Speaker 1: Welcome to tech Stuff, a production from iHeartRadio. Hey there,
Speaker 1: and welcome to tech Stuff. I'm your host, Jonathan Strickland.
Speaker 1: I'm an executive producer with iHeartRadio.
Speaker 2: And how the tech are you? So? Last week, this is.
Speaker 1: A Friday, so we're doing a tech Stuff classic episode first,
Speaker 1: get that all the way. But last week we started
Speaker 1: the Circuit City story with Part one. This week we
Speaker 1: shall conclude the Circuit City story with Part two. This
Speaker 1: episode originally published way back on February eighth, twenty seventeen.
Speaker 2: Enjoy.
Speaker 1: So in nineteen eighty four, Alan Wurtzel really concentrated on
Speaker 1: implementing a new plan based off the success of the
Speaker 1: Circuit City superstore concept that originally was just called the
Speaker 1: Wards Loading doc. Now, that plan involved creating an all
Speaker 1: most cookie cutter approach to store space, and if you've
Speaker 1: ever been to more than one Circuit City during its heyday,
Speaker 1: you probably noticed the layout was remarkably similar, probably almost identical,
Speaker 1: and that was by design.
Speaker 2: Wurtzel.
Speaker 1: My experiment would changes at one location just to see
Speaker 1: how they would do, and then perhaps implement some changes
Speaker 1: across the board, but by and large they remained almost identical. Now,
Speaker 1: the store layout embodied some of the same sales philosophies
Speaker 1: that Samuel had established back when he had first started
Speaker 1: the Wards Company. You might remember in that last episode
Speaker 1: I talked about how he used various manipulation techniques to
Speaker 1: increase sales, not in a way to be dishonest or
Speaker 1: to you know, otherwise trick a customer into buying something,
Speaker 1: but rather to entice a customer into spending as much
Speaker 1: money as possible. There's a fine line there between and
Speaker 1: admirable work ethic and kind of creepy manipulation. And he
Speaker 1: walked it carefully, or at least appeared to well. Alan
Speaker 1: wanted to do the same thing, and he incorporated that
Speaker 1: into the store design itself. This is going to sound
Speaker 1: really familiar to.
Speaker 2: Anyone who's been to.
Speaker 1: A big box store, because now it is standard practice.
Speaker 1: What they would do is they would put all the
Speaker 1: popular brands, all the big ticket items that people were
Speaker 1: really interested in in the back of the store. That
Speaker 1: meant that customers would have to walk through the rest
Speaker 1: of the store in order to get there, and they
Speaker 1: would see lots of other stuff on the way. So
Speaker 1: this was an effort to try and boost sales of
Speaker 1: slightly less popular items by having people walk through you
Speaker 1: see the same thing today, Like most electronics departments in
Speaker 1: a lot of stores are toward the back or somewhere
Speaker 1: deep in the middle of the store, and it means
Speaker 1: you have to walk through other departments to get there.
Speaker 1: And as you're doing that, you're thinking, oh, right, I
Speaker 1: do need to buy a new two piece bathing suit
Speaker 1: or something similar. I mean, I think that way too
Speaker 1: frequently anyway. The late seventies and early eighties marked a
Speaker 1: new age in consumer electronics, and Circuit City was benefiting
Speaker 1: from that. When it started off as just a television
Speaker 1: appliance and radio business, Suddenly those store shelves got way
Speaker 1: more crowded with other stuff. New gadgets were joining them.
Speaker 1: You had VCRs and both the vhs and the Betamax formats.
Speaker 1: You had laser disc players, you had cassette players, record players.
Speaker 1: Later on you would have CD players. You had cordless phones,
Speaker 1: microwave ovens. Much much later, like in the late nineties,
Speaker 1: DVD players would join that. So this succession of new
Speaker 1: products ended up giving Circuit City the base to succeed,
Speaker 1: and because the superstores were so large, they could carry
Speaker 1: all wide variety of products all in one location, and
Speaker 1: the storage space, the warehouse space in the back of
Speaker 1: the store was big enough to allow the stores to
Speaker 1: purchase items from vendors in large amounts in bulk essentially,
Speaker 1: and that lowered the cost of purchase. And then that
Speaker 1: meant they could maximize their profit margins when they sold
Speaker 1: it at a higher price to the customer when they
Speaker 1: made that sale. Now, Wurtzel led the company into an
Speaker 1: intense phase of expansion. Circuit City began to move into
Speaker 1: new markets like Atlanta and Florida. The company would open
Speaker 1: numerous stores in a relatively small region, so they'd open
Speaker 1: maybe five or six stores in a metropolitan area. This
Speaker 1: accomplished a few goals, all of which were benefiting the
Speaker 1: company and a few were benefiting the consumer. For one,
Speaker 1: adding lots of stores in the city meant customers wouldn't
Speaker 1: necessarily have to travel so far to get to a
Speaker 1: specific store. You know, if there's just one location in
Speaker 1: the city, may you have to travel to that location,
Speaker 1: no matter where you may be.
Speaker 2: If there are.
Speaker 1: Multiple locations, you have some choices. That being said, Circuit
Speaker 1: City had made it a practice to purchase cheap land,
Speaker 1: so they were mainly looking at places that weren't necessarily
Speaker 1: in the most populated or convenient spots. That was another
Speaker 1: reason to open several stores. It helped balance that because
Speaker 1: customers would still have to travel a bit, the stores
Speaker 1: didn't tend to be in areas that were convenient to residential.
Speaker 2: Areas for example.
Speaker 1: Now it also meant that they didn't have to spend
Speaker 1: as much money promoting and advertising any individual store, because
Speaker 1: they could group stores together in a single advertising campaign
Speaker 1: for whatever city it might be, and all the stores
Speaker 1: would benefit from this, and that ended up being a
Speaker 1: kind of a money saving effort for the company and
Speaker 1: cutting costs. And this was all new back then. It's
Speaker 1: something that we see a lot of today, or at
Speaker 1: least we have seen a lot of today. You might argue,
Speaker 1: we don't see it as much, mainly because of the
Speaker 1: move to online marketplaces. We'll talk more about that a
Speaker 1: little bit later in this episode.
Speaker 2: So they were keeping the company's.
Speaker 1: Bottom line healthy by managing these costs, by consolidating costs,
Speaker 1: and by maximizing the amount of exposure they were getting
Speaker 1: to customers. But some sad stuff was happening too around
Speaker 1: this time. In nineteen eighty five, the co founders of
Speaker 1: the Wards Company, the company that became Circuit City, Samuel
Speaker 1: Wurtzel and Abraham Haste. Both of them passed away that year.
Speaker 1: They lived long enough to see this little humble TV
Speaker 1: retail shop they had opened way back in nineteen forty
Speaker 1: nine grow into a substantial chain of electronics superstores that
Speaker 1: were in multiple states across the US, But then they
Speaker 1: both passed away in nineteen eighty five. In nineteen eighty six,
Speaker 1: Alan Wurtzel retired as CEO of Circuit City. Now he
Speaker 1: would remain on the board of directors until two thousand
Speaker 1: and one, so he was still active with the company.
