WEBVTT - TechStuff Classic: The Circuit City Story Part 2 0:00:04.440 --> 0:00:12.280 Welcome to tech Stuff, a production from iHeartRadio. Hey there, 0:00:12.320 --> 0:00:15.760 and welcome to tech Stuff. I'm your host, Jonathan Strickland. 0:00:16.000 --> 0:00:18.400 I'm an executive producer with iHeartRadio. 0:00:18.760 --> 0:00:22.279 And how the tech are you? So? Last week, this is. 0:00:22.280 --> 0:00:24.599 A Friday, so we're doing a tech Stuff classic episode first, 0:00:24.600 --> 0:00:26.720 get that all the way. But last week we started 0:00:27.120 --> 0:00:31.840 the Circuit City story with Part one. This week we 0:00:31.880 --> 0:00:36.559 shall conclude the Circuit City story with Part two. This 0:00:36.680 --> 0:00:42.560 episode originally published way back on February eighth, twenty seventeen. 0:00:43.159 --> 0:00:43.519 Enjoy. 0:00:44.960 --> 0:00:48.839 So in nineteen eighty four, Alan Wurtzel really concentrated on 0:00:48.920 --> 0:00:52.479 implementing a new plan based off the success of the 0:00:52.520 --> 0:00:56.360 Circuit City superstore concept that originally was just called the 0:00:56.400 --> 0:00:59.959 Wards Loading doc. Now, that plan involved creating an all 0:01:00.120 --> 0:01:03.720 most cookie cutter approach to store space, and if you've 0:01:03.760 --> 0:01:06.959 ever been to more than one Circuit City during its heyday, 0:01:07.080 --> 0:01:12.960 you probably noticed the layout was remarkably similar, probably almost identical, 0:01:12.959 --> 0:01:13.920 and that was by design. 0:01:14.920 --> 0:01:15.400 Wurtzel. 0:01:15.959 --> 0:01:19.119 My experiment would changes at one location just to see 0:01:19.160 --> 0:01:22.480 how they would do, and then perhaps implement some changes 0:01:22.520 --> 0:01:27.400 across the board, but by and large they remained almost identical. Now, 0:01:27.440 --> 0:01:31.160 the store layout embodied some of the same sales philosophies 0:01:31.200 --> 0:01:34.880 that Samuel had established back when he had first started 0:01:34.880 --> 0:01:38.040 the Wards Company. You might remember in that last episode 0:01:38.080 --> 0:01:42.080 I talked about how he used various manipulation techniques to 0:01:42.160 --> 0:01:46.160 increase sales, not in a way to be dishonest or 0:01:46.280 --> 0:01:50.960 to you know, otherwise trick a customer into buying something, 0:01:51.000 --> 0:01:55.000 but rather to entice a customer into spending as much 0:01:55.040 --> 0:01:59.840 money as possible. There's a fine line there between and 0:02:00.160 --> 0:02:04.440 admirable work ethic and kind of creepy manipulation. And he 0:02:04.480 --> 0:02:08.320 walked it carefully, or at least appeared to well. Alan 0:02:08.360 --> 0:02:11.120 wanted to do the same thing, and he incorporated that 0:02:11.200 --> 0:02:14.000 into the store design itself. This is going to sound 0:02:14.040 --> 0:02:15.040 really familiar to. 0:02:14.960 --> 0:02:16.000 Anyone who's been to. 0:02:16.000 --> 0:02:20.080 A big box store, because now it is standard practice. 0:02:20.760 --> 0:02:22.520 What they would do is they would put all the 0:02:22.520 --> 0:02:25.600 popular brands, all the big ticket items that people were 0:02:25.639 --> 0:02:28.920 really interested in in the back of the store. That 0:02:28.960 --> 0:02:31.200 meant that customers would have to walk through the rest 0:02:31.240 --> 0:02:33.400 of the store in order to get there, and they 0:02:33.400 --> 0:02:36.400 would see lots of other stuff on the way. So 0:02:36.600 --> 0:02:39.440 this was an effort to try and boost sales of 0:02:39.480 --> 0:02:44.560 slightly less popular items by having people walk through you 0:02:44.600 --> 0:02:48.600 see the same thing today, Like most electronics departments in 0:02:48.680 --> 0:02:52.160 a lot of stores are toward the back or somewhere 0:02:52.320 --> 0:02:54.760 deep in the middle of the store, and it means 0:02:54.760 --> 0:02:56.600 you have to walk through other departments to get there. 0:02:57.320 --> 0:02:59.480 And as you're doing that, you're thinking, oh, right, I 0:03:00.120 --> 0:03:02.040 do need to buy a new two piece bathing suit 0:03:03.000 --> 0:03:06.720 or something similar. I mean, I think that way too 0:03:06.760 --> 0:03:11.360 frequently anyway. The late seventies and early eighties marked a 0:03:11.440 --> 0:03:15.880 new age in consumer electronics, and Circuit City was benefiting 0:03:15.919 --> 0:03:18.800 from that. When it started off as just a television 0:03:18.840 --> 0:03:23.560 appliance and radio business, Suddenly those store shelves got way 0:03:23.560 --> 0:03:27.320 more crowded with other stuff. New gadgets were joining them. 0:03:27.360 --> 0:03:31.680 You had VCRs and both the vhs and the Betamax formats. 0:03:32.200 --> 0:03:36.800 You had laser disc players, you had cassette players, record players. 0:03:36.880 --> 0:03:40.160 Later on you would have CD players. You had cordless phones, 0:03:40.240 --> 0:03:44.640 microwave ovens. Much much later, like in the late nineties, 0:03:44.720 --> 0:03:50.560 DVD players would join that. So this succession of new 0:03:50.600 --> 0:03:56.440 products ended up giving Circuit City the base to succeed, 0:03:57.120 --> 0:03:59.800 and because the superstores were so large, they could carry 0:03:59.800 --> 0:04:03.480 all wide variety of products all in one location, and 0:04:03.520 --> 0:04:05.920 the storage space, the warehouse space in the back of 0:04:05.960 --> 0:04:07.920 the store was big enough to allow the stores to 0:04:07.960 --> 0:04:11.720 purchase items from vendors in large amounts in bulk essentially, 0:04:12.080 --> 0:04:15.240 and that lowered the cost of purchase. And then that 0:04:15.280 --> 0:04:18.760 meant they could maximize their profit margins when they sold 0:04:18.800 --> 0:04:21.600 it at a higher price to the customer when they 0:04:21.680 --> 0:04:28.200 made that sale. Now, Wurtzel led the company into an 0:04:28.200 --> 0:04:32.360 intense phase of expansion. Circuit City began to move into 0:04:32.360 --> 0:04:36.200 new markets like Atlanta and Florida. The company would open 0:04:36.320 --> 0:04:40.479 numerous stores in a relatively small region, so they'd open 0:04:40.560 --> 0:04:44.719 maybe five or six stores in a metropolitan area. This 0:04:44.800 --> 0:04:47.640 accomplished a few goals, all of which were benefiting the 0:04:47.680 --> 0:04:51.000 company and a few were benefiting the consumer. For one, 0:04:51.080 --> 0:04:54.039 adding lots of stores in the city meant customers wouldn't 0:04:54.040 --> 0:04:56.520 necessarily have to travel so far to get to a 0:04:56.560 --> 0:04:59.680 specific store. You know, if there's just one location in 0:04:59.720 --> 0:05:02.320 the city, may you have to travel to that location, 0:05:02.480 --> 0:05:03.680 no matter where you may be. 0:05:04.240 --> 0:05:04.680 If there are. 0:05:04.680 --> 0:05:08.240 Multiple locations, you have some choices. That being said, Circuit 0:05:08.279 --> 0:05:11.719 City had made it a practice to purchase cheap land, 0:05:12.040 --> 0:05:15.680 so they were mainly looking at places that weren't necessarily 0:05:16.080 --> 0:05:19.839 in the most populated or convenient spots. That was another 0:05:19.880 --> 0:05:24.840 reason to open several stores. It helped balance that because 0:05:25.240 --> 0:05:27.920 customers would still have to travel a bit, the stores 0:05:27.960 --> 0:05:32.600 didn't tend to be in areas that were convenient to residential. 0:05:32.000 --> 0:05:33.200 Areas for example. 0:05:34.360 --> 0:05:37.040 Now it also meant that they didn't have to spend 0:05:37.080 --> 0:05:41.080 as much money promoting and advertising any individual store, because 0:05:41.120 --> 0:05:45.400 they could group stores together in a single advertising campaign 0:05:45.480 --> 0:05:48.720 for whatever city it might be, and all the stores 0:05:48.760 --> 0:05:52.880 would benefit from this, and that ended up being a 0:05:53.240 --> 0:05:56.360 kind of a money saving effort for the company and 0:05:56.760 --> 0:06:00.800 cutting costs. And this was all new back then. It's 0:06:00.800 --> 0:06:03.080 something that we see a lot of today, or at 0:06:03.120 --> 0:06:06.119 least we have seen a lot of today. You might argue, 0:06:06.120 --> 0:06:08.600 we don't see it as much, mainly because of the 0:06:08.640 --> 0:06:12.160 move to online marketplaces. We'll talk more about that a 0:06:12.200 --> 0:06:13.840 little bit later in this episode. 0:06:14.760 --> 0:06:17.680 So they were keeping the company's. 0:06:17.200 --> 0:06:22.880 Bottom line healthy by managing these costs, by consolidating costs, 0:06:23.000 --> 0:06:27.080 and by maximizing the amount of exposure they were getting 0:06:27.120 --> 0:06:30.800 to customers. But some sad stuff was happening too around 0:06:30.800 --> 0:06:33.800 this time. In nineteen eighty five, the co founders of 0:06:33.839 --> 0:06:37.640 the Wards Company, the company that became Circuit City, Samuel 0:06:37.680 --> 0:06:41.440 Wurtzel and Abraham Haste. Both of them passed away that year. 0:06:42.440 --> 0:06:45.479 They lived long enough to see this little humble TV 0:06:45.680 --> 0:06:48.320 retail shop they had opened way back in nineteen forty 0:06:48.400 --> 0:06:52.760 nine grow into a substantial chain of electronics superstores that 0:06:52.800 --> 0:06:57.000 were in multiple states across the US, But then they 0:06:57.040 --> 0:07:00.960 both passed away in nineteen eighty five. In nineteen eighty six, 0:07:01.000 --> 0:07:05.480 Alan Wurtzel retired as CEO of Circuit City. Now he 0:07:05.520 --> 0:07:08.520 would remain on the board of directors until two thousand 0:07:08.520 --> 0:07:11.120 and one, so he was still active with the company. 