WEBVTT - The Circuit City Story Part 1 0:00:04.160 --> 0:00:07.160 Get in tech with technology with tech Stuff from how 0:00:07.240 --> 0:00:14.160 stuff works dot com. Hey there, and welcome to tech Stuff. 0:00:14.200 --> 0:00:16.920 I'm your host, Jonathan Strickland, and today we're going to 0:00:17.040 --> 0:00:20.040 begin to talk about a company that played a part 0:00:20.120 --> 0:00:25.119 in getting consumer technology to the consumer, Circuit City. So 0:00:25.239 --> 0:00:27.560 Circuit City is best known for being a big box 0:00:27.560 --> 0:00:31.080 electronics retail store that had some pretty dramatic ups and downs. 0:00:31.400 --> 0:00:33.600 And there's a lot to this story. So this is 0:00:33.600 --> 0:00:36.600 gonna be a two parter. But before I get into 0:00:36.640 --> 0:00:39.600 the details, let's talk about why I'm covering this story 0:00:39.640 --> 0:00:45.239 at all. It's because of a little listener mail. This 0:00:45.320 --> 0:00:48.320 listener mail comes from Kevin, who says, I really enjoy 0:00:48.360 --> 0:00:50.720 your shows that trace the history of tech companies. I 0:00:50.880 --> 0:00:53.800 just finished catching up on the Sony episodes. Actually I 0:00:53.840 --> 0:00:56.560 was hoping you'd consider doing a similar treatment of Circuit 0:00:56.600 --> 0:00:59.080 City sometime. I feel like that was a big part 0:00:59.080 --> 0:01:01.200 of tech in the eighties in nineties, and it's where 0:01:01.200 --> 0:01:04.120 I got my first computer and my first stereo. I 0:01:04.200 --> 0:01:06.240 always thought the store was really cool as a kid, 0:01:06.520 --> 0:01:09.760 darkly lit, red dion, those glass rooms for checking out 0:01:09.800 --> 0:01:12.880 sound systems. Anyway, thanks for listening and keep up the 0:01:12.959 --> 0:01:16.240 great work. With the podcast. Well, thanks for those kind words, Kevin. 0:01:16.319 --> 0:01:20.600 The Circuit City story is interesting because the chain originated 0:01:20.959 --> 0:01:24.760 the concept of the electronics box store. And I don't 0:01:24.760 --> 0:01:28.120 mean it was a store that sold electronic boxes, although 0:01:28.160 --> 0:01:31.240 I guess technically it did, but that's not what I mean. 0:01:31.440 --> 0:01:34.880 I mean it was a box store like Best Buy 0:01:34.920 --> 0:01:39.600 is today. In fact, best buying Circuit City heaven interesting 0:01:40.800 --> 0:01:44.759 relationship or did at any rate. Circuit City was kind 0:01:44.760 --> 0:01:47.640 of best Buy before there was a Best Buy now. 0:01:47.640 --> 0:01:50.960 The company was incredibly successful for many years. In fact, 0:01:51.320 --> 0:01:53.480 it was one of only a dozen or so companies 0:01:53.520 --> 0:01:56.360 to outperform the Fortune five hundred by at least three 0:01:56.400 --> 0:02:00.440 times for fifteen years. I mean by a factor of right, 0:02:00.480 --> 0:02:05.680 by multiplying by three for fifteen years. But eventually those 0:02:05.680 --> 0:02:08.239 good times ended and the company kind of imploded and 0:02:08.280 --> 0:02:11.200 went bankrupt in two thousand nine. And today it's a 0:02:11.280 --> 0:02:14.639 very different story from its heyday. Before I get into 0:02:14.720 --> 0:02:17.360 the story at all, I want to recommend a book 0:02:17.440 --> 0:02:20.840 to anyone who wants to learn more about this company 0:02:20.880 --> 0:02:23.520 and what happened to it and the management practices that 0:02:23.560 --> 0:02:27.720 were involved at all stages. It was written by Alan Wurtzel. 0:02:28.440 --> 0:02:30.959 It's actually the son of one of the co founders 0:02:30.960 --> 0:02:34.160 of Circuit City. He wrote a book titled Good Too 0:02:34.280 --> 0:02:37.640 Great To Gone, The sixty year Rise and Fall of 0:02:37.680 --> 0:02:40.400 Circuit City, and you can read a lot more about 0:02:40.440 --> 0:02:42.800 the company in that book. If this podcast wets your 0:02:42.800 --> 0:02:45.400 whistle at Wortzel, by the way, admits that he's not 0:02:45.480 --> 0:02:49.520 exactly an unbiased reporter, but also he holds himself accountable 0:02:49.600 --> 0:02:52.760 to examine the mistakes that he he credits to himself, 0:02:53.360 --> 