Speaker 1: He just wasn't acting as CEO anymore. At the time
Speaker 1: of his retirement, the chain included ninety stores, and sales
Speaker 1: were hovering around the one billion dollar mark.
Speaker 2: In fact, from.
Speaker 1: Nineteen eighty three to nineteen eighty seven, Circuit City had
Speaker 1: the best return on investments on the New York Stock Exchange,
Speaker 1: meaning if you invested money in Circuit City in nineteen
Speaker 1: eighty three, your return was better than any other investment
Speaker 1: you could have made that year, and it remained so
Speaker 1: for the next four years, and even since nineteen sixty
Speaker 1: five it had been listed on the Fortune five hundred
Speaker 1: list of companies nineteen sixty five on it consistently made
Speaker 1: that list and would continue to do so up until
Speaker 1: nineteen ninety five. But that gets a little bit ahead
Speaker 1: of where we want to be right now. I'll get
Speaker 1: into more of the troubles that led to the fall
Speaker 1: from Grace in a bit now. Alan Wurtzel's successor was
Speaker 1: a man named Richard Sharp, and in the last episode
Speaker 1: I mentioned that Sharp had been hired on at an
Speaker 1: executive vice president level outside the company, so that was
Speaker 1: kind of counter to some of the company's core values,
Speaker 1: which included promoting from within. Instead of promoting from within,
Speaker 1: they found this very intelligent, capable hardware and software guy
Speaker 1: and brought him on. His performance was impressive. He had
Speaker 1: designed a computer system for Circuit City that made operations
Speaker 1: much more efficient and effective, and when he stepped in
Speaker 1: as president and CEO of Circuit City, the company was
Speaker 1: on the rise. He would end up pushing it farther,
Speaker 1: going into the stratosphere, though a lot of people have
Speaker 1: argued later on that it might have been his leadership
Speaker 1: that ultimately set the company on the path to self destruction.
Speaker 1: I'll let you go, guys, kind of decide what you
Speaker 1: think once we get to the end of this episode.
Speaker 1: I'm not entirely sold on the idea that Sharp was
Speaker 1: the beginning of the end. I think he made some
Speaker 1: decisions that were ultimately poor ones, but I don't know
Speaker 1: that they were ones that Circuit City couldn't have rebounded from.
Speaker 1: And so we'll get into that a little bit. Let's
Speaker 1: talk about who he was first. So Richard Rick Sharp
Speaker 1: was born on April twelfth, nineteen forty seven, just two
Speaker 1: years before Samuel Wurtzel founded the company that would become
Speaker 1: Circuit City. He grew up in the Washington, DC area
Speaker 1: and attended George Washington High School in Alexandria, Virginia. He
Speaker 1: first went to college to study electrical engineering at the
Speaker 1: University of Virginia, but discovered that that really wasn't his
Speaker 1: cup of tea. He wasn't so much interested in electrical
Speaker 1: engineering as he was in computer science, so he dropped
Speaker 1: out of college and for a short while he pursued
Speaker 1: some slightly less academic interests, like playing poker and shooting pool.
Speaker 1: I usually do the opposite. Shooting poker, however terrible. I
Speaker 1: don't recommend it. He wasn't idol for long, and soon
Speaker 1: he was attending the College of William and Mary studying
Speaker 1: computer science and then went on to attend the Harvard
Speaker 1: Business School's management program.
Speaker 2: When he was twenty.
Speaker 1: Seven years old, he founded a hardware and software business
Speaker 1: development company, and he was really good at what he did.
Speaker 1: He impressed the folks at Circuit City, which is why
Speaker 1: they hired him on at that executive vice president level.
Speaker 1: He joined in nineteen eighty two, and just four years
Speaker 1: later he became the leader of the company. By nineteen
Speaker 1: ninety four he became the chairman of the board. Now,
Speaker 1: while the company was opening new locations in Georgia and Florida,
Speaker 1: it also was working toward eliminating unnecessary drains on profits. Now,
Speaker 1: among those drains were those Lafayette stores I mentioned in
Speaker 1: the previous podcast. These were the stores located in the
Speaker 1: New York area and originally they had sold stereo equipment.
Speaker 1: When Circuit City, back then the Wards Company, purchased those stores,
Speaker 1: there were only eight. By nineteen eighty six they had fifteen,
Speaker 1: but they weren't performing well. They were unprofitable, so the
Speaker 1: company shut down the stores and it would continue having
Speaker 1: trouble penetrating the New York market because the New York
Speaker 1: market was already saturated with lots of stores that would
Speaker 1: engage in price slashing. That was not really a model
Speaker 1: that Circuit City was suited for. Circuit City was still
Speaker 1: using commissioned sales, and the commission sales depended upon salespeople
Speaker 1: trying to sell products at the highest price they could.
Speaker 1: Doesn't really work for price slashing.
Speaker 2: So the Circuit City experience was supposed.
Speaker 1: To be haggle free, but you could often argue down
Speaker 1: a salesperson from the price that was on the ticket,
Speaker 1: at least in the old Wards Company days, and Circuit
Speaker 1: City just couldn't survive in a market where other business
Speaker 1: owners were regularly cutting prices in order to compete for customers.
Speaker 2: Also, in nineteen eighty six.
Speaker 1: Circuit City shut down one other relationship it had earlier established,
Speaker 1: that would be the discount store in California called Zodi's.
Speaker 1: I mentioned them in the last episode two. They At
Speaker 1: that point, Circuit City had been operating four different lines
Speaker 1: of stores. You had the superstores, you had the smaller
Speaker 1: Circuit City stores, you had Zodi's, and you had the
Speaker 1: Lafayette stores. By getting rid of the Lafayette and Zodi's,
Speaker 1: they were able to consolidate Circuit Citi's strategy and simplify
Speaker 1: matters From a managerial standpoint. The money the company reclaimed
Speaker 1: from operating those businesses could be reinvested by opening more
Speaker 1: superstores in California and the southeastern United States in nineteen
Speaker 1: eighty seven and eighty eight. The company prospered and grew,
Speaker 1: and it was fueled by this demand for consumer electronics
Speaker 1: like the VCR, which by that time was viewed as
Speaker 1: a standard component in your typical home theater system.
Speaker 2: Sales grew over.
Speaker 1: One billion dollars a year and the number of stores
Speaker 1: increased to one hundred fifty.
Speaker 2: Circuit City had already.
Speaker 1: Experimented with mall store fronts in the past, and decided
Speaker 1: to try and give it another shot with a new
Speaker 1: idea new brand.
Speaker 2: This time.