0:07:11.280 --> 0:07:15.040 He just wasn't acting as CEO anymore. At the time 0:07:15.080 --> 0:07:19.080 of his retirement, the chain included ninety stores, and sales 0:07:19.120 --> 0:07:21.920 were hovering around the one billion dollar mark. 0:07:22.800 --> 0:07:24.520 In fact, from. 0:07:24.720 --> 0:07:28.360 Nineteen eighty three to nineteen eighty seven, Circuit City had 0:07:28.360 --> 0:07:32.560 the best return on investments on the New York Stock Exchange, 0:07:32.560 --> 0:07:35.960 meaning if you invested money in Circuit City in nineteen 0:07:36.000 --> 0:07:39.920 eighty three, your return was better than any other investment 0:07:39.960 --> 0:07:41.960 you could have made that year, and it remained so 0:07:42.040 --> 0:07:45.760 for the next four years, and even since nineteen sixty 0:07:45.760 --> 0:07:48.400 five it had been listed on the Fortune five hundred 0:07:48.440 --> 0:07:52.920 list of companies nineteen sixty five on it consistently made 0:07:52.920 --> 0:07:56.200 that list and would continue to do so up until 0:07:56.320 --> 0:08:00.400 nineteen ninety five. But that gets a little bit ahead 0:08:00.440 --> 0:08:02.320 of where we want to be right now. I'll get 0:08:02.400 --> 0:08:04.720 into more of the troubles that led to the fall 0:08:04.760 --> 0:08:09.960 from Grace in a bit now. Alan Wurtzel's successor was 0:08:10.000 --> 0:08:12.760 a man named Richard Sharp, and in the last episode 0:08:12.760 --> 0:08:15.280 I mentioned that Sharp had been hired on at an 0:08:15.320 --> 0:08:20.480 executive vice president level outside the company, so that was 0:08:20.680 --> 0:08:23.360 kind of counter to some of the company's core values, 0:08:23.400 --> 0:08:27.040 which included promoting from within. Instead of promoting from within, 0:08:27.200 --> 0:08:32.520 they found this very intelligent, capable hardware and software guy 0:08:32.880 --> 0:08:36.360 and brought him on. His performance was impressive. He had 0:08:36.360 --> 0:08:39.320 designed a computer system for Circuit City that made operations 0:08:39.400 --> 0:08:42.040 much more efficient and effective, and when he stepped in 0:08:42.080 --> 0:08:45.040 as president and CEO of Circuit City, the company was 0:08:45.120 --> 0:08:48.040 on the rise. He would end up pushing it farther, 0:08:48.200 --> 0:08:51.880 going into the stratosphere, though a lot of people have 0:08:52.080 --> 0:08:55.120 argued later on that it might have been his leadership 0:08:55.160 --> 0:08:58.439 that ultimately set the company on the path to self destruction. 0:08:59.440 --> 0:09:01.679 I'll let you go, guys, kind of decide what you 0:09:01.720 --> 0:09:03.720 think once we get to the end of this episode. 0:09:03.920 --> 0:09:07.880 I'm not entirely sold on the idea that Sharp was 0:09:08.240 --> 0:09:10.840 the beginning of the end. I think he made some 0:09:11.000 --> 0:09:14.960 decisions that were ultimately poor ones, but I don't know 0:09:14.960 --> 0:09:18.520 that they were ones that Circuit City couldn't have rebounded from. 0:09:18.679 --> 0:09:21.960 And so we'll get into that a little bit. Let's 0:09:21.960 --> 0:09:26.120 talk about who he was first. So Richard Rick Sharp 0:09:26.600 --> 0:09:29.800 was born on April twelfth, nineteen forty seven, just two 0:09:29.920 --> 0:09:33.520 years before Samuel Wurtzel founded the company that would become 0:09:33.600 --> 0:09:37.360 Circuit City. He grew up in the Washington, DC area 0:09:37.480 --> 0:09:41.960 and attended George Washington High School in Alexandria, Virginia. He 0:09:42.040 --> 0:09:44.600 first went to college to study electrical engineering at the 0:09:44.679 --> 0:09:47.800 University of Virginia, but discovered that that really wasn't his 0:09:47.880 --> 0:09:50.400 cup of tea. He wasn't so much interested in electrical 0:09:50.400 --> 0:09:53.440 engineering as he was in computer science, so he dropped 0:09:53.440 --> 0:09:56.559 out of college and for a short while he pursued 0:09:56.600 --> 0:10:02.200 some slightly less academic interests, like playing poker and shooting pool. 0:10:03.320 --> 0:10:07.280 I usually do the opposite. Shooting poker, however terrible. I 0:10:07.320 --> 0:10:10.320 don't recommend it. He wasn't idol for long, and soon 0:10:10.559 --> 0:10:13.400 he was attending the College of William and Mary studying 0:10:13.400 --> 0:10:16.000 computer science and then went on to attend the Harvard 0:10:16.040 --> 0:10:17.920 Business School's management program. 0:10:18.360 --> 0:10:19.240 When he was twenty. 0:10:19.080 --> 0:10:21.840 Seven years old, he founded a hardware and software business 0:10:21.880 --> 0:10:24.559 development company, and he was really good at what he did. 0:10:24.679 --> 0:10:26.920 He impressed the folks at Circuit City, which is why 0:10:26.960 --> 0:10:29.559 they hired him on at that executive vice president level. 0:10:30.320 --> 0:10:33.920 He joined in nineteen eighty two, and just four years 0:10:34.000 --> 0:10:37.520 later he became the leader of the company. By nineteen 0:10:37.559 --> 0:10:40.840 ninety four he became the chairman of the board. Now, 0:10:40.840 --> 0:10:45.199 while the company was opening new locations in Georgia and Florida, 0:10:45.240 --> 0:10:49.920 it also was working toward eliminating unnecessary drains on profits. Now, 0:10:49.960 --> 0:10:53.040 among those drains were those Lafayette stores I mentioned in 0:10:53.080 --> 0:10:56.400 the previous podcast. These were the stores located in the 0:10:56.440 --> 0:10:59.960 New York area and originally they had sold stereo equipment. 0:11:00.600 --> 0:11:05.000 When Circuit City, back then the Wards Company, purchased those stores, 0:11:05.320 --> 0:11:08.240 there were only eight. By nineteen eighty six they had fifteen, 0:11:08.320 --> 0:11:10.760 but they weren't performing well. They were unprofitable, so the 0:11:10.800 --> 0:11:13.920 company shut down the stores and it would continue having 0:11:14.000 --> 0:11:17.520 trouble penetrating the New York market because the New York 0:11:17.559 --> 0:11:20.080 market was already saturated with lots of stores that would 0:11:20.120 --> 0:11:23.160 engage in price slashing. That was not really a model 0:11:23.200 --> 0:11:26.080 that Circuit City was suited for. Circuit City was still 0:11:26.160 --> 0:11:30.760 using commissioned sales, and the commission sales depended upon salespeople 0:11:30.800 --> 0:11:35.000 trying to sell products at the highest price they could. 0:11:35.360 --> 0:11:37.040 Doesn't really work for price slashing. 0:11:37.559 --> 0:11:40.559 So the Circuit City experience was supposed. 0:11:40.120 --> 0:11:46.000 To be haggle free, but you could often argue down 0:11:46.080 --> 0:11:48.400 a salesperson from the price that was on the ticket, 0:11:48.440 --> 0:11:51.680 at least in the old Wards Company days, and Circuit 0:11:51.679 --> 0:11:53.800 City just couldn't survive in a market where other business 0:11:53.840 --> 0:11:57.480 owners were regularly cutting prices in order to compete for customers. 0:11:58.480 --> 0:12:00.000 Also, in nineteen eighty six. 0:12:00.080 --> 0:12:04.160 Circuit City shut down one other relationship it had earlier established, 0:12:04.200 --> 0:12:07.000 that would be the discount store in California called Zodi's. 0:12:07.040 --> 0:12:10.960 I mentioned them in the last episode two. They At 0:12:10.960 --> 0:12:14.440 that point, Circuit City had been operating four different lines 0:12:14.480 --> 0:12:17.480 of stores. You had the superstores, you had the smaller 0:12:17.559 --> 0:12:19.920 Circuit City stores, you had Zodi's, and you had the 0:12:20.000 --> 0:12:23.240 Lafayette stores. By getting rid of the Lafayette and Zodi's, 0:12:23.840 --> 0:12:27.680 they were able to consolidate Circuit Citi's strategy and simplify 0:12:27.760 --> 0:12:31.120 matters From a managerial standpoint. The money the company reclaimed 0:12:31.120 --> 0:12:35.160 from operating those businesses could be reinvested by opening more 0:12:35.280 --> 0:12:40.280 superstores in California and the southeastern United States in nineteen 0:12:40.320 --> 0:12:43.439 eighty seven and eighty eight. The company prospered and grew, 0:12:43.520 --> 0:12:46.840 and it was fueled by this demand for consumer electronics 0:12:46.880 --> 0:12:49.600 like the VCR, which by that time was viewed as 0:12:49.640 --> 0:12:53.240 a standard component in your typical home theater system. 0:12:53.840 --> 0:12:55.040 Sales grew over. 0:12:54.960 --> 0:12:58.440 One billion dollars a year and the number of stores 0:12:58.480 --> 0:13:00.400 increased to one hundred fifty. 0:13:01.480 --> 0:13:02.760 Circuit City had already. 0:13:02.559 --> 0:13:05.400 Experimented with mall store fronts in the past, and decided 0:13:05.440 --> 0:13:07.880 to try and give it another shot with a new 0:13:07.960 --> 0:13:09.160 idea new brand. 