WEBVTT - TechStuff Classic: The Circuit City Story Part 1 0:00:04.440 --> 0:00:12.280 Welcome to tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.320 --> 0:00:15.960 and welcome to tech Stuff. I'm your host, Jonathan Strickland. 0:00:16.040 --> 0:00:19.840 I'm an executive producer with iHeartRadio and how the tech 0:00:20.120 --> 0:00:23.640 are you? It is time for a tech Stuff classic episode, 0:00:23.680 --> 0:00:27.160 and we're bringing you another two parters. So this week 0:00:27.440 --> 0:00:30.960 we have the first part of the Circuit City story. 0:00:31.640 --> 0:00:33.280 For those of you in the United States, you may 0:00:33.320 --> 0:00:37.960 have fond memories, or at least memories of Circuit City 0:00:38.040 --> 0:00:40.519 if you are of a certain age, and if not, 0:00:40.960 --> 0:00:46.720 you're about to dive into a now obsolete world about 0:00:46.880 --> 0:00:50.879 a retail establishment that existed once upon a time. This 0:00:50.920 --> 0:00:58.360 episode originally published February first, twenty seventeen. Hope you enjoy 0:00:58.440 --> 0:01:01.360 this Listener mail comes from Kevin, who says, I really 0:01:01.440 --> 0:01:03.920 enjoy your shows that trace the history of tech companies. 0:01:04.000 --> 0:01:06.800 I just finished catching up on the Sony episodes. Actually, 0:01:07.040 --> 0:01:09.480 I was hoping you'd consider doing a similar treatment of 0:01:09.560 --> 0:01:12.199 Circuit City sometime. I feel like that was a big 0:01:12.240 --> 0:01:14.319 part of tech in the eighties and nineties, and it's 0:01:14.319 --> 0:01:17.039 where I got my first computer and my first stereo. 0:01:17.440 --> 0:01:19.679 I always thought the store was really cool as a kid. 0:01:19.880 --> 0:01:24.560 Darkly lit red neon those glassrooms for checking out sound systems. Anyway, 0:01:24.720 --> 0:01:26.959 thanks for listening, and keep up the great work with 0:01:27.040 --> 0:01:29.760 the podcast. Well thanks for those kind words, Kevin. The 0:01:29.840 --> 0:01:34.839 Circuit City story is interesting because the chain originated the 0:01:34.920 --> 0:01:38.280 concept of the electronics box store. And I don't mean 0:01:38.319 --> 0:01:41.560 it was a store that sold electronic boxes, although I 0:01:41.560 --> 0:01:44.640 guess technically it did, but that's not what I mean. 0:01:44.800 --> 0:01:48.000 I mean it was a box store like Best Buy 0:01:48.280 --> 0:01:51.360 is today. In fact, best Buy in Circuit City have 0:01:51.560 --> 0:01:57.800 an interesting relationship, or did at any rate. Circuit City 0:01:57.880 --> 0:01:59.720 was kind of best Buy before there was a best 0:01:59.760 --> 0:02:03.880 Buy now. The company was incredibly successful for many years. 0:02:03.920 --> 0:02:06.200 In fact, it was one of only a dozen or 0:02:06.200 --> 0:02:08.880 so companies to outperform the Fortune five hundred by at 0:02:08.960 --> 0:02:12.680 least three times for fifteen years. I mean by a 0:02:12.720 --> 0:02:16.760 factor of three, right, by multiplying by three for fifteen years. 0:02:17.080 --> 0:02:20.680 But eventually those good times ended and the company kind 0:02:20.680 --> 0:02:23.720 of imploded. It went bankrupt in two thousand and nine, 0:02:23.800 --> 0:02:26.400 and today it's a very different story from its heyday. 0:02:27.000 --> 0:02:29.600 Before I get into the story at all, I want 0:02:29.639 --> 0:02:32.200 to recommend a book to anyone who wants to learn 0:02:32.200 --> 0:02:35.400 more about this company and what happened to it and 0:02:35.440 --> 0:02:39.520 the management practices that were involved at all stages. It 0:02:39.560 --> 0:02:43.079 was written by Alan Wurtzel. It's actually the son of 0:02:43.160 --> 0:02:45.760 one of the co founders of Circuit City. He wrote 0:02:45.800 --> 0:02:49.600 a book titled Good to Great to Gone, The sixty 0:02:49.720 --> 0:02:52.840 Year Rise and Fall of Circuit City, and you can 0:02:52.880 --> 0:02:54.720 read a lot more about the company in that book. 0:02:54.800 --> 0:02:57.880 If this podcast wets your whistle at Wurtzel, by the way, 0:02:57.960 --> 0:03:01.400 admits that he's not exactly an UnBias reporter, but also 0:03:01.520 --> 0:03:04.560 he holds himself accountable to examine the mistakes that he 0:03:04.919 --> 0:03:08.520 credits to himself, also to his father and others in 0:03:08.560 --> 0:03:11.480 the company, and the book is an easy and interesting 0:03:11.520 --> 0:03:14.520 read on the subject of business practices. So we're going 0:03:14.560 --> 0:03:18.080 to talk a lot about business practices and how it 0:03:18.160 --> 0:03:22.520 relates to the operation of an electronics store, and not 0:03:22.639 --> 0:03:25.360 so much about the tech side of things, because Circuit 0:03:25.400 --> 0:03:30.079 City was a retail establishment. They didn't create electronics, they 0:03:30.200 --> 0:03:33.040 sold them, but they did play a very big role 0:03:33.120 --> 0:03:35.880 in the tech world for many years. So now on 0:03:36.080 --> 0:03:40.720 with the show, and our story begins in Seabright, New Jersey, 0:03:41.000 --> 0:03:45.640 on March second, nineteen oh seven. That's when Samuel S 0:03:45.680 --> 0:03:49.880 Wertzel was born. His mother, Flora, was originally from Russia. 0:03:50.000 --> 0:03:52.520 She moved to the United States in her early twenties 0:03:52.600 --> 0:03:55.920 and she ended up opening up a grocery store. She 0:03:55.960 --> 0:03:59.600 actually did that after she divorced Samuel's father. It was 0:03:59.640 --> 0:04:03.240 a changed marriage and it did not work out, which 0:04:03.280 --> 0:04:07.000 meant that Flora ended up raising Samuel and his siblings 0:04:07.040 --> 0:04:10.560 by herself. That was four kids in total. Samuel had 0:04:10.560 --> 0:04:14.320 two sisters and a brother. So she had very high 0:04:14.480 --> 0:04:17.279 hopes for her children and demanded that they study hard 0:04:17.320 --> 0:04:19.920 in school, and she managed to get some help from 0:04:20.000 --> 0:04:22.039 her parents to open up the grocery store and was 0:04:22.080 --> 0:04:25.599 able to eke out a living that way. Now Samuel 0:04:26.000 --> 0:04:29.320 went to night school to study accounting after a fairly 0:04:29.360 --> 0:04:32.320 tumultuous high school phase in which he was, according to 0:04:32.400 --> 0:04:38.000 his son quote often a discipline problem. In quote now 0:04:38.360 --> 0:04:42.000 Alan attributes this primarily to the fact that Samuel didn't 0:04:42.040 --> 0:04:45.640 have a father figure for his childhood, and so he 0:04:45.760 --> 0:04:49.359 ended up acting out quite a bit, and once he 0:04:49.440 --> 0:04:52.479 started to mature, he began to really apply himself. He 0:04:52.640 --> 0:04:56.000 was charismatic and he turned out to have an aptitude 0:04:56.000 --> 0:04:59.240 for business. He and his older brother first opened up 0:04:59.279 --> 0:05:03.160 a wholesale butter and egg business, you know, the way 0:05:03.279 --> 0:05:07.480 every tech retail est establishment gets its start by selling 0:05:07.520 --> 0:05:12.400 butter and eggs. His estranged father actually worked in that 0:05:12.480 --> 0:05:16.440 business too, and they ended up having a working relationship, 0:05:16.480 --> 0:05:20.000 although not a familial one, and that ended up not 0:05:20.120 --> 0:05:23.000 working out either. He then went on to work for 0:05:23.040 --> 0:05:27.119 a company called June Dairy, but this was also during 0:05:27.279 --> 0:05:31.080 the time of the Great Depression and he was not 0:05:31.160 --> 0:05:33.000 able to hold onto that job for long. He was 0:05:33.040 --> 0:05:36.200 actually laid off, so he then moved on and from 0:05:36.279 --> 0:05:39.200 nineteen thirty eight through nineteen forty seven he worked for 0:05:39.200 --> 0:05:42.800 a company called Packing Products, and that was a company 0:05:42.800 --> 0:05:45.760 that was actually created by his father in law, and 0:05:45.839 --> 0:05:49.920 a family vacation in nineteen forty nine would change his destiny, 0:05:50.160 --> 0:05:54.400 and that is the beginning of Circuit City. Now I'm 0:05:54.440 --> 0:05:56.080 going to jump into that in a second, but first 0:05:56.120 --> 0:05:58.000 I want to give you a little more information about 0:05:58.000 --> 0:06:01.360 his family because they played a very important role in 0:06:01.440 --> 0:06:05.680 the evolution of Circuit City. First of all, Samuel married 0:06:05.760 --> 0:06:09.599 a woman named Ruth Mann in nineteen thirty two. He 0:06:09.680 --> 0:06:12.000 had met her in nineteen thirty one and a year 0:06:12.080 --> 0:06:15.320 later they got married. Now, Ruth came from an upper 0:06:15.360 --> 0:06:19.920 class background, very different from Samuel. She was also a 0:06:19.960 --> 0:06:24.479 college educated woman, which was not necessarily common at that 0:06:24.640 --> 0:06:28.120 time in the United States. Her father, Leon was in 0:06:28.160 --> 0:06:31.840 the clothing manufacturing business and was really successful, and later 0:06:31.880 --> 0:06:35.159 he became an entrepreneur who funded the efforts of various 0:06:35.160 --> 0:06:39.040 inventors and engineers. One of those inventors had created a 0:06:39.200 --> 0:06:43.760 packaging material for eggs so that they could be shipped 0:06:43.800 --> 0:06:46.880 without the risk of breakage, or at least reducing that risk. 0:06:47.320 --> 0:06:51.520 There was actually a different invention that was already patented 0:06:51.560 --> 0:06:53.760 in the United States, or that won a patent in 0:06:53.800 --> 0:06:57.000 the United States, and so Leon ended up convincing the 0:06:57.000 --> 0:06:59.360 inventor to give up the patent rights in the US 0:06:59.600 --> 0:07:03.800 and andrate on a market in Europe. And so that's 0:07:03.880 --> 0:07:09.000 when he created this company packing Products. Leon and Samuel 0:07:09.040 --> 0:07:13.040 got along great. Leon instilled in Samuel two qualities he 0:07:13.040 --> 0:07:16.240 thought were important in business and beyond, which were humor 0:07:16.480 --> 0:07:22.680 and humility. From Alan's perspective, reflecting back on the stories 0:07:22.720 --> 0:07:25.840 of his father and his grandfather, it sounds as though 0:07:25.880 --> 0:07:29.119 Samuel saw in Leon a father figure he had lacked 0:07:29.120 --> 0:07:32.440 in childhood, and Leon in turn treated Samuel as his 0:07:32.640 --> 0:07:35.840 own son, because Leon didn't have any sons, he had 0:07:35.840 --> 0:07:40.440 a daughter named Ruth. Samuel and Ruth, however, did have sons, 0:07:40.480 --> 0:07:43.800 two of them, Alan and David. Alan Wurtzel would go 0:07:43.880 --> 0:07:47.080 on with Samuel to create the Circuit City Empire. But 0:07:47.440 --> 0:07:50.440 even empires have humble beginnings, which brings us back to 0:07:50.520 --> 0:07:54.880 that family vacation I mentioned. So, Samuel and Ruth were 0:07:54.920 --> 0:07:57.640 going on a golfing vacation with their family in order 0:07:57.640 --> 0:08:00.840 to clear their heads and plan for the future. This 0:08:00.880 --> 0:08:03.440 was in nineteen forty nine and things had suddenly kind 0:08:03.440 --> 0:08:08.120 of turned south for the couple financially. The packing products 0:08:08.120 --> 0:08:12.000 company had transitioned into a broker company. Now, a broker 0:08:12.040 --> 0:08:16.080 company doesn't hold its own inventory. Typically, what a broker 0:08:16.160 --> 0:08:19.920 company does is they get in the business of matching 0:08:20.000 --> 0:08:23.720 buyers with sellers. The idea was that the company would 0:08:23.720 --> 0:08:27.880 find someone wanting to purchase a particular commodity, then they 0:08:27.880 --> 0:08:31.560 would find a seller who was going to sell that commodity, 0:08:31.800 --> 0:08:34.480 and they would match the two together, making some money 0:08:34.520 --> 0:08:36.640 in the middle of this. And it may even be 0:08:36.760 --> 0:08:40.840 that the company buys the commodity from one entity, sells 0:08:40.880 --> 0:08:43.120 it at a markup to another entity, and that's how 0:08:43.160 --> 0:08:47.240 you make your profit. But someone at the packing products 0:08:47.320 --> 0:08:50.480 company made a really bad decision. They ended up buying 0:08:50.520 --> 0:08:54.480 a large amount of steel without first securing a customer. So, 0:08:54.480 --> 0:08:56.240 in other words, no one had said that they wanted 0:08:56.240 --> 0:09:00.000 to buy steel, but apparently this person at Parker Products 0:09:00.080 --> 0:09:02.679 felt that the