Speaker 1: The company planned to open twenty stores, and they branded
Speaker 1: them Impulse And I think that's a pretty clever name
Speaker 1: for a store that specialized in selling small electronic devices,
Speaker 1: particularly the kind you might purchase as a gift or
Speaker 1: a stocking stuffer. It's the very definition of an impulse buy. Now,
Speaker 1: whether the executives at Circuit City intended that meaning to
Speaker 1: be part of the name or not, it definitely was
Speaker 1: the foundation for their sales strategy and it worked and
Speaker 1: a few years later the company made plans to open
Speaker 1: dozens of other stores in malls within their territory. That's
Speaker 1: good to mention that more than a billion dollars in
Speaker 1: sales is not the same thing as a billion dollars
Speaker 1: in profits. Profits are what you get when you deduct
Speaker 1: your costs from your revenue. Now, Circuit City's profits by
Speaker 1: nineteen eighty nine were just under seventy million dollars. Not
Speaker 1: still a heck of a lot of money, but it
Speaker 1: shows how much work the company had to do in
Speaker 1: order to make that kind of profit. A billion dollars
Speaker 1: in sales for seventy million dollars in profit. Also, the
Speaker 1: company managed to do this while there was another economic
Speaker 1: recession in effect.
Speaker 2: So how did it do that? Well?
Speaker 1: Mainly their success hinged on new consumer electronic products coming out. So,
Speaker 1: as you guys are probably aware, I've been going to
Speaker 1: CES also formerly known as the Consumer Electronics Show, every
Speaker 1: year in Las Vegas, Nevada since two thousand and eight.
Speaker 2: Circuit City would be.
Speaker 1: A company that would pay very close attention to trade shows.
Speaker 2: Like cees, the.
Speaker 1: Company depended upon new compelling products to come out so
Speaker 1: that they could offer them in their retail stores. In fact,
Speaker 1: stores like Circuit City are why those trade shows exist. Now,
Speaker 1: sometimes we in the tech media I include myself here,
Speaker 1: we forget this as we walk around waiting to be
Speaker 1: blown away by a groundbreaking product or a new category
Speaker 1: defining technology.
Speaker 2: But the real reason.
Speaker 1: Those trade shows exist is to let retailers get a
Speaker 1: look at the products that will soon be available for
Speaker 1: customers so that they can create a sales strategy for
Speaker 1: the near future and figure out which products they want
Speaker 1: to carry in their stores.
Speaker 2: That's the real reason for those trade shows.
Speaker 1: The press's presence is really just icing on the cake.
Speaker 1: Who has the stuff we report on ends up being
Speaker 1: advertising for both the companies making the cool products and
Speaker 1: the ones that are going to end up selling them.
Speaker 1: Back in the eighties and nineties, those retail establishments were
Speaker 1: primarily superstores like Circuit City, So in many ways, Circuit
Speaker 1: cities booming years can be attributed to advances in consumer electronics,
Speaker 1: from the migration of cassette players to CD players to
Speaker 1: the similar trend of VCRs to DVD players. Much later,
Speaker 1: Circuit City also got into the personal computer retail business,
Speaker 1: beginning in nineteen eighty nine. Now by nineteen ninety, the
Speaker 1: company's sales had hit two billion dollars. Circuit City began
Speaker 1: opening smaller stores and markets that seemed to be too
Speaker 1: small to support a full superstore, and a few years
Speaker 1: later the company introduced a new department in superstores that
Speaker 1: sold music like actual albums as opposed to just the
Speaker 1: equipment that plays music. This was a move that put
Speaker 1: a ton of pressure on smaller independent music stores and
Speaker 1: music chains. I remember a lot of those, both the
Speaker 1: chains and the independent businesses that used to specialize in
Speaker 1: selling music. In my neck of the woods, we had
Speaker 1: a regional chain called Turtles Records and Tapes. I remember
Speaker 1: fondly going into Turtles because that was where not only
Speaker 1: would you buy albums, you could purchase tickets to concerts there.
Speaker 1: And then there were the truly independent mom and pop shops.
Speaker 1: Turtles was still a chain, but there were lots of
Speaker 1: independence stores too, and all of these were pressured by
Speaker 1: the superstore movement into their tis territory. Now that we've
Speaker 1: crept up into the early nineties, it's a good time
Speaker 1: to talk about some of the competitors that rose up
Speaker 1: to face Circuit City. But first, let's take a quick
Speaker 1: break to thank our sponsor. Okay, you can't really talk
Speaker 1: about Circuit City without mentioning their chief competitor, which I
Speaker 1: would argue was Best Buy. I could do a full
Speaker 1: episode on the best Buy story, but let me give
Speaker 1: you the cliffs Notes version. Do they even still have
Speaker 1: cliffs Notes? Do you guys get that reference? Well, anyway,
Speaker 1: here's a summary to tide us over. Best Buy began
Speaker 1: as a chain of music stores in Minnesota in nineteen
Speaker 1: sixty six. It was founded by a man named Richard Shulz,
Speaker 1: and originally.
Speaker 2: The store was called Sound of Music.
Speaker 1: I don't know if the hills are alive in Minnesota,
Speaker 1: but they did have the Sound of Music stores. In
Speaker 1: nineteen eighty two, one of those stores was damaged in
Speaker 1: a tornado. The store held a special tornado sale and
Speaker 1: they called it a Best Buy sale. The event was
Speaker 1: so successful the company decided to hold one every year.
Speaker 1: That being a special sale, not holding a tornado. The
Speaker 1: company didn't schedule tornadoes. I don't think you would want to.
Speaker 2: Those things are.
Speaker 1: Terrible, but the sales went over like Gangbusters. Eventually, the
Speaker 1: company changed its name to best Buy, the same name
Speaker 1: as those sales that made it famous, and that made
Speaker 1: more sense than Sound of Music anyway, because by that
Speaker 1: time the stores were also beginning to carry lots of
Speaker 1: unrelated stuff, things that had nothing to do with audio
Speaker 1: or music. Throughout the eighties, best Buy began to grow,
Speaker 1: and by the early nineties it had expanded into a
Speaker 1: national chain. Circuit City still dominated the market at that time,
Speaker 1: and it seemed like no one at the company really
Speaker 1: took best Buy seriously. In fact, Alan Wurtzel said that
Speaker 1: at that time, no one at Circuit City really considered
Speaker 1: any competition as being anything more than just an annoyance.
Speaker 1: Now you could call that hubris or arrogance, but at
Speaker 1: the time it seemed like Circuit City was firmly on
Speaker 1: the prosperity highway and hindsight is twenty twenty. Best Buy, meanwhile,
Speaker 1: benefited from Circuit City success because Best Buy executives were
Speaker 1: able to learn from the path that was forged by
Speaker 1: Circuit City. They could employ the most successful strategies and
Speaker 1: avoid the pitfalls that Circuit City had identified during its
Speaker 1: growth phase. Because Circuit City was sort of the pioneer.
