Circuit City Takes Leave (Response)

Yet again, current events in this topic have prevailed. Not two days before researching this topic, I was informed by my parents of Circuit City’s filing of a Chapter 11 Bankruptcy. Unfortunately, this article offers yet more bad news and even more dire predictions of what is to become of the American economy. It really is quite frightening that a company of such large scale, (No. 2 in the nation for electronics) and one with both online and store front sale opportunities should be coming to such a chapter in the story of their existence. However, it does pose the question of whether this bankruptcy was caused by a lack of management by the company or a lack of customers. Circuit City claims that their failure is the result of increasing competition from stores such as Best Buy and Wal-Mart. However, a more in-depth look into the company’s records reveal such strategic decisions as the firing of 3,000 high paid employees and replacing them with lower paid employees. This brings to light the possibility that such this company’s crisis is more deeply rooted in lack customer satisfaction. As I delve deeper and deeper into this economic crisis, I have begun to see just how well an American company’s success can mirror the success or failure of the American population. Indeed, the best fit for the reason for Circuit City’s failure seems to be a simple lack of customers. In this economy, people are being more frugal with their money. As a result, a store that specializes in products that are more for personal pleasure, such as televisions and personal computers, is much more likely to feel the burden of a bad economy than say, an oil company. It will be very interesting to see where this story goes. Circuit City seems to think that they can stay on their feet, despite the potential losses that are almost certain to be suffered this holiday season. It does seem very unlikely that this electronics giant will be able to pull through this unfazed. With trust now being transferred from Circuit City into the arms of seemingly more stable companies like Best Buy, Circuit City is sure to take a hit this holiday season. Who wants to buy a $2,000 television when it is not guaranteed that the company will last as long as their warranty? As more companies close their doors, it seems that America is about to face an almost complete reform of retail stores. Both Best Buy and Wal-Mart are in tough times, suffering from a severe lack of customers willing to purchase expensive goods. If companies such as these are to close their doors in the future, what is to become of the once glorious American mall? As unprofitable as these times seem, it may indeed bring rise to many new companies, looking to replace the large giants that are falling almost everyday. And these companies will be small and flexible enough to dodge the falling debris, bring in a new customer base, and tough it out for the long run.

Circuit City to stay open in bankruptcy

Circuit City is the No. 2 electronics outlet in the US after Best Buy

Filed for bankruptcy “Chapter 11” on Monday

Hopes to be able to stock shelves in time for holidays

Will close 155 stores

Has 566 operating stores currently

Plans to cut about 17% of it’s 40,000 domestic workers
Is reviewing how best to deal with lack of shoppers in such a bad economy
Will keep rest of stores open through bankruptcy proceedings
“Chapter 11 is no a closing or liquidation. We remain committed to doing a better job of taking care of our guests, and making it easier to shop at Circuit City.” said in an email to CNN
Is seeking approval from bankruptcy court to continue with services such as returns and warranties.
The store will still accept credit cards for purchases
Even though such precautions are being taken, it is thought that the uncertainty of the store’s future will make customers wary of shopping there
Competition by Best Buy and Wal-Mart are thought to be a major threat to the store’s future.
The November-December period can account for 50% of a stores annual profit
Last year, Circuit City decided to fire more than 3,000 of it’s highest paid staff.
The staff was replaced by lower paid workers.
This was thought to be a “strategic blunder” in Circuit City’s behalf
Circuit City has negotiated a commitment for a $1.1 billion credit line to add to it’s curect working capital
This credit line will give Circuit City immediate liquidity while it resorts it’s resources to reorganizing the company and keeping current employees paid.
Circuit City plans to strengthen their balance sheets and restructure their entire company through the support that the Chapter 11 filing offers.