Circuit City The Circuit City story began in 1949 when entrepreneur Sam Wurtzel opened a small store in Richmond, VA, after he learned that the south’s first television station was going on the air. Over the next 20 years, Sam grew his company into a 100 store chain. His son, Alan became CEO in 1972 and created the ground-breaking superstore format that evolved into Circuit City. When Alan retired from the board in 2000, Circuit City was a fortune 500 company with more than 600 stores and 60,000 employees.
Circuit City was a shining example of exceptional management practices in a 2001 best- selling book “Good to Great.” However, cracks were beginning to show in the company’s foundation.
Circuit City’s rise and fall revealed leadership lessons and emphasizes the critical strategic role that training and development play in a company’s continued success. For its first 50 years, Circuit City (originally called Wards TV) was a pioneer in the rapidly changing consumer electronics industry. The following are what made the company great.
Things that made the company great
THE FIRST BIG BOX SUPERSTORE
In 1975, Alan Wurtzel transformed the retail landscape in America by creating the first big-box superstore with a focus on Savings, Selection, Service, and Satisfaction. His “4 S’s” were captured in policies and processes that were easily understood by the customer and easily executed by his employees. Circuit City offered a low price guarantee, a 30 day satisfaction guarantee, and huge selection of products which it delivered, installed, and repaired as necessary. A complaint was considered “an opportunity to make a friend.” Recognizing that customers could help identify ways to improve its business, Circuit City created a survey department that called thousands of customers each year to learn about their shopping experience.
THE BEST TRAINED SALES STAFF IN THE INDUSTRY
Every new Circuit City Sales Associate attended a week of classroom training, practicing customer service and selling skills with a professional trainer. That was supplemented with a strong in-store mentor program and self-training. Sales managers received a continuous stream of lesson plans and facilitator guides from the home office to conduct weekly sales training. In addition, the commissioned pay structure rewarded Sales Associates for learning as much as they could about new products. As a result, customers could expect a superior shopping experience with friendly, knowledgeable assistance. CARREER DEVELOPMENT OPPORTUNITIES
Circuit City grew from a dozen superstores to more than 600 in a period of 15 years. That explosive growth required a large increase in store, district, and regional managers, in which the majority were promoted from within. Circuit City invested heavily to ensure its management selection, training, and retention strategies were the best in retail. Large bonuses were awarded to store managers for every new manager promoted from their location. In the late 1990’s more than 3,000 managers each year attended position-specific, week-long management training classes in Richmond. Unfortunately, as you will soon see this did not continue.
Contributions to Circuit City’s failure
OVERCONFIDENCE AND COMPLACENCY
Circuit City was the No. 1 performing stock on the New York Stock Exchange for the decade of 1980 to 1990. With that track record, Circuit City became overconfident, taking its eye off its competitors. In 1990, a relatively small retailer named Best Buy began testing its new superstore format in the Midwest. Best Buy aggressively entered existing Circuit City markets. Their strategy was to go into newer retail developments which out positioned Circuit City’s existing locations. Circuit City failed to respond, and the arrogance of top leadership of Circuit City allowed Best Buy to successfully implement their strategy. A refusal to admit that they could be challenged by a smaller company took Circuit