0:02:56.360 also to his father and others in the company, and 0:02:56.440 --> 0:02:58.560 the book is an easy and interesting read on the 0:02:58.600 --> 0:03:01.560 subject of business practice is So, we're gonna talk a 0:03:01.560 --> 0:03:06.799 lot about business practices and how it relates to the 0:03:06.840 --> 0:03:09.960 operation of an electronics store, and not so much about 0:03:10.000 --> 0:03:12.600 the tech side of things, because Circuit City was a 0:03:12.680 --> 0:03:18.160 retail establishment. They didn't create electronics, they sold them, but 0:03:18.200 --> 0:03:20.240 they did play a very big role in the tech 0:03:20.320 --> 0:03:23.400 world for many years. So now on with the show, 0:03:23.880 --> 0:03:27.760 and our story begins in Sea Bright, New Jersey, on 0:03:27.840 --> 0:03:32.799 March second, nineteen o seven. That's when Samuel S. Wertzel 0:03:32.960 --> 0:03:36.720 was born. His mother, Flora, was originally from Russia. She 0:03:36.840 --> 0:03:39.480 moved to the United States in her early twenties and 0:03:39.560 --> 0:03:42.560 she ended up opening up a grocery store. Um. She 0:03:42.600 --> 0:03:46.280 actually did that after she divorced Samuel's father. It was 0:03:46.360 --> 0:03:49.880 an arranged marriage and it did not work out, which 0:03:49.880 --> 0:03:53.640 meant that Flora ended up raising Samuel and his siblings 0:03:53.680 --> 0:03:57.200 by herself. That was four kids in total. Samuel had 0:03:57.240 --> 0:04:01.080 two sisters and a brother. So she had very high 0:04:01.120 --> 0:04:03.920 hopes for her children and demanded that they study hard 0:04:03.960 --> 0:04:06.640 in school. And she managed to get some help from 0:04:06.640 --> 0:04:08.680 her parents to open up the grocery store and was 0:04:08.720 --> 0:04:12.240 able to eke out a living that way. Now, Samuel 0:04:12.640 --> 0:04:15.960 went to night school to study accounting after a fairly 0:04:16.000 --> 0:04:19.039 tumultuous high school phase in which he was, according to 0:04:19.080 --> 0:04:24.640 his son quote often a discipline problem end quote. Now 0:04:24.960 --> 0:04:28.680 Alan attributes this primarily to the fact that Samuel didn't 0:04:28.680 --> 0:04:32.080 have a father figure for his childhood. Uh and so 0:04:32.200 --> 0:04:35.919 he ended up acting out quite a bit, and once 0:04:35.960 --> 0:04:38.960 he started to mature, he began to really apply himself. 0:04:39.040 --> 0:04:42.080 He was charismatic and he turned out to have an 0:04:42.120 --> 0:04:45.680 aptitude for business. He and his older brother first opened 0:04:45.760 --> 0:04:49.480 up a wholesale butter and egg business, you know the 0:04:49.560 --> 0:04:53.760 way every tech retail esta establishment gets its start by 0:04:53.760 --> 0:04:58.840 selling butter and eggs um. His estranged father actually worked 0:04:58.839 --> 0:05:01.680 in that business too, and they ended up having a 0:05:01.720 --> 0:05:06.279 working relationship, although not a familial one, and that ended 0:05:06.360 --> 0:05:09.240 up not working out either. He then went on to 0:05:09.320 --> 0:05:13.080 work for a company called June Dairy, but this was 0:05:13.120 --> 0:05:17.080 also during the time of the Great Depression UH, and 0:05:17.320 --> 0:05:19.360 he was not able to hold onto that job for long. 0:05:19.440 --> 0:05:22.320 He was actually laid off, so he then moved on 0:05:22.520 --> 0:05:25.440 and from nineteen thirty eight through nineteen forty seven he 0:05:25.520 --> 0:05:28.800 worked for a company called Packing Products UH. And that 0:05:28.920 --> 0:05:31.000 was a company that was actually created by his father 0:05:31.040 --> 0:05:34.880 in law. And a family vacation in nineteen forty nine 0:05:35.080 --> 0:05:39.360 would change his destiny, and that is the beginning of 0:05:39.520 --> 0:05:41.960 Circuit City. Now I'm going to jump into that in 0:05:42.000 --> 0:05:43.360 a second, but first I want to give you a 0:05:43.400 --> 0:05:46.080 little more information about his family because they played a 0:05:46.160 --> 0:05:51.280 very important role in the evolution of Circuit City. First 0:05:51.279 --> 0:05:54.560 of all, Samuel married a woman named Ruth Mann in 0:05:54.720 --> 0:05:57.800 nineteen thirty two. He had met her in nineteen thirty 0:05:57.800 --> 0:06:00.520 one and a year later they got married. Now, Ruth 0:06:01.000 --> 0:06:04.799 came from an upper class background, very different from Samuel. 