Speaker 1: Best Buy, following behind, could say, oh, well, we want
Speaker 1: to go this way, but we won't make the same
Speaker 1: mistake that they did. We can avoid that, save money,
Speaker 1: and expand faster. So it gave Best Buy a chance
Speaker 1: to catch up quickly to Circuit City. With companies like
Speaker 1: best Buy biting at Circuit City's heels, the company became
Speaker 1: motivated to get into the price slashing business.
Speaker 2: This stay competitive. Now.
Speaker 1: At this point, Circuit City was still in the lead,
Speaker 1: and Richard Sharp had decided that the company should diversify
Speaker 1: what it offered. What if the company could sell used cars? Well,
Speaker 1: that's a step too far for just a Circuit City brand,
Speaker 1: but it provided the inspiration for Sharp to guide Circuit
Speaker 1: City into launching a new company that was a subsidiary,
Speaker 1: and it specialized in selling used cars. And I bet
Speaker 1: you've heard of it, because in September nineteen ninety three,
Speaker 1: the first CarMax location opened in Richmond, Virginia. And yes,
Speaker 1: CarMax originated as a Circuit City company. And while Circuit
Speaker 1: City would eventually die in two thousand and nine, spoiler alert,
Speaker 1: CarMax is still around. But in those early years Carmacks
Speaker 1: had a rough start, and since Circuit City had a
Speaker 1: stake in the company, it also hit Circuit City pretty hard. Also,
Speaker 1: launching Carmacks wasn't going to stave off those competitors best Buy.
Speaker 1: To do that, Circuit City stores began to engage in
Speaker 1: that price slashing, at least in the markets where Best
Speaker 1: Buy stores were trying to get a foothold. So if
Speaker 1: you happened to live in a city that had both
Speaker 1: Best Buy stores and Circuit City stores, you benefited from
Speaker 1: this because you could get a better bargain for your product.
Speaker 2: If you shopped at Circuit City.
Speaker 1: But if you lived in a place where only Circuit
Speaker 1: City existed, you didn't see that benefit because there was
Speaker 1: no need for them to slash prices. Best Buy wasn't
Speaker 1: there to siphon off any of the business. The two
Speaker 1: companies had very different sales strategies. At Best Buy, employees
Speaker 1: were trained to be able to answer basic customer questions
Speaker 1: and assist when necessary, but largely customers had kind of
Speaker 1: a help yourself approach, like walk into a store, see
Speaker 1: the thing they wanted to buy, put it in a cart,
Speaker 1: and go to checkout.
Speaker 2: That's how it would work. At best Buy, you.
Speaker 1: Might get asked by an employee if there's anything he
Speaker 1: or she could do to help you find, but that
Speaker 1: would be about it until you made your purchase. But
Speaker 1: over at Circuit City, salespeople were still working on commission,
Speaker 1: so the experience was very different. You walk into a
Speaker 1: circuit City, you would see demonstration models of various products,
Speaker 1: but for the most part, you couldn't pick anything up.
Speaker 1: Everything was in boxes in the warehouse and you would
Speaker 1: talk to a salesperson who would make a sale, establish
Speaker 1: whatever the price was that you're paying. Then they would
Speaker 1: go into the back and get the thing that you
Speaker 1: were interested in buying, bring it out to you, and
Speaker 1: then you would go.
Speaker 2: And purchase it.
Speaker 1: So very different models, and it meant that over at
Speaker 1: Circuit City, a salesperson made more money if they made
Speaker 1: more sales, they had an incentive to sell more to
Speaker 1: more customers.
Speaker 2: At best Buy that wasn't the case.
Speaker 1: People were on an hourly wage, no commissions, so the
Speaker 1: customer experience at Circuit City was very different from Best Buy.
Speaker 1: If you walk into a circuit City and you encountered
Speaker 1: a salesperson who didn't have a particularly subtle approach, you
Speaker 1: might feel pressured when shopping for electronics, which a lot
Speaker 1: of folks react negatively toward. Circuit City executives felt that
Speaker 1: their approach was actually the best one, which is why
Speaker 1: they stuck with it for so long. It motivated their
Speaker 1: sales force and it drove revenue because salespeople were selling
Speaker 1: those higher margin products, the things that cost more money
Speaker 1: and you would make more profit from because the cost
Speaker 1: to the consumer was much higher than what it cost
Speaker 1: Circuit City to purchase.
Speaker 2: From a vendor.
Speaker 1: The company at that point was valued at more than
Speaker 1: a billion dollars, and they continued to grow and open
Speaker 1: up new superstores in various markets. Meanwhile, Best Buy was
Speaker 1: starting to gain ground, and by nineteen ninety five, it
Speaker 1: was competing with Circuit City in about half of the
Speaker 1: larger company's markets. So half the stores that Circuit City
Speaker 1: owned were competing with Best Buy. The other half were
Speaker 1: in markets the Best Buy had not quite penetrated yet.
Speaker 1: Best Buy was also taking a different strategy when choosing
Speaker 1: store locations. Remember I mentioned that those Circuit City superstores
Speaker 1: were located on cheap land, which wasn't always convenient to
Speaker 1: local populations. It could be really out of the way.
Speaker 1: Best Buy tried to avoid that same problem and find
Speaker 1: areas close to population centers and pay that higher upfront
Speaker 1: cost because it was access to more customers, and they
Speaker 1: figured that people would be more willing to go to
Speaker 1: a store that's closer to their home rather than travel
Speaker 1: across town to go to a competitors superstore. Other stores
Speaker 1: besides Best Buy were also pushing up against the giant,
Speaker 1: which created a much more competitive environment for Circuit City. Still,
Speaker 1: at that point, the company was really doing great. It
Speaker 1: hit seven billion dollars in sales in nineteen ninety five,
Speaker 1: with earnings at a twenty percent growth rate.
Speaker 2: It seemed like the company was unstoppable. It was too
Speaker 2: big to fail.
Speaker 1: Accept it totally wasn't bump bump bomb. Nineteen ninety five
Speaker 1: really is the turning point year. That's the year where
Speaker 1: we see Circuit City doing incredibly well, and afterward we
Speaker 1: start to see it falter. In nineteen ninety six, Best
Speaker 1: Buy sales officially outperformed Circuit City sales. Now Circuit City
Speaker 1: was still doing well, just not as well as the
Speaker 1: company had been doing in previous years. This would become
Speaker 1: a familiar story over the next few years. The company
Speaker 1: continue to see earnings grow, but they were growing by
Speaker 1: smaller amounts with occasional rallies over the next few years.
Speaker 1: So you might say, in one year they'd see twenty
Speaker 1: percent growth, the next year they might see fifteen percent growth,
Speaker 1: the next year might be seven percent growth. And like
Speaker 1: I said, there were a couple of rallies. But seeing
Speaker 1: the growth slow like that is terrifying to companies, particularly
Speaker 1: publicly traded companies, because shareholders expect a return on their investment. Now,
Speaker 1: that continued to go until about two thousand and two,
Speaker 1: when the company had what folks in the industry referred
Speaker 1: to as negative growth, which means the company last money.
