off.

    At least we might get some real good deals in the next month. That is if you still have your job...
  • 0 Hide
    Anonymous , January 12, 2009 6:36 PM
    Service is what makes the difference.

    At Best Buy the service is absolutely non-existent. I am a Tech Supervisor for Circuit City and I can honestly say I was a Best Buy shopper for the longest time out of sheer ignorance to what Circuit City had to offer. Once I started shopping with CC, I saw the error of my ways.

    Please keep in mind there are people here that may lose their jobs. Opinions aside, jobs are jobs and I am praying for something "good" to come of this. Hopefully we can keep the competition alive. What person in their right mind would compare Walmart to Best Buy as a serious technology store, come on. Best Buy will turn into the same being as Walmart with not a ton of real competition for the consumer turn to, forcing people to shop online for electronics.
  • 0 Hide
    AndrewMD , January 12, 2009 7:06 PM
    I can't wait for CC to move out... It is a terrible store with terrible people and business practises..

    I avoid all deals that have to do with rebates unless noted as Instant. I also want to see Best Buy go down with CC. There is no need for them anymore.

  • 0 Hide
    10tacle , January 12, 2009 9:02 PM
    CC almost always had better pricing that BB, especially when they put DVDs on sale. However, on occasion I have come across a sale from BB, usually from the Sunday flier, that even beat every major online vendor like Amazon and NewEgg.

    Two recent examples of that were Kaspersky's 2009 AV for $19.99 (best price was $27.69 online at NewEgg) and a Samsung 46" 120MHz LCD (650 series) for $1449 (best price via Amazon for $1479). Granted I had to pay a little more after local sales tax on the TV overall, but that was a small price to pay for local convenience in the event the TV was bad, let alone insurance against abuse in the logistics supply chain.

    But back to CC vs. BB, Best Buy has a much nicer environment and layout inside. It makes me want to shop and check everything out there. Every CC I had been in looked the same as it did 15 years ago - they were so overdue for an overhaul. Too little, too late I'm afraid now.
  • 0 Hide
    ravenware , January 13, 2009 12:36 AM
    aevmIt's not just Wal-Mart and BestBuy. I think the future will see Newegg and becoming leaders. I do feel sorry for circuit City employees and shareholders,but the truth is that the world has changed and it's time for the online retailers to win.

    The eTailer hit on Circuit City must have been huge.

    Best Buy needs to wise up and take note from Circuit City's mistakes and Amazons success too.
    Best Buy was a late entry in to online retailing much like CC and the website is poorly designed much like CC's.

    Other than online I would poor management was also a factor. Every CC I have been to in California is poorly ran. They have low inventory, outdated POS machines, non-attentive staff and unorganized stock. (DVDs the only thing I would ever buy from them were a mess)