0:06:05.320 --> 0:06:09.200 She was also a college educated woman, which was not 0:06:09.320 --> 0:06:13.640 necessarily common at that time in the United States. Her father, 0:06:13.880 --> 0:06:17.680 Leon was in the clothing manufacturing business and was really successful, 0:06:18.040 --> 0:06:21.240 and later he became an entrepreneur who funded the efforts 0:06:21.240 --> 0:06:24.800 of various inventors and engineers. One of those inventors had 0:06:24.800 --> 0:06:29.920 created a packaging material for eggs so that they could 0:06:29.960 --> 0:06:32.600 be shipped without the risk of breakage, or at least 0:06:32.600 --> 0:06:37.080 reducing that risk. There was actually a different invention that 0:06:37.160 --> 0:06:39.680 was already patented in the United States, or that one 0:06:39.800 --> 0:06:42.600 a patent in the United States, and so Leon ended 0:06:42.680 --> 0:06:45.279 up convincing the inventor to give up the patent rights 0:06:45.279 --> 0:06:49.440 in the US and concentrate on a market in Europe. 0:06:49.880 --> 0:06:54.599 And so that's when he created this company packing Products. Uh. 0:06:54.680 --> 0:06:58.839 Leon and Samuel got along great. Leon instilled in Samuel 0:06:58.880 --> 0:07:01.880 two qualities he thought were important in business and beyond, 0:07:01.960 --> 0:07:08.520 which were humor and humility. From Alan's perspective, reflecting back 0:07:08.560 --> 0:07:11.680 on the stories of his father and his grandfather, it 0:07:11.840 --> 0:07:15.160 sounds as though Samuel saw in Leon a father figure 0:07:15.200 --> 0:07:18.000 he had lacked in childhood, and Leon in turn treated 0:07:18.040 --> 0:07:22.120 Samuel as his own son. Because Leon didn't have any sons, 0:07:22.160 --> 0:07:25.760 He had a daughter named Ruth. Samuel and Ruth however, 0:07:26.280 --> 0:07:29.560 did have sons, two of them, Alan and David. Alan 0:07:29.600 --> 0:07:32.440 Wurzel would go on with Samuel to create the Circuit 0:07:32.520 --> 0:07:36.280 City Empire. But even empires have humble beginnings, which brings 0:07:36.360 --> 0:07:40.600 us back to that family vacation I mentioned. So Samuel 0:07:40.640 --> 0:07:43.520 and Ruth were going on a golfing vacation with their 0:07:43.560 --> 0:07:46.080 family in order to clear their heads and plan for 0:07:46.120 --> 0:07:50.080 the future. This was a and things had suddenly kind 0:07:50.080 --> 0:07:54.720 of turned south for the couple financially. The Packing Products 0:07:54.760 --> 0:07:58.679 company had transitioned into a broker company. Now, a broker 0:07:58.680 --> 0:08:02.760 company doesn't hold its own inventory. Typically, what a broker 0:08:02.800 --> 0:08:06.600 company does is they get in the business of matching 0:08:06.640 --> 0:08:10.360 buyers with sellers. The idea was that the company would 0:08:10.400 --> 0:08:14.520 find someone wanting to purchase a particular commodity, then they 0:08:14.520 --> 0:08:18.200 would find a seller who was going to sell that commodity, 0:08:18.480 --> 0:08:21.080 and they would match the two together, making some money 0:08:21.160 --> 0:08:23.320 in the middle of this. And it may even be 0:08:23.400 --> 0:08:27.480 that the company buys the commodity from one entity, sells 0:08:27.520 --> 0:08:29.640 it at a mark up to another entity, and that's 0:08:29.640 --> 0:08:33.480 how you make your profit. But someone at the Packing 0:08:33.520 --> 0:08:36.720 Products Company made a really bad decision. They ended up 0:08:36.760 --> 0:08:41.120 buying a large amount of steel without first securing a customer. So, 0:08:41.120 --> 0:08:42.880 in other words, no one had said that they wanted 0:08:42.880 --> 0:08:46.720 to buy steal. But apparently this person at Parker Products 0:08:46.720 --> 0:08:49.319 felt that the steel being sold was at a price 0:08:49.400 --> 0:08:51.920 that was too good to give up, so they