Speaker 1: It didn't grow at all. It actually shrank a bit.
Speaker 1: It was only a tiny amount. It was zero point
Speaker 1: seven percent negative growth, but that is a terrible sign.
Speaker 1: Best Buy, meanwhile, had experienced a pretty wild growth rate
Speaker 1: over that seeing period of time, but it was always
Speaker 1: in the positive space. So some years it was growing
Speaker 1: a lot, some years it wasn't growing as much, but
Speaker 1: it was always positive.
Speaker 2: And part of the reason that it's kind of.
Speaker 1: A zigzag wild ride for best Buy was that the
Speaker 1: company was ramping up the number of stores it opened,
Speaker 1: where as Circuit City was already pretty well entrenched. Meanwhile,
Speaker 1: another store was starting to pinch at Circuit City's performance,
Speaker 1: and this time it was Walmart. In the mid two thousands,
Speaker 1: Walmart redesigned its stores and product lines to include more electronics,
Speaker 1: including high end brands like Sony. Now that put Walmart
Speaker 1: in competition with Circuit City.
Speaker 2: Walmart was able.
Speaker 1: To do some serious damage by offering something that I
Speaker 1: I think we all have had experience in. It is
Speaker 1: the bane of my existence when I go into a
Speaker 1: brick and mortar store, and that is the upsell with
Speaker 1: extended warranties. Extended warranties are profit machines. It is a
Speaker 1: way for a company to make crazy amounts of money
Speaker 1: for relatively little investment. And Walmart was really putting the
Speaker 1: hurt on Circuit City and Best Buy by offering these
Speaker 1: extended warranties at a much lower cost than you would
Speaker 1: find at the other stores.
Speaker 2: And like I said, there were almost pure profit for stores.
Speaker 1: In fact, extended warranties accounted for all of the operating
Speaker 1: profit for Circuit City in two thousand and five, and
Speaker 1: a third of the profit for Best Buy that same year.
Speaker 1: So Walmart's move to undercut warranty prices was a shot
Speaker 1: right across the bow at the electronics superstores, and it
Speaker 1: was an effective one. According to a retailing analyst named
Speaker 1: Todd Kurt, a tiny drop in warranty revenue would result
Speaker 1: in a massive drop in operating profit for Circuit City.
Speaker 1: And when I say massive, I'm talking about if you
Speaker 1: drop one percentage point decrease in extended warranty revenue, it
Speaker 1: would end up having a twenty nine percent decrease in
Speaker 1: operating profit. And Circuit City saw a five percent decrease
Speaker 1: in warranty revenue that year.
Speaker 2: Huge impact.
Speaker 1: And when you see that your business is so heavily
Speaker 1: dependent upon a single point like that, you start getting
Speaker 1: awfully nervous. So Richard Sharp started looking into ways that
Speaker 1: he could possibly turn this around, and he thought that
Speaker 1: maybe diversifying Circuit City's products was a potential answer, and
Speaker 1: he did this in a couple of different ways. He
Speaker 1: did some home security stuff that didn't work out. But
Speaker 1: the real big one that people like to point to
Speaker 1: as being a huge misfire happened in nineteen ninety eight.
Speaker 1: That's when the company would end up carrying a new
Speaker 1: product called Divics DIVX, which is a type of digital
Speaker 1: movie disc, and it was sort of like a disposable DVD,
Speaker 1: although those were two different standards at that time. The
Speaker 1: disc could store encoded digital video, but you had to
Speaker 1: watch the disc within forty eight hours of purchase or
Speaker 1: you lost your chance. So this was kind of a
Speaker 1: move to get into the video rental business.
Speaker 2: Circuit.
Speaker 1: City's kind of moving into blockbuster territory with this, But
Speaker 1: there was no risk of someone running off with a
Speaker 1: copy of a film. You would just produce the Divics disc,
Speaker 1: sell it to a.
Speaker 2: Consumer, and then they would have two days to watch it.
Speaker 1: Divic's players had a phone connection that had to be
Speaker 1: active for the video to play. So anyone who's used
Speaker 1: to computer games that have an online component requirement, even
Speaker 1: if it's just a single player game, you know what
Speaker 1: I'm talking about. This is digital rights management, right. It's
Speaker 1: the attempt to make sure that the use of the
Speaker 1: product falls within certain parameters. In this case, you have
Speaker 1: forty eight hours to watch your movie. A central computer
Speaker 1: system kept track of everything, even unplayed movies, which drives
Speaker 1: me crazy. Is amazing that this ever was considered a
Speaker 1: good idea. Let's say that you wanted to rent a movie.
Speaker 1: So you hit your local circuit city and buy a
Speaker 1: Divic's disc and bye bye. I mean, you're really just
Speaker 1: renting the chance to watch a movie for forty eight hours.
Speaker 1: So let's pick a specific film. I'm gonna pick your
Speaker 1: favorite film, which we all know is Big Trouble in
Speaker 1: Little China, classic movie starring Kurt Russell, directed by John Carpenter.
Speaker 1: You have great taste, fantastic favorite film.
Speaker 2: Good on you.
Speaker 1: You pay a few bucks, maybe four or five dollars,
Speaker 1: and because this is a rental, you don't have to
Speaker 1: pay more than that.
Speaker 2: You know you're not buying the movie. You take the
Speaker 2: disc home, but you're a busy person. It turns out you.
Speaker 1: Don't have time to enjoy that film within those first
Speaker 1: forty eight hours. Well, that's central computing system knows this.
Speaker 1: It's tracking it because your Divic's system hasn't called in
Speaker 1: to say, hey, this guy's watching Big Trouble and Little China,
Speaker 1: or this lady is watching Big Trouble and Little China,
Speaker 1: or this family isn't watching Big Trouble and Little China.
Speaker 1: And forty eight hours have passed, and since you didn't
Speaker 1: have the decency to watch it when you were supposed
Speaker 1: to your.
Speaker 2: Build another three dollars. Isn't that crazy?
Speaker 1: You were charged for not watching the movie you rented.
Speaker 2: You go, you rent a movie, you're not supposed to
Speaker 2: return the disc. You throw it away after you.
Speaker 1: Use it forty eight hours passes, you get dinged for
Speaker 1: not watching the movie. It's like a late fee for
Speaker 1: a movie you don't have to return. Yeah, can't imagine
Speaker 1: why that standard lost out to DVD, So I'm sure
Speaker 1: you're familiar with the DVD format. I'll probably do a
Speaker 1: full episode more about DVDs and encoding and also if
Speaker 1: you say the where DVD fast enough? You sound like
Speaker 1: you're Twiggy from Buck Rogers. But it was early days
Speaker 1: for both of those standards back in nineteen ninety eight,
Speaker 1: and Circuit City had gone all in on the devics bet,
Speaker 1: but other retailers weren't so excited about that technology, which
Speaker 1: meant that Circuit City had to work extra hard to
Speaker 1: educate customers and convince them that the Divic's format was
Speaker 1: the way to go, and that was a tough job.
