Circuit City

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Circuit City Stores, Inc.
Type Public (NYSE: CC)
Founded 1949
Headquarters Richmond, Virginia, USA
Key people Philip J. Schoonover CEO
John Harlow COO
Industry Retail
Products Consumer electronics
Revenue ▼ $12.43 billion USD
Employees 46,000
Website http://www.circuitcity.com,

Circuit City (NYSE: CC) is an American dealer and retailer in brand-name consumer electronics, personal computers, and entertainment software.

Circuit City is a Fortune 500[1] company.Circuit City operates over 670 Superstores[2] and 13 other locations in USA and Puerto Rico. Circuit City Superstores range in size from 15,000 to 45,000 square feet (1400 to 4000 m²) and offer a large selection of brand-name consumer electronics, personal computers and entertainment software.

Circuit City also has over 800 retail stores and dealer outlets in Canada. Circuit City's locations in Canada are operated by InterTAN Canada Ltd which Circuit City acquired on May 19, 2004. InterTAN runs The Source by Circuit City (formerly RadioShack) chain in Canada (some of them now called La Source in Quebec) as well as THS Studio UpClose, and G-Wiz.

In April 2008, video rental firm Blockbuster announced a bid worth $1 billion to purchase the company.[3]

Contents

[edit] History

The first Circuit City logo.
The first Circuit City logo.
 This article or section may contain an inappropriate mixture of prose and timeline.
Please help convert this timeline into prose or, if necessary, a list.

In 1949, Samuel S. Wurtzel opened the first Wards Company retail store in Richmond, Virginia, at 705 West Broad Street. By 1959 Wards operated four television and home appliance stores in Richmond. The company continued to grow and acquire more stores in other locations including Albany, New York; Mobile, Alabama; Washington, DC; and Costa Mesa, California. During the 1970s and early 1980s it also sold mail-order under the name Dixie Hifi, advertising in the hifi magazines of the day.

Wards Company officially changed its name to Circuit City and became listed on the New York Stock Exchange in 1984. One of the company's early slogans was "Circuit City - Where the Streets are Paved with Bargains." The company, which leased floor space from the Zody's department stores as well as other department stores, began obtaining retail stores and turning them into Circuit City Superstores. The first of these replacements occurred in Knoxville, Tennessee; Charleston, South Carolina; and Hampton, Virginia.

Circuit City store in Los Angeles, California.
Circuit City store in Los Angeles, California.

In 1991, Circuit City entered the New York City market by acquiring the remnants of the failed Lafayette Radio chain. They operated stores there under the Lafayette name for a few years and then exited the market, only to return several years later under the Circuit City banner.

Circuit City established the First North American National Bank to operate its private-label credit card[4]. In 2002, Circuit City began offering a co-branded Visa credit card. It sold both of these operations in 2004 to Bank One (now called Chase Bank). Other companies owned by Circuit City included CarMAX, which seceded from Circuit City in 1999, and Patapsco Designs in 2001. [5]

In 2003, Circuit City converted to a single hourly pay structure in all stores, eliminating commissioned sales. Many previously commissioned sales associates were offered new positions as hourly "product specialists", while 3900 salespeople were laid off, saving the company about $130 million a year.[6]

A hedge fund headquartered in Boston, Highfields Capital, offered to take over Circuit City for $17 a share on February 11, 2005, arguing that existing management had failed to maximize shareholder value. The offer was rejected by Circuit City's board on March 7, but doubled its own share buyback program. As of February 28, 2005, Circuit City held cash, cash equivalents, and short term investments of 1 billion USD.[7]

Philip J. Schoonover succeeded W. Alan McCollough as Chairman of the Board of Circuit City Stores, Inc.[8] on June 27, 2006.