0:13:09.600 --> 0:13:09.920 This time. 0:13:10.000 --> 0:13:12.840 The company planned to open twenty stores, and they branded 0:13:12.840 --> 0:13:15.920 them Impulse And I think that's a pretty clever name 0:13:15.920 --> 0:13:19.359 for a store that specialized in selling small electronic devices, 0:13:19.400 --> 0:13:22.080 particularly the kind you might purchase as a gift or 0:13:22.120 --> 0:13:27.839 a stocking stuffer. It's the very definition of an impulse buy. Now, 0:13:27.880 --> 0:13:31.000 whether the executives at Circuit City intended that meaning to 0:13:31.040 --> 0:13:33.400 be part of the name or not, it definitely was 0:13:33.440 --> 0:13:37.080 the foundation for their sales strategy and it worked and 0:13:37.120 --> 0:13:39.360 a few years later the company made plans to open 0:13:39.440 --> 0:13:43.480 dozens of other stores in malls within their territory. That's 0:13:43.480 --> 0:13:45.920 good to mention that more than a billion dollars in 0:13:46.000 --> 0:13:49.160 sales is not the same thing as a billion dollars 0:13:49.280 --> 0:13:52.760 in profits. Profits are what you get when you deduct 0:13:52.760 --> 0:13:56.800 your costs from your revenue. Now, Circuit City's profits by 0:13:56.880 --> 0:14:00.400 nineteen eighty nine were just under seventy million dollars. Not 0:14:00.520 --> 0:14:03.040 still a heck of a lot of money, but it 0:14:03.080 --> 0:14:05.360 shows how much work the company had to do in 0:14:05.480 --> 0:14:08.959 order to make that kind of profit. A billion dollars 0:14:08.960 --> 0:14:13.400 in sales for seventy million dollars in profit. Also, the 0:14:13.400 --> 0:14:16.000 company managed to do this while there was another economic 0:14:16.040 --> 0:14:17.079 recession in effect. 0:14:17.640 --> 0:14:19.960 So how did it do that? Well? 0:14:20.000 --> 0:14:25.240 Mainly their success hinged on new consumer electronic products coming out. So, 0:14:25.360 --> 0:14:27.520 as you guys are probably aware, I've been going to 0:14:27.640 --> 0:14:32.040 CES also formerly known as the Consumer Electronics Show, every 0:14:32.080 --> 0:14:34.400 year in Las Vegas, Nevada since two thousand and eight. 0:14:34.760 --> 0:14:36.080 Circuit City would be. 0:14:36.120 --> 0:14:39.080 A company that would pay very close attention to trade shows. 0:14:39.160 --> 0:14:40.560 Like cees, the. 0:14:40.520 --> 0:14:44.440 Company depended upon new compelling products to come out so 0:14:44.480 --> 0:14:47.840 that they could offer them in their retail stores. In fact, 0:14:48.080 --> 0:14:52.280 stores like Circuit City are why those trade shows exist. Now, 0:14:52.320 --> 0:14:55.560 sometimes we in the tech media I include myself here, 0:14:55.640 --> 0:14:59.000 we forget this as we walk around waiting to be 0:14:59.080 --> 0:15:03.360 blown away by a groundbreaking product or a new category 0:15:03.520 --> 0:15:05.040 defining technology. 0:15:05.560 --> 0:15:06.720 But the real reason. 0:15:06.440 --> 0:15:09.600 Those trade shows exist is to let retailers get a 0:15:09.600 --> 0:15:11.640 look at the products that will soon be available for 0:15:11.720 --> 0:15:14.760 customers so that they can create a sales strategy for 0:15:14.800 --> 0:15:17.120 the near future and figure out which products they want 0:15:17.120 --> 0:15:18.600 to carry in their stores. 0:15:18.600 --> 0:15:21.320 That's the real reason for those trade shows. 0:15:21.760 --> 0:15:25.400 The press's presence is really just icing on the cake. 0:15:25.520 --> 0:15:27.720 Who has the stuff we report on ends up being 0:15:27.960 --> 0:15:32.440 advertising for both the companies making the cool products and 0:15:32.480 --> 0:15:35.000 the ones that are going to end up selling them. 0:15:35.400 --> 0:15:38.040 Back in the eighties and nineties, those retail establishments were 0:15:38.080 --> 0:15:42.560 primarily superstores like Circuit City, So in many ways, Circuit 0:15:42.600 --> 0:15:47.720 cities booming years can be attributed to advances in consumer electronics, 0:15:47.760 --> 0:15:51.280 from the migration of cassette players to CD players to 0:15:51.480 --> 0:15:54.720 the similar trend of VCRs to DVD players. Much later, 0:15:55.120 --> 0:15:58.680 Circuit City also got into the personal computer retail business, 0:15:58.840 --> 0:16:02.800 beginning in nineteen eighty nine. Now by nineteen ninety, the 0:16:02.840 --> 0:16:07.240 company's sales had hit two billion dollars. Circuit City began 0:16:07.320 --> 0:16:10.640 opening smaller stores and markets that seemed to be too 0:16:10.680 --> 0:16:14.280 small to support a full superstore, and a few years 0:16:14.320 --> 0:16:17.880 later the company introduced a new department in superstores that 0:16:17.960 --> 0:16:22.760 sold music like actual albums as opposed to just the 0:16:23.200 --> 0:16:26.240 equipment that plays music. This was a move that put 0:16:26.280 --> 0:16:29.520 a ton of pressure on smaller independent music stores and 0:16:29.640 --> 0:16:32.880 music chains. I remember a lot of those, both the 0:16:33.200 --> 0:16:36.400 chains and the independent businesses that used to specialize in 0:16:36.440 --> 0:16:38.960 selling music. In my neck of the woods, we had 0:16:38.960 --> 0:16:43.040 a regional chain called Turtles Records and Tapes. I remember 0:16:43.160 --> 0:16:45.680 fondly going into Turtles because that was where not only 0:16:45.720 --> 0:16:49.000 would you buy albums, you could purchase tickets to concerts there. 0:16:50.040 --> 0:16:53.240 And then there were the truly independent mom and pop shops. 0:16:53.320 --> 0:16:55.280 Turtles was still a chain, but there were lots of 0:16:55.280 --> 0:16:58.360 independence stores too, and all of these were pressured by 0:16:58.400 --> 0:17:02.000 the superstore movement into their tis territory. Now that we've 0:17:02.000 --> 0:17:05.400 crept up into the early nineties, it's a good time 0:17:05.440 --> 0:17:08.080 to talk about some of the competitors that rose up 0:17:08.119 --> 0:17:11.520 to face Circuit City. But first, let's take a quick 0:17:11.560 --> 0:17:23.040 break to thank our sponsor. Okay, you can't really talk 0:17:23.080 --> 0:17:27.480 about Circuit City without mentioning their chief competitor, which I 0:17:27.520 --> 0:17:30.000 would argue was Best Buy. I could do a full 0:17:30.080 --> 0:17:32.960 episode on the best Buy story, but let me give 0:17:33.000 --> 0:17:36.280 you the cliffs Notes version. Do they even still have 0:17:36.320 --> 0:17:39.840 cliffs Notes? Do you guys get that reference? Well, anyway, 0:17:39.840 --> 0:17:43.399 here's a summary to tide us over. Best Buy began 0:17:43.640 --> 0:17:47.479 as a chain of music stores in Minnesota in nineteen 0:17:47.600 --> 0:17:51.080 sixty six. It was founded by a man named Richard Shulz, 0:17:51.520 --> 0:17:52.920 and originally. 0:17:52.720 --> 0:17:55.320 The store was called Sound of Music. 0:17:55.960 --> 0:17:58.440 I don't know if the hills are alive in Minnesota, 0:17:58.520 --> 0:18:01.399 but they did have the Sound of Music stores. In 0:18:01.480 --> 0:18:04.399 nineteen eighty two, one of those stores was damaged in 0:18:04.480 --> 0:18:08.600 a tornado. The store held a special tornado sale and 0:18:08.640 --> 0:18:12.000 they called it a Best Buy sale. The event was 0:18:12.040 --> 0:18:14.520 so successful the company decided to hold one every year. 0:18:15.880 --> 0:18:18.760 That being a special sale, not holding a tornado. The 0:18:18.800 --> 0:18:22.399 company didn't schedule tornadoes. I don't think you would want to. 0:18:22.480 --> 0:18:23.040 Those things are. 0:18:23.119 --> 0:18:27.840 Terrible, but the sales went over like Gangbusters. Eventually, the 0:18:27.880 --> 0:18:30.920 company changed its name to best Buy, the same name 0:18:30.960 --> 0:18:33.640 as those sales that made it famous, and that made 0:18:33.720 --> 0:18:36.000 more sense than Sound of Music anyway, because by that 0:18:36.080 --> 0:18:38.280 time the stores were also beginning to carry lots of 0:18:38.400 --> 0:18:42.320 unrelated stuff, things that had nothing to do with audio 0:18:42.480 --> 0:18:46.719 or music. Throughout the eighties, best Buy began to grow, 0:18:46.880 --> 0:18:49.639 and by the early nineties it had expanded into a 0:18:49.720 --> 0:18:53.879 national chain. Circuit City still dominated the market at that time, 0:18:54.080 --> 0:18:57.320 and it seemed like no one at the company really 0:18:57.440 --> 0:19:01.439 took best Buy seriously. In fact, Alan Wurtzel said that 0:19:01.680 --> 0:19:04.600 at that time, no one at Circuit City really considered 0:19:04.760 --> 0:19:07.959 any competition as being anything more than just an annoyance. 0:19:08.560 --> 0:19:11.280 Now you could call that hubris or arrogance, but at 0:19:11.320 --> 0:19:14.120 the time it seemed like Circuit City was firmly on 0:19:14.160 --> 0:19:20.280 the prosperity highway and hindsight is twenty twenty. Best Buy, meanwhile, 0:19:20.359 --> 0:19:25.160 benefited from Circuit City success because Best Buy executives were 0:19:25.200 --> 0:19:28.680 able to learn from the path that was forged by 0:19:28.680 --> 0:19:32.600 Circuit City. They could employ the most successful strategies and 0:19:32.680 --> 0:19:36.200 avoid the pitfalls that Circuit City had identified during its 0:19:36.240 --> 0:19:38.680 growth phase. Because Circuit City was sort of the pioneer. 