steel being sold was at a price 0:09:02.720 --> 0:09:05.280 that was too good to give up, so they went 0:09:05.320 --> 0:09:08.880 in and purchased this large amount. But then the steel 0:09:08.920 --> 0:09:12.320 market collapsed in the United States and as a result, 0:09:12.640 --> 0:09:15.880 the company was in shambles. Leon by that point had 0:09:15.920 --> 0:09:18.720 retired and he wasn't really in a financial position to 0:09:18.760 --> 0:09:21.560 help bail out the business or to start a new one. 0:09:21.640 --> 0:09:24.240 So Samuel, Ruth and their kids went on this trip 0:09:24.280 --> 0:09:26.320 in nineteen forty nine or to get a new perspective 0:09:26.320 --> 0:09:27.960 and figure out, well, what are we going to do now. 0:09:28.640 --> 0:09:31.720 They weren't destitute or anything like that, but they didn't 0:09:31.920 --> 0:09:34.040 They couldn't go any further with the company that had 0:09:34.080 --> 0:09:36.160 been working for They had to start over. At this point, 0:09:36.200 --> 0:09:39.760 Samuel's forty two years old. So they were in Richmond, 0:09:39.880 --> 0:09:42.599 Virginia in nineteen forty nine when Samuel got into a 0:09:42.640 --> 0:09:46.720 conversation with a local barber. The cutter of Hares told 0:09:46.760 --> 0:09:50.200 Sammy that the very first Southern television station had just 0:09:50.240 --> 0:09:53.520 started broadcasting the previous year in April, not quite a 0:09:53.520 --> 0:09:57.839 full year before this actual encounter happened, and already the 0:09:57.920 --> 0:10:01.760 number of television stations was on the ride, as as 0:10:01.800 --> 0:10:04.760 were the number of homes that were getting TV sets, 0:10:05.200 --> 0:10:07.640 but they hadn't quite reached the tipping point. It was 0:10:07.640 --> 0:10:11.400 still one of those things that was obviously on the upswing, 0:10:12.320 --> 0:10:16.160 but wasn't anywhere close to the peak. So Wurtzel saw 0:10:16.160 --> 0:10:19.320 this as an opportunity to create a new market, and 0:10:19.679 --> 0:10:22.840 he said, well, you know, if you've got a television 0:10:22.840 --> 0:10:25.000 broadcast station down here, then clearly you got to have 0:10:25.080 --> 0:10:29.320 televisions to broadcast too. So later in nineteen forty nine, 0:10:29.360 --> 0:10:34.520 Samuel Wurtzel relocated his family to Richmond, Virginia, and opened 0:10:34.559 --> 0:10:38.240 up a store called the Wards Company on West Broad Street. 0:10:38.920 --> 0:10:41.880 He took the thirteen thousand dollars he made from the 0:10:41.920 --> 0:10:44.760 sale of his home, which was the equivalent of more 0:10:44.760 --> 0:10:48.160 than one hundred and twenty thousand dollars today, and rented 0:10:48.240 --> 0:10:51.120 a storefront in Richmond that was several blocks from the 0:10:51.120 --> 0:10:53.640 big department stores. So he wasn't right next to the 0:10:53.640 --> 0:10:58.640 places that were already selling televisions under various brands. Now, 0:10:58.640 --> 0:11:02.040 the Ward Store only sold televisions at that time. They 0:11:02.040 --> 0:11:04.480 didn't sell anything else. That was all he did was 0:11:04.520 --> 0:11:07.719 sell TVs. And you might wonder, well, why did they 0:11:07.840 --> 0:11:12.600 he call it Wards? Well, first of all, it's Waards, 0:11:13.360 --> 0:11:16.400 no apostrophe. The reason for that is Wards is actually 0:11:16.440 --> 0:11:20.960 an acronym. It stands for the initials of Samuel's family. 0:11:21.040 --> 0:11:25.400 The W stands for Wurtzel, the last name A stands 0:11:25.440 --> 0:11:28.920 for Allen, R stands for Ruth, D stands for David, 0:11:29.000 --> 0:11:33.160 which was Samuel's other son, and S stands for Samuel. 