"Firedog," the name for Circuit City's upgraded in-store and in-home and online computer and home theatre technical support and installation services, was unveiled at a Las Vegas convention in August 2006. [9]

On February 8, 2007, Circuit City announced that it planned to close seven domestic Superstores and a Kentucky distribution center to cut costs and improve its financial performance.[10] News media reports also mention that 62 stores in Canada will close.[11][12]

Circuit City announced on February 23, 2007 that Michael Foss, Chief Financial Officer, would leave the company. This unsettled investors and analysts concerned about management turnover. "This represents the third departure of a senior executive in the past six months, and the second departure of a top-five executive in the past month" said Goldman Sachs analyst Matthew Fassler in a client note. Chief Executive Office Phil Schoonover’s "hand-picked team is turning over faster than we would like to see in a turnaround situation."[13]

In a press release on March 28, 2007, Circuit City announced that it had laid off approximately 3400 of their associates who were paid above the salary range for their position in order to cut costs. Those positions will be re-staffed with associates paid within the market range for their position. Associates who were laid off due to the "wage management" decision were provided severance and offered a chance to return after ten weeks, at a market-based salary. The Washington Post reports interviews with management concerning the firings.[14]

The Post later reported in May 2007 [15] that the layoffs appear to be 'backfiring' and resulting in slower sales. The blog The Consumerist reported in November on a letter a former employee received from Circuit City, attempting to entice him to re-join the company, in a capacity 'comparable to your previous role at the most competitive rate possible.' [16]

[edit] Business model

A newly designed Circuit City store (St. Louis Mills - Hazelwood, Missouri).
A newly designed Circuit City store (St. Louis Mills - Hazelwood, Missouri).

Circuit City introduced a new Superstore format in 2001 which was much more in-line with the "Big Box Retailer" store design than its prior layouts. The newer stores have a brighter, more open sales floor to allow customers to browse the merchandise easily. The format allows putting all products, except those that are too large for a customer to carry themselves, on the sales floor. In 2007, new store formats include a 20,000 square foot store aimed to eliminate previously under-utilized space known as The City. All new store openings in 2008 will be in this new store format and significantly changes the experience traditionally found in Circuit City stores.[17]

In partnership with IBM, Circuit City has also developed its first online virtual-reality store based completely within the 3D virtual world of Second Life. The store was opened in December 2006 and houses 3D representations of actual products carried in stores. Online consumers can shop in the virtual store much like they would in a real store. The Second Life virtual store project was created as part of Circuit City's "Multi-Channel" initiative to branch into other areas of retailing in addition to a standard store environment.[18]

Domestic segment retail operations are overseen by the COO, John Harlow as of 2008. Domestic retail operations are divided into 8 regions which are under the supervision of Regional Vice Presidents. The 8 regions comprise 67 districts, which are overseen by District Managers who regularly visit stores to monitor store operations and meet with Store Management.

Domestic segment Super stores are typically staffed with an average of 56 full-time and part-time Associates including sales support personnel, such as customer service associates, product specialists and stockpersons; in-store technicians and installers; supervisors; an operations manager; an assistant manager; and a store director.[19]

[edit] Major products and services

  • Home Entertainment Equipment: Televisions, DVD Players, Receivers, Speakers
  • Imaging Equipment: Digital Cameras, Camcorders, PDAs, Cell Phones
  • Technology Equipment: Personal Computers (PCs), Laptops, Monitors, Computer Accessories, Computer Software
  • 12-Volt (Car Audio) Equipment: GPS, Amplifiers, Speakers, Subwoofers
  • Entertainment Software: Music CDs, DVD Movies, Console Systems, Console Games, PC Games
  • House Care: Vacuums, Air conditioners, Small Refrigerators
  • firedog Service: Home Entertainment Installation, PC Checkup / Installation and Car Audio Installation

Examples of services provided are narrowband, broadband, wireless telephone service through an exclusive partnership with Verizon Wireless (while also offering Virgin Mobile, and foneGEAR), voice-over IP, extended warranty programs, satellite radio, computer repair, in-store pickup, car audio installation and in-home video installation.[citation needed]

[edit] Associates

At the time of its fiscal year 2007 Annual report, Circuit City had over 43,000 hourly and salaried associates working in the United States, and 3,071 associates in Canada [20].