went 0:08:51.960 --> 0:08:55.480 in and purchased this large amount. But then the steel 0:08:55.520 --> 0:08:59.000 market collapsed in the United States and as a result, 0:08:59.280 --> 0:09:02.520 the company was and shambles. Leon by that point had 0:09:02.559 --> 0:09:05.320 retired and he wasn't really in a financial position to 0:09:05.400 --> 0:09:08.200 help bail out the business or to start a new one. 0:09:08.280 --> 0:09:10.839 So Samuel, Ruth and their kids went on this trip 0:09:10.920 --> 0:09:13.560 in nine or to get a new perspective and figure out, well, 0:09:13.600 --> 0:09:16.760 what are we gonna do now? They weren't destitute or 0:09:16.760 --> 0:09:19.440 anything like that, but they didn't They couldn't go any 0:09:19.480 --> 0:09:21.440 further with the company that had been working for They 0:09:21.440 --> 0:09:23.800 had to start over. At this point, Samuel's forty two 0:09:23.880 --> 0:09:27.640 years old, So they were in Richmond, Virginia in nineteen 0:09:27.720 --> 0:09:30.280 forty nine when Samuel got into a conversation with a 0:09:30.280 --> 0:09:34.160 local barber. The cutter of hairs told Sammy that the 0:09:34.320 --> 0:09:38.000 very first Southern television station had just started broadcasting the 0:09:38.040 --> 0:09:41.199 previous year in April, not quite a full year before 0:09:41.760 --> 0:09:45.439 this actual encounter happened, and already the number of television 0:09:45.480 --> 0:09:49.000 stations was on the rise, as as were the number 0:09:49.040 --> 0:09:52.800 of homes that were getting TV sets, but they hadn't 0:09:52.840 --> 0:09:54.720 quite reached the tipping point. It was still one of 0:09:54.720 --> 0:09:59.360 those things that was obviously on the upswing, but wasn't 0:09:59.400 --> 0:10:02.800 anywhere those to the to the peak. So Wortzel saw 0:10:02.840 --> 0:10:06.040 this as an opportunity to create a new market, and 0:10:06.320 --> 0:10:09.000 he uh said, well, you know, if you've got a 0:10:09.000 --> 0:10:11.520 television broadcast station down here, then clearly you've got to 0:10:11.559 --> 0:10:16.000 have televisions to broadcast two. So later in nineteen forty nine, 0:10:16.000 --> 0:10:21.160 Samuel Wurtzel relocated his family to Richmond, Virginia and opened 0:10:21.240 --> 0:10:24.920 up a store called the Wards Company on West Broad Street. 0:10:25.559 --> 0:10:28.520 He took the thirteen thousand dollars he made from the 0:10:28.559 --> 0:10:31.360 sale of his home, which was the equivalent of more 0:10:31.400 --> 0:10:34.840 than a hundred and twenty thousand dollars today, and rented 0:10:34.880 --> 0:10:37.760 a storefront in Richmond that was several blocks from the 0:10:37.800 --> 0:10:40.280 big department stores, so he wasn't right next to the 0:10:40.280 --> 0:10:45.280 places that were already selling televisions under various brands. Now, 0:10:45.320 --> 0:10:48.679 the Wards store only sold television's at that time, they 0:10:48.679 --> 0:10:51.120 didn't sell anything else. That was all he did was 0:10:51.120 --> 0:10:54.400 sell TVs. And you might wonder, well, why did they 0:10:54.480 --> 0:10:59.480 he call it Wards? Well, first of all, it's W, A, R, D, S, 0:11:00.040 --> 0:11:03.080 no apostrophe. The reason for that is Wards is actually 0:11:03.080 --> 0:11:07.600 an acronym. It stands for the initials of Samuel's family. 0:11:07.679 --> 0:11:12.040 The W stands for Wertzel, the last name. A stands 0:11:12.080 --> 0:11:15.560 for Alan, our stands for Ruth, D stands for David, 0:11:15.640 --> 0:11:19.800 which was Samuel's other son, and S stands for Samuel. 