0:11:33.160 --> 0:11:35.400 And he said, I don't want an apostrophe in there 0:11:35.400 --> 0:11:37.040 because I don't want it to come between me and 0:11:37.080 --> 0:11:41.040 my family, which I think is cute. Wurtzell didn't go 0:11:41.280 --> 0:11:43.520 in on this venture on his own for very long. 0:11:43.920 --> 0:11:46.680 Shortly after he established this place, he took on a 0:11:46.720 --> 0:11:49.920 business partner who became the co founder of the Wards Company, 0:11:49.920 --> 0:11:53.600 And that partner's name was Abraham Haste, who invested thirteen 0:11:53.640 --> 0:11:58.000 thousand dollars of his own money into the new company. Now, 0:11:58.040 --> 0:12:03.000 Haste's chief responsibility was to manage buying and vendor relations, 0:12:03.240 --> 0:12:06.440 so he was looking at the supply side. Sam was 0:12:06.480 --> 0:12:09.920 concentrating on the sales side, so he was looking toward 0:12:09.960 --> 0:12:13.600 the customer, whereas Haste is looking toward the supplier. And 0:12:13.679 --> 0:12:16.160 both men shared a common set of values. Although they 0:12:16.160 --> 0:12:20.160 were very different people, they both felt very strongly about 0:12:20.280 --> 0:12:22.880 certain principles when it came to working with other people, 0:12:23.200 --> 0:12:27.079 whether they are vendors or employees or customers. They believe 0:12:27.120 --> 0:12:31.280 that what goes around comes around, and that keeping interactions 0:12:31.320 --> 0:12:35.960 friendly and helpful gets better results than a more negative 0:12:36.200 --> 0:12:40.520 or pressure approach. Samuel and Abraham created the company at 0:12:40.559 --> 0:12:44.600 pretty much the perfect time. So at this time it 0:12:44.720 --> 0:12:48.600 was post World War two and America was very different 0:12:48.679 --> 0:12:51.960 from the America that was around during the depression years. 0:12:52.440 --> 0:12:56.440 During the war, American industry was almost entirely devoted to 0:12:56.559 --> 0:13:01.360 military support efforts, either directly or indirectly, and business was 0:13:01.480 --> 0:13:04.800 booming in more ways than one. But the important fact 0:13:04.960 --> 0:13:08.000 for this story is that after the war was over, 0:13:08.520 --> 0:13:11.880 those military production efforts were able to shift into a 0:13:11.960 --> 0:13:17.160 civilian role, so things that had been dedicated to producing 0:13:17.320 --> 0:13:20.920 tanks could end up being used to produce other stuff. 0:13:21.400 --> 0:13:24.400 And also at the same time you had soldiers returning 0:13:24.400 --> 0:13:28.480 home after serving overseas, and then they started families. The 0:13:28.640 --> 0:13:31.560 United States had a baby boom going on. US population 0:13:31.600 --> 0:13:34.480 would increase by more than thirty percent over the next 0:13:34.559 --> 0:13:39.520 couple of decades. So consider all the conditions that are present. 0:13:39.880 --> 0:13:42.720 You had a lot of young families, you had a 0:13:42.760 --> 0:13:45.960 booming commercial sector, you had a lot of people with 0:13:46.080 --> 0:13:49.719 disposable income, and over on the technology side, you had 0:13:49.720 --> 0:13:53.080 the development of reliable televisions. They had gone through the 0:13:53.120 --> 0:13:57.840 first few iterations and these were sets that were expensive, 0:13:58.160 --> 0:14:01.080 but with the right plan, were within the reach of 0:14:01.120 --> 0:14:04.000 the middle class. Just a few years earlier, they were 0:14:04.040 --> 0:14:07.800 almost exclusively owned by wealthy people. They were the only 0:14:07.800 --> 0:14:14.280 ones who could afford it. But using intelligent sales techniques, 0:14:14.760 --> 0:14:18.240 salespeople could make a television more affordable to a much 0:14:18.360 --> 0:14:21.680 broader variety of people. You also had a growth in 0:14:21.720 --> 0:14:24.680 the number of television stations around the country, which meant 0:14:24.720 --> 0:14:27.160 you had a lot more programming for folks, which created 0:14:27.160 --> 0:14:29.720 a more of a demand for TVs. And it was 0:14:29.760 --> 0:14:32.440 an absolute perfect storm for a company getting into the 0:14:32.480 --> 0:14:37.840 television retail business. Along with appliances like a washer, a dryer, 0:14:38.040 --> 0:14:41.560 and a refrigerator, the television became part of the standard 0:14:41.600 --> 0:14:45.600 model American home. Now, in nineteen fifty, less than ten 0:14:45.640 --> 0:14:48.600 percent of homes in the United States had a television set, 0:14:48.640 --> 0:14:52.600 but just ten years later that number was eighty five percent. 