Associates in both the domestic and international segment receive frequent training through interactive E-learning courses hosted on the company intranet known as ccity.com. In the beginning, the E-learning courses were developed in conjunction with Circuit City's training department and DigitalThink. As of 2007, all coursework is developed internally and the deployed and hosted on an LMS system by Convergys. In addition to online courses, associate training tools include training workbooks, and management-driven in-store mentoring.

On May 9, 2007, the executive board of the Retail, Wholesale and Department Store Union (RWDSU, UFCW) issued a statement that they would support a lawsuit against Circuit City by three Oxnard, California Circuit City employees who were part of the group of employees fired for earning higher wages. The three employees are Daniel Weidler, 57, Michael Yezback, 59, and Eloise Garcia, 66. RWDSU President Stuart Appelbaum said, even though the three employees were not part of their union, "what happened to them and other Circuit City workers represents a two-fisted assault against all retail employees." In Appelbaum's statement, the union plans to file an amicus brief in support of the California workers. RWDSU represents about 100,000 throughout the U.S. and Canada and feels that if Circuit City is allowed to get away with their firing practice, other major retailers will follow suit. [21]

[edit] Initiatives

Circuit City's in store tranformation program dubbed ISCE, started with laying off 3400 employees in 2007 that were earning more than fair market salary. It was internally announced at a store level within a few months of the terminations. It started with developing a "full floor" selling staff in certain stores. The company went to reasonable means to train associates how to sell in any department, however many skeptics currently believe that this move may have led to reduced earnings and a loss of market share to its competitors. [22]

Multi-Channel In the company's 2007 annual report, Circuit City lists Multi-Channel integration as one of its primary innovation initiatives. The company launched a test program that enables sales associates and shoppers in 10 stores in Boston and 10 in Florida to use wireless tablet PCs to study product specifications and compare products and prices from circuitcity.com as they walk through a store. The test has now resulted in a roll-out in all of the company's new concept stores known as The City.

Supply Chain In Fiscal 2007, Circuit City made improvements within its supply chain organization to help identify and react to consumer demand in a timely manner as well reduce the time between buying from a vendor and display of the product at the point of sale. Circuit City has set up a subsidiary, Circuit City Global Sourcing, Ltd (with offices in China, Hong Kong and Taiwan), to assist in obtaining inventory to sell. Most products are shipped directly from manufacturers to the 9 Circuit City distribution centers.[23]

Six Sigma Six Sigma was introduced in 2001 as an initiative within Circuit City's annual report.[24] Six Sigma is applied to Circuit City's operational side such as supply chain and distribution centers. In May 2004 the Director of Six Sigma for Circuit City announced that Six Sigma was being applied to important company projects. As of 2006, Six Sigma intitiatives have ceased to exist.[25]

[edit] Community involvement

Heart of the City In early 2006, Circuit City rolled out its "Heart of the City" initiative, a label for the company's ongoing encouragement for all associates to volunteer for charitable causes. Volunteering is not compulsory but is encouraged by district and store management. Stores organize events such as softball games, car washes, and bake sales to raise money for charities in their own communities. Included within the "Heart of the City" initiative are corporate donations and partnerships with organizations nationwide. As of June 2006, Heart of the City has developed an "Umbrella", which they consider the people and organizations they support through the program. There are four programs that fall under this umbrella which include Boys and Girls Clubs of America, United Way of America and as of December 2006, the newly created "Associate Relief Fund" which was originally an idea to help those associates directly affected by Hurricane Katrina. The Associate Relief Fund will now go to help any associate in need of assistance who otherwise wouldn't receive any.[26][27][28][29]