0:19:39.160 --> 0:19:41.800 Best Buy, following behind, could say, oh, well, we want 0:19:41.800 --> 0:19:43.560 to go this way, but we won't make the same 0:19:43.600 --> 0:19:46.399 mistake that they did. We can avoid that, save money, 0:19:46.560 --> 0:19:49.160 and expand faster. So it gave Best Buy a chance 0:19:49.200 --> 0:19:53.080 to catch up quickly to Circuit City. With companies like 0:19:53.119 --> 0:19:56.399 best Buy biting at Circuit City's heels, the company became 0:19:56.440 --> 0:19:59.720 motivated to get into the price slashing business. 0:20:00.080 --> 0:20:02.040 This stay competitive. Now. 0:20:02.080 --> 0:20:05.280 At this point, Circuit City was still in the lead, 0:20:05.560 --> 0:20:08.840 and Richard Sharp had decided that the company should diversify 0:20:08.920 --> 0:20:14.160 what it offered. What if the company could sell used cars? Well, 0:20:14.160 --> 0:20:17.679 that's a step too far for just a Circuit City brand, 0:20:17.680 --> 0:20:21.000 but it provided the inspiration for Sharp to guide Circuit 0:20:21.000 --> 0:20:25.000 City into launching a new company that was a subsidiary, 0:20:25.359 --> 0:20:28.160 and it specialized in selling used cars. And I bet 0:20:28.160 --> 0:20:31.280 you've heard of it, because in September nineteen ninety three, 0:20:31.600 --> 0:20:35.880 the first CarMax location opened in Richmond, Virginia. And yes, 0:20:36.119 --> 0:20:41.399 CarMax originated as a Circuit City company. And while Circuit 0:20:41.400 --> 0:20:44.720 City would eventually die in two thousand and nine, spoiler alert, 0:20:45.240 --> 0:20:48.640 CarMax is still around. But in those early years Carmacks 0:20:48.640 --> 0:20:50.879 had a rough start, and since Circuit City had a 0:20:50.920 --> 0:20:56.520 stake in the company, it also hit Circuit City pretty hard. Also, 0:20:56.640 --> 0:21:00.640 launching Carmacks wasn't going to stave off those competitors best Buy. 0:21:00.720 --> 0:21:03.359 To do that, Circuit City stores began to engage in 0:21:03.400 --> 0:21:06.080 that price slashing, at least in the markets where Best 0:21:06.080 --> 0:21:09.680 Buy stores were trying to get a foothold. So if 0:21:09.720 --> 0:21:12.520 you happened to live in a city that had both 0:21:12.600 --> 0:21:16.360 Best Buy stores and Circuit City stores, you benefited from 0:21:16.400 --> 0:21:19.040 this because you could get a better bargain for your product. 0:21:18.720 --> 0:21:20.000 If you shopped at Circuit City. 0:21:20.560 --> 0:21:22.959 But if you lived in a place where only Circuit 0:21:22.960 --> 0:21:26.200 City existed, you didn't see that benefit because there was 0:21:26.240 --> 0:21:29.480 no need for them to slash prices. Best Buy wasn't 0:21:29.520 --> 0:21:33.560 there to siphon off any of the business. The two 0:21:33.560 --> 0:21:38.400 companies had very different sales strategies. At Best Buy, employees 0:21:38.400 --> 0:21:41.400 were trained to be able to answer basic customer questions 0:21:41.400 --> 0:21:45.040 and assist when necessary, but largely customers had kind of 0:21:45.080 --> 0:21:48.160 a help yourself approach, like walk into a store, see 0:21:48.200 --> 0:21:50.120 the thing they wanted to buy, put it in a cart, 0:21:50.160 --> 0:21:51.160 and go to checkout. 0:21:51.320 --> 0:21:53.640 That's how it would work. At best Buy, you. 0:21:53.640 --> 0:21:55.680 Might get asked by an employee if there's anything he 0:21:55.800 --> 0:21:58.119 or she could do to help you find, but that 0:21:58.160 --> 0:22:00.720 would be about it until you made your purchase. But 0:22:00.840 --> 0:22:04.600 over at Circuit City, salespeople were still working on commission, 0:22:04.840 --> 0:22:07.080 so the experience was very different. You walk into a 0:22:07.080 --> 0:22:11.520 circuit City, you would see demonstration models of various products, 0:22:11.920 --> 0:22:14.920 but for the most part, you couldn't pick anything up. 0:22:15.160 --> 0:22:17.760 Everything was in boxes in the warehouse and you would 0:22:17.760 --> 0:22:21.320 talk to a salesperson who would make a sale, establish 0:22:21.400 --> 0:22:24.080 whatever the price was that you're paying. Then they would 0:22:24.119 --> 0:22:26.439 go into the back and get the thing that you 0:22:26.520 --> 0:22:28.760 were interested in buying, bring it out to you, and 0:22:28.840 --> 0:22:29.520 then you would go. 0:22:29.480 --> 0:22:30.159 And purchase it. 0:22:30.720 --> 0:22:35.240 So very different models, and it meant that over at 0:22:35.240 --> 0:22:38.080 Circuit City, a salesperson made more money if they made 0:22:38.280 --> 0:22:42.000 more sales, they had an incentive to sell more to 0:22:42.160 --> 0:22:43.040 more customers. 0:22:43.480 --> 0:22:45.040 At best Buy that wasn't the case. 0:22:45.040 --> 0:22:48.399 People were on an hourly wage, no commissions, so the 0:22:48.440 --> 0:22:51.840 customer experience at Circuit City was very different from Best Buy. 0:22:51.960 --> 0:22:55.480 If you walk into a circuit City and you encountered 0:22:55.480 --> 0:22:58.480 a salesperson who didn't have a particularly subtle approach, you 0:22:58.560 --> 0:23:02.200 might feel pressured when shopping for electronics, which a lot 0:23:02.240 --> 0:23:06.760 of folks react negatively toward. Circuit City executives felt that 0:23:06.800 --> 0:23:08.679 their approach was actually the best one, which is why 0:23:08.720 --> 0:23:11.440 they stuck with it for so long. It motivated their 0:23:11.480 --> 0:23:16.320 sales force and it drove revenue because salespeople were selling 0:23:16.359 --> 0:23:20.040 those higher margin products, the things that cost more money 0:23:20.040 --> 0:23:22.919 and you would make more profit from because the cost 0:23:23.320 --> 0:23:25.800 to the consumer was much higher than what it cost 0:23:25.920 --> 0:23:27.520 Circuit City to purchase. 0:23:27.119 --> 0:23:27.760 From a vendor. 0:23:28.680 --> 0:23:30.960 The company at that point was valued at more than 0:23:31.000 --> 0:23:35.119 a billion dollars, and they continued to grow and open 0:23:35.200 --> 0:23:39.639 up new superstores in various markets. Meanwhile, Best Buy was 0:23:39.680 --> 0:23:42.919 starting to gain ground, and by nineteen ninety five, it 0:23:42.960 --> 0:23:46.000 was competing with Circuit City in about half of the 0:23:46.119 --> 0:23:49.879 larger company's markets. So half the stores that Circuit City 0:23:49.920 --> 0:23:52.960 owned were competing with Best Buy. The other half were 0:23:53.000 --> 0:23:55.400 in markets the Best Buy had not quite penetrated yet. 0:23:55.840 --> 0:23:58.840 Best Buy was also taking a different strategy when choosing 0:23:58.920 --> 0:24:03.119 store locations. Remember I mentioned that those Circuit City superstores 0:24:03.119 --> 0:24:06.399 were located on cheap land, which wasn't always convenient to 0:24:06.560 --> 0:24:09.080 local populations. It could be really out of the way. 0:24:09.640 --> 0:24:12.399 Best Buy tried to avoid that same problem and find 0:24:12.480 --> 0:24:17.320 areas close to population centers and pay that higher upfront 0:24:17.359 --> 0:24:23.000 cost because it was access to more customers, and they 0:24:23.240 --> 0:24:25.080 figured that people would be more willing to go to 0:24:25.119 --> 0:24:28.040 a store that's closer to their home rather than travel 0:24:28.040 --> 0:24:32.639 across town to go to a competitors superstore. Other stores 0:24:32.640 --> 0:24:35.320 besides Best Buy were also pushing up against the giant, 0:24:35.560 --> 0:24:39.760 which created a much more competitive environment for Circuit City. Still, 0:24:39.920 --> 0:24:42.040 at that point, the company was really doing great. It 0:24:42.119 --> 0:24:45.640 hit seven billion dollars in sales in nineteen ninety five, 0:24:45.720 --> 0:24:48.080 with earnings at a twenty percent growth rate. 0:24:48.760 --> 0:24:51.480 It seemed like the company was unstoppable. It was too 0:24:51.560 --> 0:24:52.280 big to fail. 0:24:52.600 --> 0:24:58.480 Accept it totally wasn't bump bump bomb. Nineteen ninety five 0:24:58.520 --> 0:25:01.080 really is the turning point year. That's the year where 0:25:01.080 --> 0:25:04.560 we see Circuit City doing incredibly well, and afterward we 0:25:04.680 --> 0:25:07.560 start to see it falter. In nineteen ninety six, Best 0:25:07.560 --> 0:25:12.600 Buy sales officially outperformed Circuit City sales. Now Circuit City 0:25:12.640 --> 0:25:14.840 was still doing well, just not as well as the 0:25:14.880 --> 0:25:18.120 company had been doing in previous years. This would become 0:25:18.119 --> 0:25:20.639 a familiar story over the next few years. The company 0:25:20.680 --> 0:25:24.280 continue to see earnings grow, but they were growing by 0:25:24.320 --> 0:25:27.480 smaller amounts with occasional rallies over the next few years. 