0:11:19.840 --> 0:11:22.040 And he said, I don't want an apostrophe in there 0:11:22.040 --> 0:11:23.679 because I don't want it to come between me and 0:11:23.720 --> 0:11:27.640 my family, which I think is cute. Wertzel didn't go 0:11:27.920 --> 0:11:30.160 in on this venture on his own for very long. 0:11:30.559 --> 0:11:33.320 Shortly after he established this place, he took on a 0:11:33.360 --> 0:11:36.600 business partner who became the co founder of the Wards Company, 0:11:36.600 --> 0:11:40.280 and that partner's name was Abraham Haste who invested thirteen 0:11:40.320 --> 0:11:44.680 thousand dollars of his own money into the new company. Now, 0:11:44.679 --> 0:11:49.600 Haiti's chief responsibility was to manage buying and vendor relations, 0:11:49.880 --> 0:11:53.040 so he was looking at the supply side. Sam was 0:11:53.120 --> 0:11:56.559 concentrating on the sales side, so he was looking towards 0:11:56.600 --> 0:12:00.280 the customer, whereas Haste is looking towards the supplier, and 0:12:00.360 --> 0:12:02.800 both men shared a common set of values. Although they 0:12:02.800 --> 0:12:06.880 were very different people, they both felt very strongly about 0:12:06.920 --> 0:12:09.520 certain principles when it came to working with other people, 0:12:09.840 --> 0:12:13.720 whether they are vendors or employees or customers. They believe 0:12:13.760 --> 0:12:17.920 that what goes around comes around, and that keeping interactions 0:12:18.000 --> 0:12:21.200 friendly and helpful gets better results than a more you know, 0:12:21.600 --> 0:12:26.360 uh negative or pressure approach. Samuel and Abraham created the 0:12:26.360 --> 0:12:30.280 company at pretty much the perfect time. So at this 0:12:30.400 --> 0:12:34.240 time it was post World War two UH, and America 0:12:34.360 --> 0:12:36.960 was very different from the America that was that was 0:12:37.000 --> 0:12:41.240 around during the depression years. During the war, American industry 0:12:41.320 --> 0:12:45.800 was almost entirely devoted to military support efforts, either directly 0:12:46.040 --> 0:12:49.960 or indirectly, and business was booming in more ways than one. 0:12:50.440 --> 0:12:53.480 But the important fact for this story is that after 0:12:53.520 --> 0:12:57.240 the war was over, those military production efforts were able 0:12:57.280 --> 0:13:02.000 to shift into a civilian role, so things that had 0:13:02.040 --> 0:13:06.320 been dedicated to producing tanks could end up being used 0:13:06.360 --> 0:13:09.800 to produce other stuff. And also at the same time, 0:13:09.800 --> 0:13:13.360 you had soldiers returning home after serving overseas and then 0:13:13.360 --> 0:13:16.720 they started families. The United States had a baby boom 0:13:16.760 --> 0:13:20.080 going on. US population would increase by more than thirty 0:13:20.120 --> 0:13:24.480 percent over the next couple of decades. So consider all 0:13:24.480 --> 0:13:27.679 the conditions that are present. You had a lot of 0:13:27.840 --> 0:13:31.679 young families, you had a booming commercial sector, you had 0:13:31.720 --> 0:13:34.800 a lot of people with disposable income, and over on 0:13:34.840 --> 0:13:38.559 the technology side, you had the development of reliable televisions. 0:13:38.600 --> 0:13:42.520 They had gone through the first few iterations, and these 0:13:42.559 --> 0:13:46.240 were sets that were expensive, but with the right plan, 0:13:46.480 --> 0:13:49.160 were within the reach of the middle class. Just a 0:13:49.160 --> 0:13:53.640 few years earlier, they were almost exclusively owned by wealthy people. 0:13:53.880 --> 0:13:56.080 They were the only ones who could afford it. But 0:13:56.760 --> 0:14:02.480 using uh in intelligence sales techniques, salespeople could make a 0:14:02.520 --> 0:14:06.360 television more affordable to a much broader variety of people. 0:14:07.240 --> 0:14:09.360 You also had a growth in the number of television 0:14:09.400 --> 0:14:11.880 stations around the country, which meant you had a lot 0:14:11.920 --> 0:14:14.520 more programming for folks, which created a more more of 0:14:14.520 --> 0:14:17.480 a demand for TVs. And it was an absolute perfect 0:14:17.480 --> 0:14:20.840 storm for a company getting into the television retail business. 0:14:21.480 --> 0:14:25.840 Along with appliances like a washer, a dryer, and a refrigerator, 0:14:26.040 --> 0:14:29.640 the television became part of the standard model American home. 0:14:30.280 --> 0:14:33.080 Now in nineteen fifty less than ten percent of homes 0:14:33.080 --> 0:14:35.880 in the United States had a television set, but just 0:14:36.040 --> 0:14:40.280 ten years later that number was eighty five. That's an 0:14:40.480 --> 0:14:44.640 enormous amount of growth. So it ended up being a 0:14:44.760 --> 0:14:49.120 great business to get into if you could be competitive. Now, 0:14:49.440 --> 0:14:51.560 that kind of sets me up for my next section. 