Boys & Girls Club of America Starting in 2001, Circuit City partnered with the BGCA for their annual ImageMakers contest. This $5 million initiative, funded by the Circuit City Foundation, helps BGCA develop a state-of-the-art photography curriculum, host a photography competition, provide photography resources and involve Club members in the art of photography.[30][31]

Habitat for Humanity Circuit City is a Build Partner with Habitat for Humanity. As recently as March 2006 Circuit City made charitable contributions to the Richmond, VA. Habitat. Circuit City associates volunteered, and assisted in the construction of several houses near the Richmond area that same month.[32][33]

American Red Cross In the wake of Hurricane Katrina, Circuit City announced on September 9, 2005 the donation of $1 million to the American Red Cross Disaster Relief Fund. In addition to the corporate donation, Circuit City associates participated in a "Drive for a Million" fundraising effort, which included a variety of projects (bake sales, car washes, etc.) at Circuit City locations across the country to benefit the American Red Cross Disaster Relief Fund.[34]

United Way Circuit City makes charitable contributions to various organizations through the United Way and lists this organization in its "Community Involvement" section of its website.[35][36]

[edit] Real estate

A Circuit City store in Rome, Georgia.
A Circuit City store in Rome, Georgia.

Due to the expansion of Circuit City stores in the 1970s-1990s, the company has accumulated a surplus of unused real estate with a presence in nearly every major market in the country. Although a typical retail location is approximately 30,000 square feet (2700 m²), they have numerous freestanding and in-line locations ranging from 2,000 to 50,000 square feet (180 to 4500 m²). They also have office, service and distribution surplus locations scattered across the country. During Circuit City's 2005 fiscal year (March 1, 2004 through February 28, 2005), the company disposed of approximately 1.2 million square feet (108,000 m²) of vacant retail space.[37] In January 2007, Circuit City's vice president for real estate announced plans on opening up 200-300 stores in the next two years, a large increase from the current trend of 10-12 stores a year.[38]

[edit] firedog

Main article: firedog

The domestic segment launched the firedog brand during fiscal year 2006 to compete with other retailer's offerings such as Best Buy's Geek Squad and Staples EasyTech to provide home theater installation and PC services in-store, at home and remotely[39]. The decision to build an integrated brand for both PC services and home theater installation was based on customer research and was more cost-efficient than building multiple brands[citation needed]. As of the business model change on May 31st, firedog now includes Roadshop installation[citation needed].

[edit] Criticism & controversy

Circuit City agreed to pay $173,220 in settlement and investigation reimbursement costs due to a false advertising claim in a 2004 New Jersey court case. The court found that important information pertaining to sale items was purposely obscured within the advertisement, thus potentially deceiving to their customers.[40]

The same year, Harris and Kaufman, Attorneys at Law, successfully represented a class action suit of Circuit City employees caught in an unfair arbitration agreement. The court's ruling in Gonlugar v. Circuit City Stores, Inc., found the store's arbitration agreement to be "tainted with illegality". The arbitration agreement was found to be so one-sided that it was unconscionable. Harris and Kaufman maintained the arbitration agreement bound only the employee to arbitration, required the employee to pay fees to Circuit City for initiating the arbitration (Circuit City paid no such fee), imposed a shortened statute of limitations on the employee (not on Circuit City), and prohibited class actions.[41] [42]

Circuit City's City Advantage Plan was also challenged in a United States District Court in Massachusetts. The plaintiffs' claim concerned Circuit City's cancellation of its warranty plan without full disclosure of the plan at the time of sale. The plaintiffs cited breach of contract, unjust enrichment, and violation of the Massachusetts Consumer Protection Act. Circuit City requested the matter be dismissed. The court, however, upheld the plaintiffs' claim that the monies paid for the protection plan would be reimbursed as well as credited for the return non-working goods.[43]

