Many retailers got hurt during last year’s flat-panel pricing fiasco, but none seemed to suffer as badly as Circuit City, which bled $12 million in fiscal ‘07 after gaining $141 million gain the year before.
In our top online story today, we explore why Circuit City fell and what it will take for the retailer to regain balance. For all of the proposed remedies, the most publicized and controversial was the firing of 3,400 employees. Circuit City described them as being “paid well above the market-based salary range for their role.” Some of them probably were. But we doubt that’s true for the majority. You get what you pay for. Skilled employees don’t come cheap, nor should they.
Since flat-panel pricing pressures are at the root of Circuit City’s ills, the retailer (like all the others, no matter their size) will have to push for more full-solution sales attached to each unit, which include audio and cable products, warranties and installation services. Who is best qualified to close those value-added sales: a new hire fresh off the street or the seasoned sales vet that Circuit City claimed was being paid too much? Look what happened to Home Depot when it pulled the same cost-cutting moves, and then count the number of customers that flocked to Lowe’s, which does what it can to retain its seasoned sales staff.