0:14:51.640 --> 0:14:54.960 But before I get into that, let's take a quick 0:14:55.000 --> 0:15:07.120 break to thank our sponsor. All right, we're back, and 0:15:07.200 --> 0:15:11.440 now I want to talk about the actual business decisions 0:15:11.480 --> 0:15:14.040 that Samuel and Abraham had. Now, first of all, they 0:15:14.040 --> 0:15:17.200 had no idea how to make television's. That wasn't their 0:15:17.240 --> 0:15:21.320 business model. They would buy televisions from a manufacturer. In fact, 0:15:21.360 --> 0:15:24.440 they had one specific one in those early days. They 0:15:24.520 --> 0:15:28.360 knew a manufacturer in Long Island, New York called Olympic TVs. 0:15:28.880 --> 0:15:31.400 So they would buy their televisions from Olympic TVs and 0:15:31.440 --> 0:15:34.680 then sell them in their store in Richmond. Their first 0:15:35.160 --> 0:15:39.920 inventory was just twelve TV sets in the entire store. 0:15:40.160 --> 0:15:42.760 That's it. At this time in US history, there were 0:15:42.760 --> 0:15:44.720 only a few types of stores that you could find. 0:15:44.760 --> 0:15:48.800 In general, there were big department stores like Sears, Roebuck, 0:15:48.880 --> 0:15:53.280 and Montgomery Ward. Now those mainly carried store brand items, 0:15:53.840 --> 0:15:57.920 and maybe some major brands as well, but those were 0:15:57.920 --> 0:16:00.600 the only ones that they would carry. Right, anything that 0:16:00.800 --> 0:16:04.120 was not a major brand or a store brand you 0:16:04.240 --> 0:16:07.240 really couldn't find in those department stores. Then you had 0:16:07.240 --> 0:16:10.400 some variety store chains, kind of like Woolworth's was still 0:16:10.440 --> 0:16:12.920 big at that time, but they were on the decline. 0:16:12.920 --> 0:16:16.280 It was clear that Woolworths was not long for this 0:16:16.360 --> 0:16:20.040 world in that particular incarnation. Then you had the small 0:16:20.080 --> 0:16:23.040 business owners, the independent owners, the mom and pop stores, 0:16:23.360 --> 0:16:26.240 and they might have one or two shops at most, 0:16:26.760 --> 0:16:31.280 and they would cater to customers in the cities and towns. Now, 0:16:31.320 --> 0:16:35.360 the Wards Company was one of those, really, and they 0:16:35.400 --> 0:16:38.360 faced a lot of competition even in Richmond, both from 0:16:38.400 --> 0:16:41.680 department stores that sold larger brand name sets and other 0:16:41.760 --> 0:16:46.640 independent shops. So to set Wards apart from these other places, 0:16:46.680 --> 0:16:50.960 Samuel began to offer home demonstrations of televisions. And here's 0:16:50.960 --> 0:16:53.640 how it worked. It was pretty smart. Customers could arrange 0:16:53.680 --> 0:16:55.920 to have a TV set delivered and set up in 0:16:55.960 --> 0:17:00.720 their homes. So Samuel hired a driver who could also 0:17:00.840 --> 0:17:05.320 carry heavy things, because back in those days TVs were hefty. 0:17:05.440 --> 0:17:07.840 The screens were small, but the cabinets were enormous. This 0:17:07.920 --> 0:17:12.119 was vacuum tube technology, so vacuum tubes take up a 0:17:12.200 --> 0:17:16.520 lot of space and these were big, bulky, heavy sets. 0:17:16.960 --> 0:17:20.720 So he hired a strapping guy who picked up the 0:17:20.840 --> 0:17:23.359 television set, put it in a truck, and would drive 0:17:23.359 --> 0:17:27.320 it out to a potential customers home, deliver it, set 0:17:27.320 --> 0:17:30.359 it up, and the family would get to test the 0:17:30.440 --> 0:17:33.720 set out for a full day, and the following day summer, 0:17:34.000 --> 0:17:37.480 someone from the company from wards would come by either 0:17:37.960 --> 0:17:40.320 to claim the television, pack it back up, take it 0:17:40.320 --> 0:17:44.600 back to the store, or start a sale, and usually 0:17:44.600 --> 0:17:47.440 this would involve a cash installment, and then they would 0:17:47.480 --> 0:17:51.080 have an installment plan that