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Circuit City Failure

Introduction

Circuit City was the No. 2 electronics retailer in United States. It saw phenomenal growth in the 1980s and in 1990s but the company started losing revenue and in 2008 it filed for bankruptcy in 2008. The company started operations in 1949 and pioneered the format of electronics superstore in 1970s (Gilligan, Np). The company liquidated its last store in 2009 (BiblioGov, np).

Figure 1: Circuit City Logo, as in its final years of operations.

Circuit city was enjoying success but became complacent and made some bad strategic decisions which intensified their losses and resulted in more loses for the retailer. The retailer didn't review the core reason for the drop in customers and failed to capitalize from the housing market boom as they decided not to carry home appliances products in their store. We will be reviewing on the reasons for failure of the retailer Circuit City.

Discussion

Until 1990s, Circuit City was doing good business and had become the 2nd largest retailer. We will explore the numerous reasons which lead to the failure of Circuit City after such great success (Llovio, np).

Complacency

The management of circuit city failed to change their sales and management strategies with the changing times and consumer behavior. They underestimated their rivals and the neglected the potential of discount stores like Wal-Mart and Target which started offering electronic items extensively. They stuck to their tried and tested strategies rather than developing new strategies to exploit the opportunities present in the environment and avoid the threats.

The 4th P, (Placement) and Online Retailing

Circuit city was enjoying good sales but they underestimated their competitors who were very well placed, close to customers. Besides its chief rival, Best Buy, the company failed to assess the placement of other wholesalers like Wal-Mart and Target. These unspecialized retailers expanded their electronic offering which increased their market share and reduced the customer base of specialized retailers like Circuit City. These unspecialized retailers already had vast customers base and high rate of customer traffic. They we better located had good real estate strategies, refined supply chains which helped them in making sales of the electronic goods (Hamilton, np). These retailers were also had an active online presence, where they can display the detailed specs of the products, and carryout special inventory just for the online customers. The company also failed to establish and exploit the benefits of the online retailing and did not offer the products on the web which also limited the exposure of it products. The online presence which they did built up eventually focused on attracting the customers to the stores rather them tempting to purchase online.

Inventory

Circuit City was unable to improve on its cash to cash conversion cycle. The inventory at Circuit City started rising which reduced the working capital. The capital got tied up in electronic inventory which gets obsolete over time and the company was unable to purchase new merchandise for selling at its stores. It also affected ...