Speaker 2: They tried to convince.
Speaker 1: Studios to create exclusives, stuff that would only come out
Speaker 1: on Divics and not on DVD, but with very little success,
Speaker 1: and in nineteen ninety nine Sharp knew that this was
Speaker 1: a bad idea and he pulled the plug on the
Speaker 1: whole project. Now, the price tag for that mistake was
Speaker 1: about two hundred and thirty three million dollars for the
Speaker 1: development and promotion of Divics.
Speaker 2: Not good news.
Speaker 1: In two thousand, Sharp transitioned from president and CEO to chairman. Now,
Speaker 1: like I said earlier, Sharp's tenure included high highs and
Speaker 1: low lows for Circuit City, and some things like the
Speaker 1: Rabbit expansion in the late eighties and early nineties had
Speaker 1: really paid off, but others like the Divik's debacle and
Speaker 1: a similar misstep with the home security sales and installation
Speaker 1: were big misses. At that point, Alan McCullough, who had
Speaker 1: previously been the president and COO of Circuit City, became
Speaker 1: the new president and CEO. Two years later, McCulla would
Speaker 1: take over the title of chairman from Sharp, and from
Speaker 1: two thousand and two to two thousand and five he
Speaker 1: would be the head guy in charge. I got a
Speaker 1: lot more to say about that, but let's take another
Speaker 1: quick break to thank our sponsor. All Right, we're heading
Speaker 1: forward the slide into bankruptcy here. But first let's talk
Speaker 1: a bit about McCullough. He had worked with Circuit City
Speaker 1: since nineteen eighty seven, so he had been there for
Speaker 1: a while. He was invested in the company, at least
Speaker 1: professionally invested, if not financially invested, and his tenure began
Speaker 1: with a big change in Circuit City strategy. His tenure
Speaker 1: as the president, that is, president CEO, the company said
Speaker 1: it would no longer sell appliances. It would focus only
Speaker 1: on consumer electronics and get out of the appliance game.
Speaker 1: The appliance market, like consumer electronics, had become much more
Speaker 1: competitive over the past few years. It was largely due
Speaker 1: to big stores like Home Depot and Lows offering major appliances.
Speaker 1: Getting out of the business was thought of as a
Speaker 1: way to cut costs and to focus on consumer electronics
Speaker 1: more exclusively so that it could be more effective. Appliances
Speaker 1: also take up a lot of space when you're trying
Speaker 1: to sell them, so by getting out of that business,
Speaker 1: the company wouldn't need to maintain as much warehouse space,
Speaker 1: and it would also cut down on delivery costs.
Speaker 2: So the whole idea was.
Speaker 1: We can save a lot of money this way, but
Speaker 1: getting out of the appliance game also meant that suddenly
Speaker 1: some jobs weren't needed, like a whole lot of them,
Speaker 1: like a thousand jobs. Circuit City closed six distribution centers
Speaker 1: as well, and the decision was made so quickly that
Speaker 1: it ended up causing huge problems for Circuit City because
Speaker 1: the vendors that Circuit City worked with, the companies that
Speaker 1: made the products that Circuit City sold in their stores,
Speaker 1: weren't informed of the decision in advance, so it damaged
Speaker 1: a lot of business relationships. And it also meant that
Speaker 1: anyone in the market for appliances wasn't going to go
Speaker 1: to Circuit City, so that resulted in less customer traffic
Speaker 1: in stores and that ended up hurting. And while the
Speaker 1: business was operating at a loss for the appliance's section,
Speaker 1: the sales still went to help cover fixed costs, and
Speaker 1: now you didn't have those anymore, so that money had
Speaker 1: to be taken from other places. McCullough would also officially
Speaker 1: spin off Carmacs into its own company. Carmacks at that
Speaker 1: point was facing competition in the used car market space,
Speaker 1: and it had been a drain on Circuit City's financials.
Speaker 1: It had a rough several rough early times for carmas
Speaker 1: Circuit City tried to remodel stores in an effort to
Speaker 1: make the more attractive to customers. The company had long
Speaker 1: been focused on the practice of scooping up that cheap
Speaker 1: property for its superstores, but again it meant that most
Speaker 1: of those stores weren't convenient to customers, and Best Buy,
Speaker 1: like I had mentioned, had gone a totally different way,
Speaker 1: spending that upfront cost to get those premium locations. Now,
Speaker 1: Circuit City couldn't just relocate stores, so their next choice
Speaker 1: was to remodel and redesign store spaces to entice customers inside.
Speaker 1: So the idea would be that now customers could come
Speaker 1: in and purchase a lot of the products just by
Speaker 1: picking up a box and taking it to check out.
Speaker 1: They wouldn't have to talk to a salesperson. But they
Speaker 1: were still running the sales on commission at this point,
Speaker 1: so a lot of products didn't fall into that category.
Speaker 1: If you wanted one, you still had to talk to
Speaker 1: a salesperson. They still had to send someone to the
Speaker 1: back to get the product to come out to you.
Speaker 1: Only a few of the products were kind of a
Speaker 1: help yourself approach. So it was sort of a half measure,
Speaker 1: and you might imagine that it wasn't terribly.
Speaker 2: Effective, and you'd be right. Now.
Speaker 1: The remodeling strategy was scaled back from their original plans
Speaker 1: almost from the beginning. In two thousand and one. They
Speaker 1: initially said we're going to remodel one hundred and forty stores,
Speaker 1: but they only really remodeled about twenty or so, and
Speaker 1: the reason for that was to save money on the
Speaker 1: costs that remodeling would incur. It was about a million
Speaker 1: dollars per store to remodel them.
Speaker 2: So they thought, well, well, we'll spread.
Speaker 1: Out the costs of remodeling by doing blocks of stores
Speaker 1: each year. But the problem was doing this meant that
Speaker 1: the stores were falling further behind their competitive it was
Speaker 1: putting them in a more dangerous position. In two thousand
Speaker 1: and three, responding to changes in the market that had
Speaker 1: happened years earlier, Circuit City finally ended its commissioned sales program. Instead,
Speaker 1: all employees would get a fixed hourly pay rate based
Speaker 1: upon their pay grade. It also meant cutting nearly four
Speaker 1: thousand jobs all in sales. Four thousand people having their
Speaker 1: jobs cut because this decision no longer did Circuit City
Speaker 1: need salespeople who specialized in convincing customers to buy the
Speaker 1: highest step up on a product they could manage. Instead,
Speaker 1: hourly wage employees would provide general assistance, similar to the
Speaker 1: way business was done in shops like Best Buy.