During the week of August 31, 2007, the California Supreme Court ruled that Circuit City employees may sue the store for labor law violations, even though the store had the employees sign arbitration agreements years ago. The arbitration agreement, which Circuit City insists all 46,000 employees must sign, calls for employees to waive their right to sue their employer and establishes a cap for damages regarding any wrongdoing on the part of corporate or management. The California high court indicated that the Circuit City employee waiver violated the state's labor laws.[44]

[edit] Circuit City-owned brand names

  • Anika
  • Centrios
  • Circuit City Rewards
  • ESA
  • firedog
  • i-next
  • Liquid Video
  • NexxTech
  • Roadshop
  • Sector 7
  • Verge
  • Wasaki
  • Element
  • NexxTech Ultimate

The Centrios and NexxTech brands are imported and distributed by the American company Orbyx Electronics, and primarily manufactured in the People's Republic of China.

[edit] The City

The City is a new venture being taken on by Circuit City Stores, Inc. These new concept stores originated in the Richmond, Virginia area and have proven to be very effective in helping Circuit City sales.[citation needed] Circuit City plans to open approximately 55 new stores by 2009, most of them being The City. The City store's layouts are very similar to those found at competitor locations such as Best Buy. The stores give customers a more hands-on experience with the products they plan to buy and assist the associates in giving the customers the best experience possible.[citation needed]

[edit] Footnotes

  1. ^ Fortune Magazine 2007 entry showing Circuit City at #215
  2. ^ Circuit City - Circuit City Stores, Inc. Reports Third Quarter Results
  3. ^ Blockbuster launches $1bn bid for Circuit City. PC Retail. Retrieved on 2008-04-14.
  4. ^ in 1990. [1]
  5. ^ http://www.bizjournals.com/washington/stories/2002/08/05/story7.html
  6. ^ Stereophile: Cutbacks at Circuit City
  7. ^ [2]
  8. ^ Circuit City - Philip J. Schoonover to Succeed W. Alan McCollough as Chairman of the Board of Circuit City Stores, Inc
  9. ^ [3][dead link]
  10. ^ Circuit City - Circuit City Stores, Inc. Announces Changes to Improve Financial Performance
  11. ^ [4]
  12. ^ Circuit City to shut stores, realign top ranks - The Boston Globe
  13. ^ Departure Of Foss Shocks Circuit City Investors - Forbes.com
  14. ^ Washington Post
  15. ^ Circuit City's Job Cuts Backfiring, Analysts Say - washingtonpost.com
  16. ^ [5]
  17. ^ [6]
  18. ^ Circuit City Opening Virtual 3-D Store - 12/15/2006 12:31:00 PM - TWICE
  19. ^ untitled
  20. ^ untitled
  21. ^ [7]
  22. ^ http://www.nypost.com/seven/12222007/business/earnings_outage_hits_circuit_citys_share_848109.htm
  23. ^ [8]
  24. ^ [9]
  25. ^ Six Sigma Blogs: Circuit City - Six Sigma
  26. ^ BGCA |Our Partners
  27. ^ [10]
  28. ^ Circuit City
  29. ^ Additions to Publication 78: Organizations A - E
  30. ^ BGCA |Our Partners
  31. ^ Circuit City - Youth Will Offer Fresh Focus on Action Sports
  32. ^ Microsoft Word - circuitcity.doc
  33. ^ Microsoft Word - CircuitCity,p2.doc
  34. ^ Circuit City - Circuit City Stores, Inc. to Donate $1 Million to the American Red Cross
  35. ^ Circuit City
  36. ^ [11]
  37. ^ [12]
  38. ^ Circuit City to roll out new prototype store - Jan. 15, 2007
  39. ^ Circuit City's Secret Service Plan
  40. ^ New Jersey Office of the Attorney General
  41. ^ Harris and Kaufman Attorneys at Law
  42. ^ Gonlugur v. Circuit City Stores
  43. ^ Schacter, and as representative for all persons similarly situated vs. Circuit City, Inc 05-12456-MNG
  44. ^ Gentry vs. Superior Court, S141502

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