0:25:27.480 --> 0:25:30.119 So you might say, in one year they'd see twenty 0:25:30.160 --> 0:25:34.520 percent growth, the next year they might see fifteen percent growth, 0:25:34.800 --> 0:25:37.679 the next year might be seven percent growth. And like 0:25:37.680 --> 0:25:40.280 I said, there were a couple of rallies. But seeing 0:25:40.440 --> 0:25:44.440 the growth slow like that is terrifying to companies, particularly 0:25:44.520 --> 0:25:50.320 publicly traded companies, because shareholders expect a return on their investment. Now, 0:25:50.640 --> 0:25:53.040 that continued to go until about two thousand and two, 0:25:53.200 --> 0:25:55.719 when the company had what folks in the industry referred 0:25:55.720 --> 0:26:00.520 to as negative growth, which means the company last money. 0:26:00.800 --> 0:26:03.160 It didn't grow at all. It actually shrank a bit. 0:26:03.280 --> 0:26:05.639 It was only a tiny amount. It was zero point 0:26:05.920 --> 0:26:08.960 seven percent negative growth, but that is a terrible sign. 0:26:09.560 --> 0:26:13.840 Best Buy, meanwhile, had experienced a pretty wild growth rate 0:26:14.000 --> 0:26:17.359 over that seeing period of time, but it was always 0:26:17.400 --> 0:26:20.320 in the positive space. So some years it was growing 0:26:20.640 --> 0:26:23.679 a lot, some years it wasn't growing as much, but 0:26:24.040 --> 0:26:25.120 it was always positive. 0:26:25.840 --> 0:26:27.320 And part of the reason that it's kind of. 0:26:27.320 --> 0:26:30.800 A zigzag wild ride for best Buy was that the 0:26:30.880 --> 0:26:33.920 company was ramping up the number of stores it opened, 0:26:34.119 --> 0:26:38.680 where as Circuit City was already pretty well entrenched. Meanwhile, 0:26:38.760 --> 0:26:42.280 another store was starting to pinch at Circuit City's performance, 0:26:42.320 --> 0:26:45.440 and this time it was Walmart. In the mid two thousands, 0:26:45.520 --> 0:26:49.360 Walmart redesigned its stores and product lines to include more electronics, 0:26:49.359 --> 0:26:53.600 including high end brands like Sony. Now that put Walmart 0:26:53.600 --> 0:26:55.080 in competition with Circuit City. 0:26:56.200 --> 0:26:57.200 Walmart was able. 0:26:57.040 --> 0:26:59.800 To do some serious damage by offering something that I 0:27:00.000 --> 0:27:03.080 I think we all have had experience in. It is 0:27:03.119 --> 0:27:05.320 the bane of my existence when I go into a 0:27:05.320 --> 0:27:08.000 brick and mortar store, and that is the upsell with 0:27:08.160 --> 0:27:14.080 extended warranties. Extended warranties are profit machines. It is a 0:27:14.080 --> 0:27:17.000 way for a company to make crazy amounts of money 0:27:18.040 --> 0:27:23.080 for relatively little investment. And Walmart was really putting the 0:27:23.200 --> 0:27:26.840 hurt on Circuit City and Best Buy by offering these 0:27:26.880 --> 0:27:29.440 extended warranties at a much lower cost than you would 0:27:29.440 --> 0:27:30.720 find at the other stores. 0:27:31.400 --> 0:27:34.080 And like I said, there were almost pure profit for stores. 0:27:34.119 --> 0:27:40.280 In fact, extended warranties accounted for all of the operating 0:27:40.359 --> 0:27:42.879 profit for Circuit City in two thousand and five, and 0:27:42.920 --> 0:27:46.000 a third of the profit for Best Buy that same year. 0:27:46.400 --> 0:27:49.439 So Walmart's move to undercut warranty prices was a shot 0:27:49.520 --> 0:27:53.199 right across the bow at the electronics superstores, and it 0:27:53.240 --> 0:27:56.480 was an effective one. According to a retailing analyst named 0:27:56.520 --> 0:28:01.399 Todd Kurt, a tiny drop in warranty revenue would result 0:28:01.480 --> 0:28:05.040 in a massive drop in operating profit for Circuit City. 0:28:05.280 --> 0:28:07.199 And when I say massive, I'm talking about if you 0:28:07.320 --> 0:28:13.159 drop one percentage point decrease in extended warranty revenue, it 0:28:13.160 --> 0:28:16.480 would end up having a twenty nine percent decrease in 0:28:16.640 --> 0:28:21.720 operating profit. And Circuit City saw a five percent decrease 0:28:22.680 --> 0:28:24.359 in warranty revenue that year. 0:28:25.000 --> 0:28:26.160 Huge impact. 0:28:27.040 --> 0:28:29.880 And when you see that your business is so heavily 0:28:29.960 --> 0:28:33.600 dependent upon a single point like that, you start getting 0:28:33.640 --> 0:28:37.480 awfully nervous. So Richard Sharp started looking into ways that 0:28:37.520 --> 0:28:39.840 he could possibly turn this around, and he thought that 0:28:40.000 --> 0:28:44.200 maybe diversifying Circuit City's products was a potential answer, and 0:28:44.240 --> 0:28:46.120 he did this in a couple of different ways. He 0:28:46.200 --> 0:28:48.760 did some home security stuff that didn't work out. But 0:28:48.880 --> 0:28:51.880 the real big one that people like to point to 0:28:51.960 --> 0:28:55.120 as being a huge misfire happened in nineteen ninety eight. 0:28:56.040 --> 0:28:59.040 That's when the company would end up carrying a new 0:28:59.120 --> 0:29:04.080 product called Divics DIVX, which is a type of digital 0:29:04.160 --> 0:29:07.680 movie disc, and it was sort of like a disposable DVD, 0:29:08.080 --> 0:29:11.960 although those were two different standards at that time. The 0:29:12.160 --> 0:29:14.840 disc could store encoded digital video, but you had to 0:29:14.920 --> 0:29:18.280 watch the disc within forty eight hours of purchase or 0:29:18.320 --> 0:29:21.360 you lost your chance. So this was kind of a 0:29:21.400 --> 0:29:23.760 move to get into the video rental business. 0:29:24.160 --> 0:29:24.520 Circuit. 0:29:24.560 --> 0:29:27.920 City's kind of moving into blockbuster territory with this, But 0:29:28.200 --> 0:29:30.120 there was no risk of someone running off with a 0:29:30.120 --> 0:29:33.120 copy of a film. You would just produce the Divics disc, 0:29:33.680 --> 0:29:34.320 sell it to a. 0:29:34.280 --> 0:29:37.160 Consumer, and then they would have two days to watch it. 0:29:37.760 --> 0:29:41.160 Divic's players had a phone connection that had to be 0:29:41.280 --> 0:29:43.880 active for the video to play. So anyone who's used 0:29:43.880 --> 0:29:48.280 to computer games that have an online component requirement, even 0:29:48.280 --> 0:29:50.600 if it's just a single player game, you know what 0:29:50.600 --> 0:29:53.840 I'm talking about. This is digital rights management, right. It's 0:29:53.880 --> 0:29:57.240 the attempt to make sure that the use of the 0:29:57.680 --> 0:30:01.720 product falls within certain parameters. In this case, you have 0:30:01.800 --> 0:30:05.040 forty eight hours to watch your movie. A central computer 0:30:05.080 --> 0:30:10.479 system kept track of everything, even unplayed movies, which drives 0:30:10.520 --> 0:30:14.040 me crazy. Is amazing that this ever was considered a 0:30:14.080 --> 0:30:17.680 good idea. Let's say that you wanted to rent a movie. 0:30:17.680 --> 0:30:20.959 So you hit your local circuit city and buy a 0:30:21.120 --> 0:30:24.280 Divic's disc and bye bye. I mean, you're really just 0:30:24.400 --> 0:30:27.040 renting the chance to watch a movie for forty eight hours. 0:30:27.080 --> 0:30:29.960 So let's pick a specific film. I'm gonna pick your 0:30:30.080 --> 0:30:33.000 favorite film, which we all know is Big Trouble in 0:30:33.040 --> 0:30:36.680 Little China, classic movie starring Kurt Russell, directed by John Carpenter. 0:30:37.200 --> 0:30:39.880 You have great taste, fantastic favorite film. 0:30:39.920 --> 0:30:40.760 Good on you. 0:30:40.760 --> 0:30:43.000 You pay a few bucks, maybe four or five dollars, 0:30:43.440 --> 0:30:45.960 and because this is a rental, you don't have to 0:30:46.000 --> 0:30:46.680 pay more than that. 0:30:46.840 --> 0:30:49.600 You know you're not buying the movie. You take the 0:30:49.600 --> 0:30:54.280 disc home, but you're a busy person. It turns out you. 0:30:54.200 --> 0:30:57.520 Don't have time to enjoy that film within those first 0:30:57.560 --> 0:31:01.160 forty eight hours. Well, that's central computing system knows this. 0:31:01.400 --> 0:31:06.160 It's tracking it because your Divic's system hasn't called in 0:31:06.240 --> 0:31:09.680 to say, hey, this guy's watching Big Trouble and Little China, 0:31:09.840 --> 0:31:13.000 or this lady is watching Big Trouble and Little China, 0:31:13.320 --> 0:31:16.040 or this family isn't watching Big Trouble and Little China. 0:31:16.040 --> 0:31:19.120 And forty eight hours have passed, and since you didn't 0:31:19.120 --> 0:31:21.440 have the decency to watch it when you were supposed 0:31:21.480 --> 0:31:22.520 to your. 0:31:22.360 --> 0:31:26.360 Build another three dollars. Isn't that crazy? 0:31:26.440 --> 0:31:30.960 You were charged for not watching the movie you rented. 0:31:31.960 --> 0:31:35.080 You go, you rent a movie, you're not supposed to 0:31:35.080 --> 0:31:37.640 return the disc. You throw it away after you. 0:31:37.640 --> 0:31:41.240 Use it forty eight hours passes, you get dinged for 0:31:41.440 --> 0:31:43.880 not watching the movie. It's like a late fee for 0:31:43.920 --> 0:31:48.320 a movie you don't have to return. Yeah, can't imagine 0:31:48.360 --> 0:31:52.680 why that standard lost out to DVD, So I'm sure 0:31:52.720 --> 0:31:55.640 you're familiar with the DVD format. I'll probably do a 0:31:55.800 --> 0:31:59.560 full episode more about DVDs and encoding and also if 0:31:59.560 --> 0:32:01.840 you say the where DVD fast enough? You sound like 0:32:01.840 --> 0:32:05.600 you're Twiggy from Buck Rogers. But it was early days 0:32:06.080 --> 0:32:08.720 for both of those standards back in nineteen ninety eight, 0:32:08.840 --> 0:32:12.400 and Circuit City had gone all in on the devics bet, 0:32:12.760 --> 0:32:16.680 but other retailers weren't so excited about that technology, which 0:32:16.720 --> 0:32:20.040 meant that Circuit City had to work extra hard to 0:32:20.480 --> 0:32:24.280 educate customers and convince them that the Divic's format was 0:32:24.320 --> 0:32:26.200 the way to go, and that was a tough job. 0:32:26.760 --> 0:32:27.920 They tried to convince. 