Speaker 2: Now.
Speaker 1: If Circuit City had made this change back in the nineties,
Speaker 1: it might have worked, though it still would have obviously
Speaker 1: been painful for the people who were in sales, But
Speaker 1: by this point, when the company was already in dire straits,
Speaker 1: when it was struggling, it meant seeing a decrease in
Speaker 1: those higher margin sales and further negative impact on revenue,
Speaker 1: which wasn't something they could easily bounce back from at
Speaker 1: this point. In June two thousand and three, the Circuit
Speaker 1: City Board of directors had a big decision to make.
Speaker 1: Another company was coming to the table with an offer,
Speaker 1: and that other company was comp Usa Incorporated. The offer
Speaker 1: was a one point five billion dollar acquisition deal, but
Speaker 1: the board of directors decided not to pursue the offer
Speaker 1: and rejected it. By two thousand and four, things were
Speaker 1: looking pretty grim. In a single day, Circuit City announced
Speaker 1: three thousand, four hundred job cuts and not just any jobs.
Speaker 1: They cut sales associates, people who had the most knowledge
Speaker 1: and experience and tenure with the company. They were also,
Speaker 1: no coincidence, the highest compensated in that department in.
Speaker 2: These sales associate roles.
Speaker 1: Now their replacements lacked that knowledge and experience that they
Speaker 1: needed in order.
Speaker 2: To succeed in their new roles.
Speaker 1: The Urtzels would have found this entire move unacceptable. You
Speaker 1: might remember in my last episode I talked about how
Speaker 1: Samuel Wurtzel had always stressed the importance of training and
Speaker 1: setting employees up for success. Now this move put unqualified
Speaker 1: people into positions without proper preparation, through no fault of
Speaker 1: their own, and it was a huge mistake. At the
Speaker 1: same time, Circuit City executives were awarding themselves big retention
Speaker 1: bonuses in order to keep various executives from jumping ship.
Speaker 1: So this had a devastating effect on employee morale. You've
Speaker 1: got the most knowledgeable employees booted, you've got people unqualified
Speaker 1: put into new positions, and you've got the executives at
Speaker 1: the top rewarding themselves seemingly in spite of all the employees.
Speaker 1: So this was sending a really bad message not just
Speaker 1: to employees, but also to vendors and also customers, and
Speaker 1: losing those experienced employees and demoralizing the rest of the
Speaker 1: workforce trickled down into that customer experience. It became increasingly
Speaker 1: unpleasant to shop at Circuit City. Stores were poorly organized
Speaker 1: in staff, and customer dissatisfaction was through the roof. Now,
Speaker 1: in two thousand and five, a man named Philip J.
Speaker 1: Schoonover became the president of the company. He would then
Speaker 1: later become the chairman and CEO in two thousand and six,
Speaker 1: and he would stay in that role until forced to
Speaker 1: leave in two thousand and eight. That probably tells you
Speaker 1: that things.
Speaker 2: Did not go well.
Speaker 1: Now, if Sharp had made decisions that put the company
Speaker 1: in danger and McCullough had exacerbated matters, you could say
Speaker 1: Schoonover is the person everyone associates with the death of
Speaker 1: Circuit City. It may not entirely be Schoonover's fault. He
Speaker 1: was in a terribly difficult position when he came on board.
Speaker 1: But Alan Wurtzel said Schoonover completely ignored company values, the
Speaker 1: ones that Samuel Wurtzel, Allen's father had instilled in the company.
Speaker 2: Namely, he said.
Speaker 1: That schoonover stopped caring about fair deals and honesty when
Speaker 1: dealing with employees and vendors alike, which is pretty brutal.
Speaker 2: In two thousand and.
Speaker 1: Six, Circuit City decided to copy Best Buy, which is
Speaker 1: kind of interesting considering how many times Best Buy was
Speaker 1: essentially copying Circuit City but doing it better. Best Buy
Speaker 1: had launched an electronics service called geek Squad back in
Speaker 1: two thousand and two. Now, geek Squad provides specialized customer
Speaker 1: service for things like equipment installation, adjustment repairs, that kind
Speaker 1: of thing for a fee, and those fees add up
Speaker 1: kind of like those extended warranties had been a huge
Speaker 1: source of revenue for Best Buy and Circuit City alike. Well,
Speaker 1: this was four years later, but Circuit City says, all right,
Speaker 1: two thousand and six, we're going to launch our own service,
Speaker 1: which is going to be a specialized electronics service, and
Speaker 1: we're calling it fire Dog.
Speaker 2: Fire Doog, however, required a big investment.
Speaker 1: The company spent millions of dollars in the hiring, training,
Speaker 1: and resource allocation for fire Doog teams, and it wasn't
Speaker 1: a very well coordinated effort. Some stores were lagging way
Speaker 1: behind other stores, and there was a lot of confusion
Speaker 1: and not clear messaging, and that ended up adding to
Speaker 1: the expense. Customers were confused by the service, which wasn't
Speaker 1: promoted very well, and many rejected it. So while geek
Speaker 1: Squad succeeded over at Best Buy, fire Doog floundered at
Speaker 1: Circuit City. Also in two thousand and six, the company
Speaker 1: made a real bold move on Black Friday, the day
Speaker 1: after Thanksgiving here in the United States, Circuit City offered
Speaker 1: an amazing deal at the time. It offered a forty
Speaker 1: two inch panasonic plasma television for less than one thousand dollars,
Speaker 1: which was way below the normal price you would find
Speaker 1: at most places at that time, but it actually created
Speaker 1: a domino effect that caused damage. Circuit City began to
Speaker 1: slash to such levels that the profit margins were almost
Speaker 1: completely eliminated, meaning the company was selling products very close
Speaker 1: to what it cost the company to get them in
Speaker 1: the first place, all in an effort to regain customers.
Speaker 1: And it's a game you cannot play forever because those
Speaker 1: profits are never going to be enough, especially for a
Speaker 1: publicly traded company. Two thousand and eight would see the
Speaker 1: end of Schoonover's tenure. Like I said, he was forced
Speaker 1: out of his role and an investor named Mark Waddles
Speaker 1: took over the job, which by then was not great.
Speaker 1: Sales for Circuit City were down by eleven percent and
Speaker 1: the company had suffered more than one hundred and fifty
Speaker 1: million dollars in losses. Things were ugly. In April two
Speaker 1: thousand and eight, another suitor came calling Circuit City, and
Speaker 1: this time it was Blockbuster, which is yet another company
Speaker 1: I could do an episode on and talk about how
Speaker 1: it failed to be nimble, sort of like Circuit City
Speaker 1: and ultimately a doomed Blockbuster. But this is Circuit City story.
Speaker 1: So Blockbuster comes up to Circuit City and says, hey,
Speaker 1: buy it for a billion dollars.
Speaker 2: So this is half a billion dollars less than.