0:14:53.280 --> 0:14:56.880 That's an enormous amount of growth. So it ended up 0:14:56.920 --> 0:15:00.400 being a great business to get into if you could 0:15:00.400 --> 0:15:03.840 be competitive. Now, that kind of sets me up for 0:15:03.960 --> 0:15:07.640 my next section. But before I get into that, let's 0:15:07.680 --> 0:15:20.800 take a quick break to thank our sponsor. All right, 0:15:20.840 --> 0:15:23.920 we're back, and now I want to talk about the 0:15:24.000 --> 0:15:27.680 actual business decisions that Samuel and Abraham had. Now, first 0:15:27.680 --> 0:15:30.840 of all, they had no idea how to make televisions. 0:15:31.080 --> 0:15:34.560 That wasn't their business model. They would buy televisions from 0:15:34.600 --> 0:15:37.640 a manufacturer. In fact, they had one specific one in 0:15:37.680 --> 0:15:40.680 those early days. They knew a manufacturer in Long Island, 0:15:40.680 --> 0:15:44.080 New York called Olympic TVs. So they would buy their 0:15:44.080 --> 0:15:47.000 televisions from Olympic TVs and then sell them in their 0:15:47.040 --> 0:15:51.960 store in Richmond. Their first inventory was just twelve TV 0:15:52.120 --> 0:15:56.120 sets in the entire store. That's it. At this time 0:15:56.120 --> 0:15:58.120 in US history, there were only a few types of 0:15:58.120 --> 0:16:00.800 stores that you could find. In general, there were big 0:16:00.840 --> 0:16:05.560 department stores like Sears, Roebuck and Montgomery Ward. Now those 0:16:05.600 --> 0:16:09.840 mainly carried store brand items and maybe some major brands 0:16:09.880 --> 0:16:13.080 as well, but those were the only ones that they 0:16:13.080 --> 0:16:16.880 would carry. Right, anything that was not a major brand 0:16:17.040 --> 0:16:19.880 or a store brand you really couldn't find in those 0:16:20.040 --> 0:16:23.160 department stores. Then you had some variety store chains, kind 0:16:23.200 --> 0:16:25.800 of like Woolworth's was still big at that time, but 0:16:25.840 --> 0:16:28.600 they were on the decline. It was clear that Woolworth's 0:16:28.720 --> 0:16:33.000 was not long for this world in that particular incarnation. 0:16:33.440 --> 0:16:36.280 Then you had the small business owners, the independent owners, 0:16:36.280 --> 0:16:38.880 the mom and pop stores, and they might have one 0:16:39.000 --> 0:16:42.160 or two shops at most, and they would cater to 0:16:42.280 --> 0:16:46.560 customers in the cities and towns. Now the Wards Company 0:16:47.440 --> 0:16:50.520 was one of those, really, and they faced a lot 0:16:50.560 --> 0:16:53.760 of competition even in Richmond, both from department stores that 0:16:53.800 --> 0:16:57.680 sold larger brand name sets and other independent shops. So 0:16:57.800 --> 0:17:01.880 to set Wards apart from these other places, Samuel began 0:17:02.000 --> 0:17:05.960 to offer home demonstrations of televisions. And here's how it worked. 0:17:05.960 --> 0:17:08.399 It was pretty smart. Customers could arrange to have a 0:17:08.440 --> 0:17:12.240 TV set delivered and set up in their homes. So 0:17:12.600 --> 0:17:16.440 Samuel hired a driver who could also carry heavy things. 0:17:16.800 --> 0:17:20.360 Because back in those days, TVs were hefty. The screens 0:17:20.400 --> 0:17:22.960 were small, but the cabinets were enormous. This was vacuum 0:17:23.000 --> 0:17:26.960 tube technology, so vacuum tubes take up a lot of 0:17:27.080 --> 0:17:31.840 space and these were big, bulky, heavy sets. So he 0:17:31.920 --> 0:17:36.040 hired a strapping guy who picked up the television set, 0:17:36.080 --> 0:17:38.040 put it in a truck, and would drive it out 0:17:38.080 --> 0:17:42.040 to a potential customer's home, deliver it, set it up, 0:17:42.560 --> 0:17:45.360 and the family would get to test the set out 0:17:45.480 --> 0:17:48.880 for a full day, and the following day someone from 0:17:48.880 --> 0:17:53.040 the company from wards would come by either to claim 0:17:53.080 --> 0:17:54.960 the television, pack it back up, take it back to 0:17:55.000 --> 0:17:59.320 the store, or start a sale, and usually this would 0:17:59.359 --> 0:18:02.040 involve a cat installment, and then they would have an 0:18:02.080 --> 0:18:06.160 