0:32:27.640 --> 0:32:31.360 Studios to create exclusives, stuff that would only come out 0:32:31.400 --> 0:32:35.560 on Divics and not on DVD, but with very little success, 0:32:36.240 --> 0:32:40.440 and in nineteen ninety nine Sharp knew that this was 0:32:40.480 --> 0:32:42.520 a bad idea and he pulled the plug on the 0:32:42.560 --> 0:32:46.000 whole project. Now, the price tag for that mistake was 0:32:46.080 --> 0:32:49.800 about two hundred and thirty three million dollars for the 0:32:49.840 --> 0:32:52.760 development and promotion of Divics. 0:32:53.800 --> 0:32:55.400 Not good news. 0:32:56.320 --> 0:33:01.360 In two thousand, Sharp transitioned from president and CEO to chairman. Now, 0:33:01.400 --> 0:33:04.280 like I said earlier, Sharp's tenure included high highs and 0:33:04.400 --> 0:33:07.760 low lows for Circuit City, and some things like the 0:33:07.840 --> 0:33:10.440 Rabbit expansion in the late eighties and early nineties had 0:33:10.520 --> 0:33:14.080 really paid off, but others like the Divik's debacle and 0:33:14.160 --> 0:33:18.360 a similar misstep with the home security sales and installation 0:33:18.560 --> 0:33:23.160 were big misses. At that point, Alan McCullough, who had 0:33:23.200 --> 0:33:26.520 previously been the president and COO of Circuit City, became 0:33:26.560 --> 0:33:30.520 the new president and CEO. Two years later, McCulla would 0:33:30.520 --> 0:33:33.840 take over the title of chairman from Sharp, and from 0:33:33.880 --> 0:33:35.560 two thousand and two to two thousand and five he 0:33:35.600 --> 0:33:38.000 would be the head guy in charge. I got a 0:33:38.000 --> 0:33:40.480 lot more to say about that, but let's take another 0:33:40.560 --> 0:33:51.240 quick break to thank our sponsor. All Right, we're heading 0:33:51.280 --> 0:33:54.560 forward the slide into bankruptcy here. But first let's talk 0:33:54.560 --> 0:33:57.320 a bit about McCullough. He had worked with Circuit City 0:33:57.440 --> 0:34:00.600 since nineteen eighty seven, so he had been there for 0:34:00.680 --> 0:34:04.360 a while. He was invested in the company, at least 0:34:04.800 --> 0:34:09.160 professionally invested, if not financially invested, and his tenure began 0:34:09.840 --> 0:34:13.360 with a big change in Circuit City strategy. His tenure 0:34:13.440 --> 0:34:18.600 as the president, that is, president CEO, the company said 0:34:18.640 --> 0:34:22.480 it would no longer sell appliances. It would focus only 0:34:22.520 --> 0:34:25.399 on consumer electronics and get out of the appliance game. 0:34:26.239 --> 0:34:29.200 The appliance market, like consumer electronics, had become much more 0:34:29.280 --> 0:34:32.680 competitive over the past few years. It was largely due 0:34:32.760 --> 0:34:37.320 to big stores like Home Depot and Lows offering major appliances. 0:34:38.280 --> 0:34:40.400 Getting out of the business was thought of as a 0:34:40.400 --> 0:34:44.000 way to cut costs and to focus on consumer electronics 0:34:44.000 --> 0:34:48.080 more exclusively so that it could be more effective. Appliances 0:34:48.120 --> 0:34:50.160 also take up a lot of space when you're trying 0:34:50.160 --> 0:34:52.800 to sell them, so by getting out of that business, 0:34:52.840 --> 0:34:55.920 the company wouldn't need to maintain as much warehouse space, 0:34:56.040 --> 0:34:58.640 and it would also cut down on delivery costs. 0:34:59.120 --> 0:35:00.520 So the whole idea was. 0:35:00.680 --> 0:35:02.840 We can save a lot of money this way, but 0:35:02.920 --> 0:35:06.120 getting out of the appliance game also meant that suddenly 0:35:06.160 --> 0:35:09.120 some jobs weren't needed, like a whole lot of them, 0:35:09.160 --> 0:35:13.880 like a thousand jobs. Circuit City closed six distribution centers 0:35:13.920 --> 0:35:16.759 as well, and the decision was made so quickly that 0:35:16.800 --> 0:35:20.600 it ended up causing huge problems for Circuit City because 0:35:21.360 --> 0:35:24.600 the vendors that Circuit City worked with, the companies that 0:35:24.760 --> 0:35:27.800 made the products that Circuit City sold in their stores, 0:35:28.360 --> 0:35:32.000 weren't informed of the decision in advance, so it damaged 0:35:32.040 --> 0:35:35.160 a lot of business relationships. And it also meant that 0:35:35.200 --> 0:35:37.880 anyone in the market for appliances wasn't going to go 0:35:37.920 --> 0:35:41.040 to Circuit City, so that resulted in less customer traffic 0:35:41.239 --> 0:35:44.480 in stores and that ended up hurting. And while the 0:35:45.440 --> 0:35:49.440 business was operating at a loss for the appliance's section, 0:35:50.400 --> 0:35:53.880 the sales still went to help cover fixed costs, and 0:35:53.920 --> 0:35:56.359 now you didn't have those anymore, so that money had 0:35:56.400 --> 0:35:59.680 to be taken from other places. McCullough would also officially 0:35:59.680 --> 0:36:04.200 spin off Carmacs into its own company. Carmacks at that 0:36:04.239 --> 0:36:07.000 point was facing competition in the used car market space, 0:36:07.440 --> 0:36:10.280 and it had been a drain on Circuit City's financials. 0:36:10.280 --> 0:36:13.880 It had a rough several rough early times for carmas 0:36:15.160 --> 0:36:18.239 Circuit City tried to remodel stores in an effort to 0:36:18.280 --> 0:36:21.520 make the more attractive to customers. The company had long 0:36:21.600 --> 0:36:24.560 been focused on the practice of scooping up that cheap 0:36:24.560 --> 0:36:29.680 property for its superstores, but again it meant that most 0:36:29.719 --> 0:36:32.839 of those stores weren't convenient to customers, and Best Buy, 0:36:33.080 --> 0:36:34.960 like I had mentioned, had gone a totally different way, 0:36:35.040 --> 0:36:38.120 spending that upfront cost to get those premium locations. Now, 0:36:38.320 --> 0:36:42.840 Circuit City couldn't just relocate stores, so their next choice 0:36:42.920 --> 0:36:47.320 was to remodel and redesign store spaces to entice customers inside. 0:36:48.000 --> 0:36:50.319 So the idea would be that now customers could come 0:36:50.360 --> 0:36:52.919 in and purchase a lot of the products just by 0:36:53.000 --> 0:36:54.920 picking up a box and taking it to check out. 0:36:54.960 --> 0:36:58.520 They wouldn't have to talk to a salesperson. But they 0:36:58.520 --> 0:37:01.840 were still running the sales on commission at this point, 0:37:01.880 --> 0:37:04.240 so a lot of products didn't fall into that category. 0:37:04.239 --> 0:37:06.000 If you wanted one, you still had to talk to 0:37:06.040 --> 0:37:08.400 a salesperson. They still had to send someone to the 0:37:08.440 --> 0:37:10.120 back to get the product to come out to you. 0:37:10.480 --> 0:37:12.759 Only a few of the products were kind of a 0:37:12.800 --> 0:37:16.360 help yourself approach. So it was sort of a half measure, 0:37:17.760 --> 0:37:20.000 and you might imagine that it wasn't terribly. 0:37:19.680 --> 0:37:22.600 Effective, and you'd be right. Now. 0:37:22.680 --> 0:37:27.200 The remodeling strategy was scaled back from their original plans 0:37:27.360 --> 0:37:29.879 almost from the beginning. In two thousand and one. They 0:37:30.080 --> 0:37:34.280 initially said we're going to remodel one hundred and forty stores, 0:37:34.800 --> 0:37:38.840 but they only really remodeled about twenty or so, and 0:37:38.880 --> 0:37:41.040 the reason for that was to save money on the 0:37:41.080 --> 0:37:44.440 costs that remodeling would incur. It was about a million 0:37:44.560 --> 0:37:47.000 dollars per store to remodel them. 0:37:47.440 --> 0:37:49.680 So they thought, well, well, we'll spread. 