would last between eighteen and 0:17:51.119 --> 0:17:55.359 twenty four months to space out payments for the television set, 0:17:56.320 --> 0:17:58.280 which is not a bad idea for a world that 0:17:58.359 --> 0:18:02.679 had not yet invented edit cards. This gave customers the 0:18:02.760 --> 0:18:05.920 opportunity to purchase a television set even if they thought 0:18:05.960 --> 0:18:09.040 that it was outside of their budget, because they could 0:18:09.040 --> 0:18:12.280 break up that expense over several months instead of having 0:18:12.359 --> 0:18:16.320 to do a big upfront purchase. Samuel also became an 0:18:16.400 --> 0:18:19.600 expert at sales strategies, many of which involved a good 0:18:19.640 --> 0:18:23.159 deal of social manipulation. That's a nice way of putting it. 0:18:23.480 --> 0:18:25.480 In fact, if you read up on the strategies, you 0:18:25.560 --> 0:18:29.520 might feel a bit uncomfortable as a consumer. But these 0:18:29.520 --> 0:18:33.280 were ideas that worked in sales. So here's an example. 0:18:33.440 --> 0:18:35.719 You could teach sales people to act as though a 0:18:35.720 --> 0:18:39.480 potential customer had already made a decision to buy a 0:18:39.560 --> 0:18:43.880 product without actually having done that. So someone comes into 0:18:43.880 --> 0:18:47.520 your store. There you're showing them, say, a new television set, 0:18:48.080 --> 0:18:51.520 and you pretend like the customer has already decided they 0:18:51.520 --> 0:18:55.000 are absolutely going to buy the television set, and you 0:18:55.080 --> 0:18:58.320 just start asking questions that kind of hint at that 0:18:58.440 --> 0:19:01.720 this actually adds extra pressure on the consumer to walk 0:19:01.720 --> 0:19:05.040 away buying a television set. So you wouldn't say something 0:19:05.160 --> 0:19:08.399 like would you like to purchase this, because that's giving 0:19:08.400 --> 0:19:11.239 the consumer and out. Instead, you might say, do you 0:19:11.640 --> 0:19:15.159 like this one better? In the dark wood cabinet or 0:19:15.200 --> 0:19:19.680 the lightwood cabinet. See, you've already made the assumption that 0:19:19.720 --> 0:19:22.560 they're going to buy one or the other. You take 0:19:22.600 --> 0:19:25.080 away the option of saying, oh, I'm not I'm not 0:19:25.160 --> 0:19:28.439 buying anything. It adds that extra level of pressure. Or 0:19:28.480 --> 0:19:31.200 you might begin by showing a customer a base model 0:19:31.440 --> 0:19:34.879 that has very few features, and honestly, you don't really 0:19:34.880 --> 0:19:37.399 want to sell the base model because you're selling it 0:19:37.440 --> 0:19:40.440 at a very low price and the margin is very low. 0:19:40.480 --> 0:19:43.200 In other words, the profit you make from the sale 0:19:43.480 --> 0:19:48.960 is negligible, and really you could not sustain a business 0:19:49.080 --> 0:19:52.919 selling those style television sets. The purpose of showing the 0:19:52.960 --> 0:19:56.200 basic model is to then move the customer over to 0:19:56.359 --> 0:19:59.960 higher end models that have more features and us cause 0:20:00.040 --> 0:20:02.720 ust more and have a better sales margin, so you 0:20:02.760 --> 0:20:06.680 make a bigger profit from the sale. Uh. Some people 0:20:06.720 --> 0:20:10.520 call this the bait and switch. Samuel preferred to think 0:20:10.560 --> 0:20:13.520 of it as a step up approach. He felt that 0:20:13.560 --> 0:20:16.320 customer service was really important, so it wasn't like it 0:20:16.400 --> 0:20:19.720 was an outright attempt to be a snake oil salesman. 