Speaker 1: The previous offer had been just a few years ago
Speaker 1: from CompUSA. But by July one, two thousand and eight,
Speaker 1: Blockbuster had second thoughts. They had actually looked into the
Speaker 1: potential deal further and concluded that acquiring Circuit City would
Speaker 1: be a bad business decision.
Speaker 2: Yikes.
Speaker 1: So Circuit City stocks plummeted as a result. If someone
Speaker 1: comes up and says, hey, do you want to go
Speaker 1: to the problem the you know what, never mind, I
Speaker 1: can do better. It's probably not going to help your
Speaker 1: self esteem. The same is true with investor confidence in
Speaker 1: Circuit City after this event. And yeah, that story comes
Speaker 1: from Jonathan's past, I'll thank you not to pursue it further.
Speaker 2: By November two.
Speaker 1: Thousand and eight, the company was baling waters. Circuit City
Speaker 1: announced it would close one hundred and fifty five stores
Speaker 1: and layoff more than fifteen percent of its workforce by
Speaker 1: end of the year, and just a little bit later,
Speaker 1: seven hundred corporate employees, the people who worked at Circuit
Speaker 1: City's corporate headquarters were let go.
Speaker 2: All the other.
Speaker 1: Corporate employees were moved into the same building to cut
Speaker 1: costs so they didn't have to have as much office space,
Speaker 1: and on November tenth, the company filed for bankruptcy for
Speaker 1: Chapter eleven and started searching for a White Night to
Speaker 1: rescue them. The whole idea was that, you know, by
Speaker 1: filing for bankruptcy, you get a little breathing room. The
Speaker 1: goal is to try and get out of bankruptcy and
Speaker 1: go back to business. But at this point it was
Speaker 1: too late. No one was willing to jump forward and
Speaker 1: try to write a sinking ship, not for a company
Speaker 1: that lost five billion dollars in stock market value in
Speaker 1: just twenty four months. There were still hopes that a
Speaker 1: company could re emerge from this bankruptcy.
Speaker 2: It just wasn't meant to be.
Speaker 1: There was a brief moment of hope when it appeared
Speaker 1: that a retail businessman from Mexico might swoop in at
Speaker 1: the last second, but after purchasing a little less than
Speaker 1: thirty percent of the company, that just stopped. A lot
Speaker 1: of questions were raised about why someone would come in
Speaker 1: and buy up a third of a company that was
Speaker 1: doomed to failure and not try to do more. So
Speaker 1: the company at this time was still trying to do
Speaker 1: business like. Stores were still open and still trying to
Speaker 1: sell merchandise, but those bankruptcy proceedings had really hurt them
Speaker 1: beyond just that backstage stuff. I mean, customer confidence had
Speaker 1: withered away, and the company lacked the resources to try
Speaker 1: anything new to bring customers back in. So in January
Speaker 1: two thousand and nine, they couldn't keep things going any
Speaker 1: longer and the company was forced to liquidate all its assets,
Speaker 1: and over the next few months, the company would close stores,
Speaker 1: layoff workers, liquidate things until the final store closed on
Speaker 1: March eighth, two thousand and nine. But that's not quite
Speaker 1: the end of the story. On April sixteenth, two thousand
Speaker 1: and nine, a company called system As Incorporated, purchased the
Speaker 1: intellectual property of Circuit City, which include the company's name
Speaker 1: and their customer database. So for several years, Circuit City
Speaker 1: existed but essentially existed in name only, and system Acts
Speaker 1: used it here and there until twenty twelve, when they
Speaker 1: figured this name doesn't really have any value anymore and
Speaker 1: they just stopped using it. But you might think this
Speaker 1: is when the company died off, and you'd still be wrong,
Speaker 1: because it's zombie time. It's like closing time, only with
Speaker 1: more brain devouring now. One thing Circuit City had continued
Speaker 1: to do in this time, despite no longer being a
Speaker 1: viable entity, was make charitable donations, which is weird, right,
Speaker 1: You might wonder, how can a company that doesn't exist
Speaker 1: fund charities? Well, it's because the company had established a
Speaker 1: fund and deposited money into the fund specifically for the
Speaker 1: purpose of making regular charitable donations, and there's still money
Speaker 1: in it, so the fund still pays out year over year.
Speaker 1: Last time I checked there's a little bit more than
Speaker 1: a million dollars in that fund, so it won't go forever.
Speaker 1: It will eventually drain, but for the time being there's
Speaker 1: still money from Circuit City funding charities. And now there
Speaker 1: are new owners of the Circuit City intellectual property. So
Speaker 1: from twenty twelve to twenty sixteen, that name remained unused,
Speaker 1: but then a new group came in and purchased the
Speaker 1: IP from Systemax. The new CEO is a guy named
Speaker 1: Ronnie schmol who said that plans are in place to
Speaker 1: open kiosks and stores. Originally they had aimed at kind
Speaker 1: of the summer of twenty sixteen, but that didn't actually happen,
Speaker 1: and according to the new owners, the reason for that
Speaker 1: is they want to make sure that they do it correctly.
Speaker 1: So we're still waiting as of the recording of this
Speaker 1: podcast to see that happen. But if the owners are successful,
Speaker 1: we may see a return of the Circuit City brand
Speaker 1: under new ownership.
Speaker 2: It'll be a new.
Speaker 1: Kind of not that different from the way Atari came back.
Speaker 1: But we have a very different marketplace today than we
Speaker 1: did even back in two thousand and nine. Online purchases
Speaker 1: are on the rise. Brick and mortar stores are having
Speaker 1: trouble getting consumers to actually visit physical stores, so it
Speaker 1: may end up that Circuit City will become an online
Speaker 1: only enterprise, although that's not necessarily the plan if it
Speaker 1: works at all, But like I said, the plan is
Speaker 1: to open real, actual stores. So perhaps in the future
Speaker 1: I'll need to record a part three to this story.
Speaker 1: And that concludes our two part series about Circuit City,
Speaker 1: a store that you know, was kind of a trailblazer
Speaker 1: in some ways and then blazed right out and in
Speaker 1: pretty much every way that counts. I hope you all
Speaker 1: enjoyed this two part retrospective look at Circuit City, and yeah,
Speaker 1: I look forward to doing a lot more episodes about
Speaker 1: stores like this. I really need to do a deep
Speaker 1: dive on radio Shack, because I think I actually did
Speaker 1: do episodes about radio Shack once upon a time. But
Speaker 1: I really need to do another one because that story
Speaker 1: gets bonkers. But we'll have to leave that for another time.
Speaker 1: In the meantime, I hope you're all well, and I'll
Speaker 1: talk to you again really soon. Tech Stuff is an
Speaker 1: iHeartRadio production. For more podcasts from iHeartRadio, visit the iHeartRadio
Speaker 1: app Apple podcasts, or wherever you listen to your favorite shows.