0:37:49.320 --> 0:37:53.239 Out the costs of remodeling by doing blocks of stores 0:37:53.719 --> 0:37:57.080 each year. But the problem was doing this meant that 0:37:57.160 --> 0:38:00.480 the stores were falling further behind their competitive it was 0:38:00.480 --> 0:38:03.800 putting them in a more dangerous position. In two thousand 0:38:03.800 --> 0:38:07.200 and three, responding to changes in the market that had 0:38:07.200 --> 0:38:13.800 happened years earlier, Circuit City finally ended its commissioned sales program. Instead, 0:38:13.840 --> 0:38:16.799 all employees would get a fixed hourly pay rate based 0:38:16.840 --> 0:38:19.480 upon their pay grade. It also meant cutting nearly four 0:38:19.600 --> 0:38:25.160 thousand jobs all in sales. Four thousand people having their 0:38:25.239 --> 0:38:30.879 jobs cut because this decision no longer did Circuit City 0:38:30.960 --> 0:38:34.200 need salespeople who specialized in convincing customers to buy the 0:38:34.280 --> 0:38:37.360 highest step up on a product they could manage. Instead, 0:38:37.840 --> 0:38:41.560 hourly wage employees would provide general assistance, similar to the 0:38:41.600 --> 0:38:43.839 way business was done in shops like Best Buy. 0:38:44.680 --> 0:38:44.919 Now. 0:38:45.040 --> 0:38:47.759 If Circuit City had made this change back in the nineties, 0:38:47.800 --> 0:38:50.360 it might have worked, though it still would have obviously 0:38:50.440 --> 0:38:53.560 been painful for the people who were in sales, But 0:38:53.600 --> 0:38:56.920 by this point, when the company was already in dire straits, 0:38:56.920 --> 0:38:59.719 when it was struggling, it meant seeing a decrease in 0:38:59.760 --> 0:39:03.560 those higher margin sales and further negative impact on revenue, 0:39:04.200 --> 0:39:06.480 which wasn't something they could easily bounce back from at 0:39:06.480 --> 0:39:09.400 this point. In June two thousand and three, the Circuit 0:39:09.440 --> 0:39:11.640 City Board of directors had a big decision to make. 0:39:11.880 --> 0:39:14.240 Another company was coming to the table with an offer, 0:39:14.280 --> 0:39:17.960 and that other company was comp Usa Incorporated. The offer 0:39:18.040 --> 0:39:21.719 was a one point five billion dollar acquisition deal, but 0:39:21.840 --> 0:39:24.480 the board of directors decided not to pursue the offer 0:39:24.520 --> 0:39:27.680 and rejected it. By two thousand and four, things were 0:39:27.719 --> 0:39:32.080 looking pretty grim. In a single day, Circuit City announced 0:39:32.120 --> 0:39:35.800 three thousand, four hundred job cuts and not just any jobs. 0:39:36.120 --> 0:39:40.920 They cut sales associates, people who had the most knowledge 0:39:40.920 --> 0:39:43.680 and experience and tenure with the company. They were also, 0:39:44.440 --> 0:39:49.160 no coincidence, the highest compensated in that department in. 0:39:49.080 --> 0:39:50.520 These sales associate roles. 0:39:51.320 --> 0:39:56.120 Now their replacements lacked that knowledge and experience that they 0:39:56.160 --> 0:39:57.360 needed in order. 0:39:57.280 --> 0:39:59.240 To succeed in their new roles. 0:39:59.640 --> 0:40:03.640 The Urtzels would have found this entire move unacceptable. You 0:40:03.719 --> 0:40:05.920 might remember in my last episode I talked about how 0:40:06.000 --> 0:40:10.600 Samuel Wurtzel had always stressed the importance of training and 0:40:10.640 --> 0:40:15.160 setting employees up for success. Now this move put unqualified 0:40:15.160 --> 0:40:19.359 people into positions without proper preparation, through no fault of 0:40:19.440 --> 0:40:22.319 their own, and it was a huge mistake. At the 0:40:22.320 --> 0:40:26.920 same time, Circuit City executives were awarding themselves big retention 0:40:27.120 --> 0:40:31.080 bonuses in order to keep various executives from jumping ship. 0:40:31.400 --> 0:40:34.919 So this had a devastating effect on employee morale. You've 0:40:34.960 --> 0:40:40.160 got the most knowledgeable employees booted, you've got people unqualified 0:40:40.200 --> 0:40:42.920 put into new positions, and you've got the executives at 0:40:42.960 --> 0:40:48.560 the top rewarding themselves seemingly in spite of all the employees. 0:40:49.600 --> 0:40:54.440 So this was sending a really bad message not just 0:40:54.560 --> 0:40:58.600 to employees, but also to vendors and also customers, and 0:40:58.640 --> 0:41:01.560 losing those experienced employees and demoralizing the rest of the 0:41:01.560 --> 0:41:05.680 workforce trickled down into that customer experience. It became increasingly 0:41:05.880 --> 0:41:10.280 unpleasant to shop at Circuit City. Stores were poorly organized 0:41:10.320 --> 0:41:15.440 in staff, and customer dissatisfaction was through the roof. Now, 0:41:15.480 --> 0:41:18.120 in two thousand and five, a man named Philip J. 0:41:18.560 --> 0:41:22.279 Schoonover became the president of the company. He would then 0:41:22.360 --> 0:41:25.399 later become the chairman and CEO in two thousand and six, 0:41:25.440 --> 0:41:28.120 and he would stay in that role until forced to 0:41:28.560 --> 0:41:32.239 leave in two thousand and eight. That probably tells you 0:41:32.320 --> 0:41:33.040 that things. 0:41:32.800 --> 0:41:35.040 Did not go well. 0:41:35.239 --> 0:41:38.560 Now, if Sharp had made decisions that put the company 0:41:38.600 --> 0:41:42.080 in danger and McCullough had exacerbated matters, you could say 0:41:42.080 --> 0:41:45.799 Schoonover is the person everyone associates with the death of 0:41:45.960 --> 0:41:50.239 Circuit City. It may not entirely be Schoonover's fault. He 0:41:50.320 --> 0:41:53.440 was in a terribly difficult position when he came on board. 0:41:54.200 --> 0:41:59.480 But Alan Wurtzel said Schoonover completely ignored company values, the 0:41:59.480 --> 0:42:03.520 ones that Samuel Wurtzel, Allen's father had instilled in the company. 0:42:04.160 --> 0:42:05.640 Namely, he said. 0:42:05.520 --> 0:42:10.480 That schoonover stopped caring about fair deals and honesty when 0:42:10.520 --> 0:42:13.920 dealing with employees and vendors alike, which is pretty brutal. 0:42:14.760 --> 0:42:15.440 In two thousand and. 0:42:15.480 --> 0:42:19.040 Six, Circuit City decided to copy Best Buy, which is 0:42:19.120 --> 0:42:22.120 kind of interesting considering how many times Best Buy was 0:42:22.239 --> 0:42:26.399 essentially copying Circuit City but doing it better. Best Buy 0:42:26.560 --> 0:42:30.520 had launched an electronics service called geek Squad back in 0:42:30.560 --> 0:42:34.600 two thousand and two. Now, geek Squad provides specialized customer 0:42:34.680 --> 0:42:38.680 service for things like equipment installation, adjustment repairs, that kind 0:42:38.719 --> 0:42:41.879 of thing for a fee, and those fees add up 0:42:42.000 --> 0:42:44.840 kind of like those extended warranties had been a huge 0:42:44.880 --> 0:42:48.839 source of revenue for Best Buy and Circuit City alike. Well, 0:42:48.880 --> 0:42:51.719 this was four years later, but Circuit City says, all right, 0:42:51.920 --> 0:42:54.200 two thousand and six, we're going to launch our own service, 0:42:54.760 --> 0:42:57.840 which is going to be a specialized electronics service, and 0:42:57.880 --> 0:42:59.600 we're calling it fire Dog. 0:43:00.880 --> 0:43:03.440 Fire Doog, however, required a big investment. 0:43:03.480 --> 0:43:06.680 The company spent millions of dollars in the hiring, training, 0:43:06.719 --> 0:43:10.520 and resource allocation for fire Doog teams, and it wasn't 0:43:10.520 --> 0:43:14.040 a very well coordinated effort. Some stores were lagging way 0:43:14.080 --> 0:43:16.680 behind other stores, and there was a lot of confusion 0:43:16.760 --> 0:43:20.400 and not clear messaging, and that ended up adding to 0:43:20.440 --> 0:43:23.839 the expense. Customers were confused by the service, which wasn't 0:43:23.880 --> 0:43:27.360 promoted very well, and many rejected it. So while geek 0:43:27.440 --> 0:43:31.480 Squad succeeded over at Best Buy, fire Doog floundered at 0:43:31.520 --> 0:43:35.000 Circuit City. Also in two thousand and six, the company 0:43:35.040 --> 0:43:37.759 made a real bold move on Black Friday, the day 0:43:37.800 --> 0:43:41.600 after Thanksgiving here in the United States, Circuit City offered 0:43:41.680 --> 0:43:45.480 an amazing deal at the time. It offered a forty 0:43:45.560 --> 0:43:50.000 two inch panasonic plasma television for less than one thousand dollars, 0:43:50.040 --> 0:43:52.960 which was way below the normal price you would find 0:43:53.000 --> 0:43:56.280 at most places at that time, but it actually created 0:43:56.320 --> 0:43:59.400 a domino effect that caused damage. Circuit City began to 0:43:59.480 --> 0:44:03.280 slash to such levels that the profit margins were almost 0:44:03.280 --> 0:44:07.800 completely eliminated, meaning the company was selling products very close 0:44:07.840 --> 0:44:10.000 to what it cost the company to get them in 0:44:10.000 --> 0:44:13.280 the first place, all in an effort to regain customers. 0:44:13.600 --> 0:44:15.799 And it's a game you cannot play forever because those 0:44:15.840 --> 0:44:19.040 profits are never going to be enough, especially for a 0:44:19.040 --> 0:44:22.960 publicly traded company. Two thousand and eight would see the 0:44:23.239 --> 0:44:26.280 end of Schoonover's tenure. Like I said, he was forced 0:44:26.320 --> 0:44:29.080 out of his role and an investor named Mark Waddles 0:44:29.120 --> 0:44:32.400 took over the job, which by then was not great. 0:44:33.000 --> 0:44:35.799 Sales for Circuit City were down by eleven percent and 0:44:35.840 --> 0:44:38.000 the company had suffered more than one hundred and fifty 0:44:38.080 --> 0:44:42.359 million dollars in losses. Things were ugly. In April two 0:44:42.400 --> 0:44:45.920 thousand and eight, another suitor came calling Circuit City, and 0:44:45.960 --> 0:44:49.240 this time it was Blockbuster, which is yet another company 0:44:49.280 --> 0:44:51.600 I could do an episode on and talk about how 0:44:52.120 --> 0:44:54.880 it failed to be nimble, sort of like Circuit City 0:44:55.080 --> 0:44:59.560 and ultimately a doomed Blockbuster. But this is Circuit City story. 0:45:00.040 --> 0:45:02.640 So Blockbuster comes up to Circuit City and says, hey, 0:45:03.360 --> 0:45:04.760 buy it for a billion dollars. 