installment plan that would last between eighteen and twenty four 0:18:06.240 --> 0:18:11.000 months to space out payments for the television set, which 0:18:11.040 --> 0:18:12.960 is not a bad idea for a world that had 0:18:13.000 --> 0:18:17.920 not yet invented credit cards. This gave customers the opportunity 0:18:18.000 --> 0:18:20.439 to purchase a television set even if they thought that 0:18:20.480 --> 0:18:23.680 it was outside of their budget, because they could break 0:18:23.760 --> 0:18:26.840 up that expense over several months instead of having to 0:18:26.880 --> 0:18:31.200 do a big upfront purchase. Samuel also became an expert 0:18:31.280 --> 0:18:34.320 at sales strategies, many of which involved a good deal 0:18:34.440 --> 0:18:37.560 of social manipulation. That's a nice way of putting it. 0:18:37.920 --> 0:18:39.879 In fact, if you read up on the strategies, you 0:18:39.960 --> 0:18:43.920 might feel a bit uncomfortable as a consumer, But these 0:18:43.920 --> 0:18:47.680 were ideas that worked in sales. So here's an example. 0:18:47.880 --> 0:18:50.560 You could teach salespeople to act as though a potential 0:18:50.640 --> 0:18:54.480 customer had already made a decision to buy a product 0:18:55.160 --> 0:18:59.440 without actually having done that. So someone comes into your store, 0:18:59.480 --> 0:19:02.840 your show them, say a new television set, and you 0:19:02.960 --> 0:19:07.000 pretend like the customer has already decided they are absolutely 0:19:07.040 --> 0:19:09.880 going to buy the television set, and you just start 0:19:09.920 --> 0:19:13.280 asking questions that kind of hint at that this actually 0:19:13.320 --> 0:19:16.760 adds extra pressure on the consumer to walk away buying 0:19:16.800 --> 0:19:20.160 a television set. So you wouldn't say something like would 0:19:20.160 --> 0:19:23.480 you like to purchase this, because that's giving the consumer 0:19:23.520 --> 0:19:26.520 an out. Instead, you might say, do you like this 0:19:26.560 --> 0:19:32.240 one better? In the dark wood cabinet or the lightwood cabinet. See, 0:19:32.280 --> 0:19:34.920 you've already made the assumption that they're going to buy 0:19:34.960 --> 0:19:38.679 one or the other. You take away the option of saying, oh, 0:19:38.720 --> 0:19:41.680 I'm I'm not buying anything. It adds that extra level 0:19:41.720 --> 0:19:44.680 of pressure. Or you might begin by showing a customer 0:19:44.720 --> 0:19:48.560 a base model that has very few features, and honestly, 0:19:48.600 --> 0:19:51.240 you don't really want to sell the base model because 0:19:51.280 --> 0:19:53.639 you're selling it at a very low price and the 0:19:53.720 --> 0:19:56.480 margin is very low. In other words, the profit you 0:19:56.560 --> 0:20:01.760 make from the sale is negligible, and really you could 0:20:01.760 --> 0:20:06.280 not sustain a business selling those style television sets. The 0:20:06.359 --> 0:20:09.359 purpose of showing the basic model is to then move 0:20:09.480 --> 0:20:12.520 the customer over to higher end models that have more 0:20:12.600 --> 0:20:16.800 features and thus cost more and have a better sales margin, 0:20:16.880 --> 0:20:20.760 so you make a bigger profit from the sale. Some 0:20:20.800 --> 0:20:24.760 people call this the bait and switch. Samuel preferred to 0:20:24.760 --> 0:20:27.840 think of it as a step up approach. He felt 0:20:27.880 --> 0:20:30.560 that customer service was really important, so it wasn't like 0:20:30.600 --> 0:20:34.160 it was an outright attempt to be a snake oil salesman. 