0:20:20.000 --> 0:20:23.159 He was interested in employing the most effective techniques to 0:20:23.240 --> 0:20:26.359 move products. But he also felt that honesty was important 0:20:26.680 --> 0:20:28.680 and that the message he and his employees gave to 0:20:28.840 --> 0:20:32.280 vendors and customers and others should always be the truth, 0:20:33.200 --> 0:20:36.560 because keeping track of lies is a hassle. If you 0:20:36.560 --> 0:20:39.400 tell different lies to different people, maintaining all of that 0:20:39.800 --> 0:20:42.120 is a huge headache. So just be truthful up front 0:20:42.200 --> 0:20:46.680 was his policy. Reconciling the sales approach with the company's 0:20:46.760 --> 0:20:50.200 values requires a little bit of mental gymnastics and perhaps 0:20:50.400 --> 0:20:56.399 some generous allowances, I'll say, but one of those sales 0:20:56.400 --> 0:21:00.320 practices was that the price tag of the televisions in 0:21:00.400 --> 0:21:04.680 the Wards Company store and later other appliances that they 0:21:04.760 --> 0:21:08.800 started to sell after a couple more years, wasn't actually 0:21:08.840 --> 0:21:13.280 a fixed price. Every product had a listed price that 0:21:13.400 --> 0:21:16.439 was the starting point, and then every product had a 0:21:16.520 --> 0:21:21.560 bottom line lowest acceptable price a salesperson would be allowed 0:21:21.600 --> 0:21:25.159 to sell that item for. So your goal as a 0:21:25.160 --> 0:21:28.960 salesperson is to sell it as close to that ticket 0:21:29.040 --> 0:21:32.639 price as you possibly could. But customers can haggle, they 0:21:32.640 --> 0:21:36.760 can bargain, and the salesperson would get a commission based 0:21:36.840 --> 0:21:41.080 upon how high above that lowest acceptable price they were 0:21:41.119 --> 0:21:44.399 able to make a sale. So it was better to 0:21:44.440 --> 0:21:46.600 make a sale than not make a sale. If you 0:21:46.720 --> 0:21:49.280 absolutely had to go to the lowest price in order 0:21:49.320 --> 0:21:51.679 to move a product, then it was better to do 0:21:51.720 --> 0:21:54.400 that than not. But you would get a bigger reward 0:21:54.640 --> 0:21:58.639 if you could sell the product at the higher price, 0:21:58.800 --> 0:22:01.720 the closer to the list price as opposed to the 0:22:01.800 --> 0:22:06.640 secret lowest acceptable price. So if you happen to nab 0:22:06.680 --> 0:22:09.119 a customer that's not terribly aggressive, you can make a 0:22:09.160 --> 0:22:14.600 big commission off a hefty sale. It's another UH idea 0:22:14.680 --> 0:22:18.240 that a lot of modern shoppers find particularly shady. It 0:22:18.400 --> 0:22:21.240 also falls into the category that a lot of people 0:22:22.080 --> 0:22:25.280 will associate with buying a car, and in fact, Circuit 0:22:25.320 --> 0:22:28.680 City has a connection to car sales as well. I'll 0:22:28.680 --> 0:22:31.440 get into that probably in Part two, not so much 0:22:31.440 --> 0:22:35.200 in Part one. Now paired with this was a customer 0:22:35.280 --> 0:22:38.359 service policy that went above and beyond the pale. So 0:22:38.520 --> 0:22:41.640 every salesperson was expected to follow up with a customer 0:22:41.640 --> 0:22:45.000 to make certain that the delivery, installation, and operation of 0:22:45.040 --> 0:22:48.680 their brand new television's met expectations, and if they didn't, 0:22:48.720 --> 0:22:51.120 the company would work to make things right and even 0:22:51.160 --> 0:22:55.040 send along a conciliatory present or two to smooth things over. 0:22:55.560 --> 0:22:58.400 So Samuel felt that great customer service would help word 0:22:58.440 --> 0:23:01.680 of mouth, but perhaps are importantly, it would help the 0:23:01.720 --> 0:23:06.080 company avoid bad word of mouth, which tends to travel 0:23:06.160 --> 0:23:09.639 faster and farther than good word of mouth. People love 0:23:09.880 --> 0:23:13.520 to complain, and that's something that's still true today. If 0:23:13.560 --> 0:23:16.880 you read over the comments or reviews on things online, 0:23:16.920 --> 0:23:22.000 you'll see that people who are dissatisfied uh often will 0:23:22.040 --> 0:23:25.640 go to much greater lengths to express that dissatisfaction than 0:23:25.720 --> 0:23:29.200 folks who are happy, and may even seem that uh 0:23:29.240 --> 0:23:31.760 that the happy folks are are far outnumbered by the 0:23:31.840 --> 0:23:34.600 dissatisfied folks, even if the overall rating is high. It's 0:23:34.680 --> 0:23:38.200 because people who are happy might be willing to give 0:23:38.240 --> 0:23:42.159 like a five star review on something, but not actually 0:23:42.160 --> 0:23:45.080 write anything, just say of five stars, whereas people who 0:23:45.119 --> 0:23:48.399