0:45:05.120 --> 0:45:08.280 So this is half a billion dollars less than. 0:45:08.200 --> 0:45:10.919 The previous offer had been just a few years ago 0:45:11.239 --> 0:45:16.399 from CompUSA. But by July one, two thousand and eight, 0:45:17.000 --> 0:45:20.640 Blockbuster had second thoughts. They had actually looked into the 0:45:20.640 --> 0:45:24.200 potential deal further and concluded that acquiring Circuit City would 0:45:24.239 --> 0:45:25.960 be a bad business decision. 0:45:26.320 --> 0:45:26.720 Yikes. 0:45:27.760 --> 0:45:31.200 So Circuit City stocks plummeted as a result. If someone 0:45:31.239 --> 0:45:32.880 comes up and says, hey, do you want to go 0:45:32.920 --> 0:45:34.680 to the problem the you know what, never mind, I 0:45:34.719 --> 0:45:36.799 can do better. It's probably not going to help your 0:45:36.800 --> 0:45:40.840 self esteem. The same is true with investor confidence in 0:45:40.880 --> 0:45:44.920 Circuit City after this event. And yeah, that story comes 0:45:44.960 --> 0:45:48.480 from Jonathan's past, I'll thank you not to pursue it further. 0:45:49.080 --> 0:45:50.000 By November two. 0:45:49.840 --> 0:45:53.279 Thousand and eight, the company was baling waters. Circuit City 0:45:53.320 --> 0:45:56.480 announced it would close one hundred and fifty five stores 0:45:56.520 --> 0:46:00.000 and layoff more than fifteen percent of its workforce by 0:46:00.160 --> 0:46:02.480 end of the year, and just a little bit later, 0:46:02.560 --> 0:46:05.840 seven hundred corporate employees, the people who worked at Circuit 0:46:05.880 --> 0:46:08.200 City's corporate headquarters were let go. 0:46:09.400 --> 0:46:10.120 All the other. 0:46:09.960 --> 0:46:12.840 Corporate employees were moved into the same building to cut 0:46:12.880 --> 0:46:15.280 costs so they didn't have to have as much office space, 0:46:15.920 --> 0:46:19.759 and on November tenth, the company filed for bankruptcy for 0:46:19.880 --> 0:46:23.000 Chapter eleven and started searching for a White Night to 0:46:23.040 --> 0:46:25.719 rescue them. The whole idea was that, you know, by 0:46:25.840 --> 0:46:28.600 filing for bankruptcy, you get a little breathing room. The 0:46:29.040 --> 0:46:32.319 goal is to try and get out of bankruptcy and 0:46:32.360 --> 0:46:35.120 go back to business. But at this point it was 0:46:35.120 --> 0:46:37.560 too late. No one was willing to jump forward and 0:46:37.600 --> 0:46:40.080 try to write a sinking ship, not for a company 0:46:40.080 --> 0:46:43.319 that lost five billion dollars in stock market value in 0:46:43.400 --> 0:46:46.000 just twenty four months. There were still hopes that a 0:46:46.040 --> 0:46:48.680 company could re emerge from this bankruptcy. 0:46:48.760 --> 0:46:49.719 It just wasn't meant to be. 0:46:49.840 --> 0:46:52.640 There was a brief moment of hope when it appeared 0:46:52.640 --> 0:46:55.640 that a retail businessman from Mexico might swoop in at 0:46:55.640 --> 0:46:59.319 the last second, but after purchasing a little less than 0:46:59.360 --> 0:47:02.600 thirty percent of the company, that just stopped. A lot 0:47:02.600 --> 0:47:04.840 of questions were raised about why someone would come in 0:47:04.880 --> 0:47:07.040 and buy up a third of a company that was 0:47:07.120 --> 0:47:11.520 doomed to failure and not try to do more. So 0:47:11.719 --> 0:47:14.080 the company at this time was still trying to do 0:47:14.160 --> 0:47:17.680 business like. Stores were still open and still trying to 0:47:17.719 --> 0:47:21.799 sell merchandise, but those bankruptcy proceedings had really hurt them 0:47:21.840 --> 0:47:26.120 beyond just that backstage stuff. I mean, customer confidence had 0:47:26.160 --> 0:47:29.120 withered away, and the company lacked the resources to try 0:47:29.120 --> 0:47:32.480 anything new to bring customers back in. So in January 0:47:32.520 --> 0:47:35.239 two thousand and nine, they couldn't keep things going any 0:47:35.280 --> 0:47:39.280 longer and the company was forced to liquidate all its assets, 0:47:39.320 --> 0:47:42.320 and over the next few months, the company would close stores, 0:47:42.440 --> 0:47:46.440 layoff workers, liquidate things until the final store closed on 0:47:46.560 --> 0:47:50.600 March eighth, two thousand and nine. But that's not quite 0:47:50.600 --> 0:47:54.160 the end of the story. On April sixteenth, two thousand 0:47:54.160 --> 0:47:57.600 and nine, a company called system As Incorporated, purchased the 0:47:57.680 --> 0:48:02.200 intellectual property of Circuit City, which include the company's name 0:48:02.320 --> 0:48:06.680 and their customer database. So for several years, Circuit City 0:48:06.760 --> 0:48:10.560 existed but essentially existed in name only, and system Acts 0:48:10.680 --> 0:48:13.960 used it here and there until twenty twelve, when they 0:48:13.960 --> 0:48:16.759 figured this name doesn't really have any value anymore and 0:48:16.840 --> 0:48:20.520 they just stopped using it. But you might think this 0:48:20.640 --> 0:48:23.919 is when the company died off, and you'd still be wrong, 0:48:23.960 --> 0:48:29.120 because it's zombie time. It's like closing time, only with 0:48:29.200 --> 0:48:35.120 more brain devouring now. One thing Circuit City had continued 0:48:35.320 --> 0:48:38.279 to do in this time, despite no longer being a 0:48:38.360 --> 0:48:43.040 viable entity, was make charitable donations, which is weird, right, 0:48:43.080 --> 0:48:46.080 You might wonder, how can a company that doesn't exist 0:48:46.280 --> 0:48:49.799 fund charities? Well, it's because the company had established a 0:48:49.920 --> 0:48:54.160 fund and deposited money into the fund specifically for the 0:48:54.160 --> 0:48:58.360 purpose of making regular charitable donations, and there's still money 0:48:58.400 --> 0:49:02.680 in it, so the fund still pays out year over year. 0:49:03.440 --> 0:49:05.120 Last time I checked there's a little bit more than 0:49:05.120 --> 0:49:07.960 a million dollars in that fund, so it won't go forever. 0:49:08.080 --> 0:49:12.200 It will eventually drain, but for the time being there's 0:49:12.200 --> 0:49:17.560 still money from Circuit City funding charities. And now there 0:49:17.600 --> 0:49:21.560 are new owners of the Circuit City intellectual property. So 0:49:21.600 --> 0:49:25.600 from twenty twelve to twenty sixteen, that name remained unused, 0:49:25.960 --> 0:49:28.040 but then a new group came in and purchased the 0:49:28.080 --> 0:49:31.600 IP from Systemax. The new CEO is a guy named 0:49:31.719 --> 0:49:35.000 Ronnie schmol who said that plans are in place to 0:49:35.080 --> 0:49:39.000 open kiosks and stores. Originally they had aimed at kind 0:49:39.040 --> 0:49:42.040 of the summer of twenty sixteen, but that didn't actually happen, 0:49:42.480 --> 0:49:44.600 and according to the new owners, the reason for that 0:49:44.800 --> 0:49:46.920 is they want to make sure that they do it correctly. 0:49:47.800 --> 0:49:49.759 So we're still waiting as of the recording of this 0:49:49.840 --> 0:49:53.920 podcast to see that happen. But if the owners are successful, 0:49:53.960 --> 0:49:57.200 we may see a return of the Circuit City brand 0:49:57.520 --> 0:49:58.759 under new ownership. 0:49:59.080 --> 0:49:59.880 It'll be a new. 0:50:01.280 --> 0:50:05.200 Kind of not that different from the way Atari came back. 0:50:06.280 --> 0:50:09.080 But we have a very different marketplace today than we 0:50:09.120 --> 0:50:12.080 did even back in two thousand and nine. Online purchases 0:50:12.120 --> 0:50:14.440 are on the rise. Brick and mortar stores are having 0:50:14.480 --> 0:50:18.759 trouble getting consumers to actually visit physical stores, so it 0:50:18.800 --> 0:50:21.680 may end up that Circuit City will become an online 0:50:21.719 --> 0:50:25.960 only enterprise, although that's not necessarily the plan if it 0:50:26.000 --> 0:50:28.880 works at all, But like I said, the plan is 0:50:28.920 --> 0:50:32.240 to open real, actual stores. So perhaps in the future 0:50:32.320 --> 0:50:34.960 I'll need to record a part three to this story. 0:50:36.080 --> 0:50:40.640 And that concludes our two part series about Circuit City, 0:50:40.960 --> 0:50:44.879 a store that you know, was kind of a trailblazer 0:50:45.040 --> 0:50:48.920 in some ways and then blazed right out and in 0:50:48.960 --> 0:50:51.680 pretty much every way that counts. I hope you all 0:50:51.800 --> 0:50:57.960 enjoyed this two part retrospective look at Circuit City, and yeah, 0:50:58.040 --> 0:51:00.400 I look forward to doing a lot more episodes about 0:51:00.440 --> 0:51:03.520 stores like this. I really need to do a deep 0:51:03.560 --> 0:51:06.960 dive on radio Shack, because I think I actually did 0:51:06.960 --> 0:51:09.120 do episodes about radio Shack once upon a time. But 0:51:09.160 --> 0:51:12.120 I really need to do another one because that story 0:51:12.440 --> 0:51:16.640 gets bonkers. But we'll have to leave that for another time. 0:51:17.120 --> 0:51:19.759 In the meantime, I hope you're all well, and I'll 0:51:19.760 --> 0:51:28.680 talk to you again really soon. Tech Stuff is an 0:51:28.760 --> 0:51:33.920 iHeartRadio production. For more podcasts from iHeartRadio, visit the iHeartRadio 0:51:34.000 --> 0:51:41.040 app Apple podcasts, or wherever you listen to your favorite shows.