0:20:34.440 --> 0:20:37.600 He was interested in employing the most effective techniques to 0:20:37.640 --> 0:20:40.760 move products, but he also felt that honesty was important 0:20:41.080 --> 0:20:43.119 and that the message he and his employees gave to 0:20:43.240 --> 0:20:46.720 vendors and customers and others should always be the truth, 0:20:47.600 --> 0:20:50.960 because keeping track of lies is a hassle if you 0:20:51.000 --> 0:20:53.719 tell different lies to different people. Maintaining all of that 0:20:54.200 --> 0:20:56.720 is a huge headache, So just be truthful upfront was 0:20:56.760 --> 0:21:01.560 his policy. Reconciling the sale approach with the company's values 0:21:01.600 --> 0:21:04.879 requires a little bit of mental gymnastics and perhaps some 0:21:06.080 --> 0:21:11.359 generous allowances, I'll say, but one of those sales practices 0:21:11.560 --> 0:21:14.959 was that the price tag of the televisions in the 0:21:15.000 --> 0:21:19.600 Wards Company store and later other appliances that they started 0:21:19.600 --> 0:21:23.399 to sell after a couple more years, wasn't actually a 0:21:23.440 --> 0:21:27.879 fixed price. Every product had a listed price that was 0:21:27.920 --> 0:21:31.360 the starting point, and then every product had a bottom 0:21:31.560 --> 0:21:36.119 line lowest acceptable price a salesperson would be allowed to 0:21:36.240 --> 0:21:40.280 sell that item for. So your goal as a salesperson 0:21:40.720 --> 0:21:43.840 is to sell it as close to that ticket price 0:21:44.040 --> 0:21:47.680 as you possibly could. But customers could haggle, they can bargain, 0:21:48.400 --> 0:21:52.200 and the salesperson would get a commission based upon how 0:21:52.400 --> 0:21:55.919 high above that lowest acceptable price they were able to 0:21:55.960 --> 0:21:59.080 make a sale. So it was better to make a 0:21:59.119 --> 0:22:01.960 sale than not make it sale. If you absolutely had 0:22:02.000 --> 0:22:04.160 to go to the lowest price in order to move 0:22:04.240 --> 0:22:06.639 a product, then it was better to do that than not. 0:22:07.240 --> 0:22:09.639 But you would get a bigger reward if you could 0:22:09.720 --> 0:22:14.119 sell the product at the higher price, the closer to 0:22:14.200 --> 0:22:18.080 the list price, as opposed to the secret lowest acceptable price. 0:22:19.320 --> 0:22:21.879 So if you happen to nab a customer that's not 0:22:22.000 --> 0:22:24.439 terribly aggressive, you can make a big commission off a 0:22:24.440 --> 0:22:30.280 hefty sale. It's another idea that a lot of modern 0:22:30.320 --> 0:22:34.800 shoppers find particularly shady. It also falls into the category 0:22:34.880 --> 0:22:38.200 that a lot of people will associate with buying a car, 0:22:38.680 --> 0:22:41.920 and in fact, Circuit City has a connection to car 0:22:42.000 --> 0:22:44.920 sales as well. I'll get into that probably in Part two, 0:22:45.320 --> 0:22:48.760 not so much in Part one. Now, paired with this 0:22:49.000 --> 0:22:52.160 was a customer service policy that went above and beyond 0:22:52.240 --> 0:22:55.240 the pale. So every salesperson was expected to follow up 0:22:55.320 --> 0:22:58.480 with a customer to make certain that the delivery, installation, 0:22:58.640 --> 0:23:01.960 and operation of their brand new television's met expectations, and 0:23:02.040 --> 0:23:04.720 if they didn't, the company would work to make things 0:23:04.800 --> 0:23:08.239 right and even send along a conciliatory present or two 0:23:08.359 --> 0:23:11.680 to smooth things over. So Samuel felt that great customer 0:23:11.720 --> 0:23:15.080 service would help word of mouth, but perhaps more importantly, 0:23:15.440 --> 0:23:18.639 it would help the company avoid bad word of mouth, 0:23:19.480 --> 0:23:22.720 which tends to travel faster and farther than good word 0:23:22.720 --> 0:23:25.960 of mouth. People love to complain, and that's something that's 0:23:25.960 --> 0:23:29.600 still true today. If you read over the comments or 0:23:29.640 --> 0:23:33.120 reviews on things online. You'll see that people who are 0:23:33.119 --> 0:23:38.720 dissatisfied often will go to much greater lengths to express 0:23:38.800 --> 0:23:42.200 that dissatisfaction than folks who are happy, and may even 0:23:42.240 --> 0:23:46.199 seem that the happy folks are far outnumbered by the 0:23:46.240 --> 0:23:49.439 dissatisfied folks, even if the overall rating is heights, because 0:23:49.840 --> 0:23:52.760 people who are happy might be willing to give like 0:23:52.840 --> 0:23:57.240 a five star review on something, but not actually write anything, 0:23:57.359 --> 0:23:59.960 just say of five stars, whereas people who are unhappy. 0:24:00.000 --> 0:24:02.960 He want to tell you about it. Anyone who's got 0:24:02.960 --> 0:24:05.879