Friday, April 06, 2007

Circuit City

Where do you shop? Do you ever think about the stores you choose? Do you simply shop for the best price?

Most of us have some establishments where we just will not do business. Whether we have had a bad experience in the place, or they treated someone we know poorly, or we disagree with their politics, there is at least one store where we won't shop.

For me, it's Wal-Mart. Just can't do it. They've destroyed American ideals and replaced them with corporate ideals. Ideals of success and hard work have been replaced by Wal-Mart with ideals of cost-cutting and profiteering, using no moral compass.

Most American companies have followed the Wal-Mart paradigm. From retailers and restaurants to banks and law firms, the plan is to undermine the security of the workers at the bottom to maximize the security of the executives and shareholders at the top.

In companies all across America, even companies already hugely profitable, benefits are slashed and long-time employees are terminated to make way for lesser-paid new employees.

The short-term benefits to those at the top are immediate -- profits soar. The long-term impact, however, is that you no longer have a knowledgeable workforce and your organic knowledge base disappears. Nobody on the bottom remembers how the place became successful.

Circuit City, the chain of electronics retailers, has been well-known for its service, which was far superior to its competitors like Wal-Mart and Best Buy. I preferred Circuit City over Best Buy (and I never shop at Wal-Mart), because the people who worked there were knowledgeable and familiar.

Well, Circuit City has decided that more profits are more important than more loyalty and have laid off all their long-term employees. They determined that these people were earning too much, so they fired them all and are replacing them with lower-paid newcomers. New staff who know nothing about the products they sell and less about what made Circuit City a better store.

This makes Circuit City just like Wal-Mart.

So, I will not be shopping there anymore!

Here's an article from the Seattle Post-Intelligencer, followed by some additional links:
Circuit City laying off 3,400 store workers
Seattle Post-Intelligencer
Thursday, March 29, 2007


NEW YORK -- A new plan for layoffs at Circuit City is openly targeting better-paid workers, risking a public backlash by implying that its wages are as subject to discounts as its flat-screen TVs.

The electronics retailer, facing larger competitors and falling sales, said Wednesday that it would lay off about 3,400 store workers immediately and replace them with lower-paid new hires as soon as possible.

The laid-off workers, about 8 percent of the company's total work force, would get a severance package and a chance to reapply for their former jobs, at lower pay, after a 10-week delay, the company said.

Analysts and economists said the move is an uncertain experiment that could backfire for the chain. The risks: Morale could sink and customers could avoid the stores. Also, knowledgeable customer service is one of the few ways Circuit City can tackle competitors that include Wal-Mart Stores Inc., they say.

"This strategy strikes me as being quite cold," said Bernard Baumohl, executive director of The Economic Outlook Group. "I don't think it's in the best interest of Circuit City as a whole."

While other companies, such as Caterpillar Inc., have introduced two-tiered wage systems, where newer workers make less, firing workers and offering to rehire them at a lower wage is very rare.

"I don't think you're going to find too many examples," of this, said Ken Goldstein, labor economist for the Conference Board, a business research group. "That certainly has not been a trend we've seen."

Circuit City, the nation's No. 2 consumer electronics retailer behind Best Buy Co. Inc., says the workers being laid off were earning "well above the market-based salary range for their role." They will be replaced with employees who will be paid at the current market range, the company said in a news release.

"We haven't done something called (a) wage management initiative before," company spokesman Jim Babb said. "All companies at one time or another need to go through and make sure their cost structure works with market conditions."

Customers at the store questioned the move.

"I don't think it's fair," said Hamilton Smith, an 88-year-old retired federal worker who had just bought some batteries at Circuit City. "You need to give people a living, working wage."

He said he would think twice before shopping at the company's stores again.

Circuit City's cuts come at a time when other retailers are trying to put more knowledgeable workers on store floors. Home Depot Inc., whose new chief executive is struggling to reignite sales growth at its stores, said it has raised pay to attract skilled tradespeople, such as carpenters and electricians.

The Home Depot is adding 15,000 jobs this year, spokesman Jerry Shields said.

Circuit City's move, by contrast, "shows they're positioning for another tough year," said Timothy Allen, a Jefferies & Company Inc. retail analyst. Not only will service levels at the store suffer, he said, but "you've lost 3,400 customers/employees."

© 1998-2007 Seattle Post-Intelligencer

Peter Cohan, who blogs about "money & finance" at AOL, posted these two articles:

Circuit City layoffs set a scary precedent for workers

Layoffs expose Circuit City's crossed wires

Thanks to Pat for sending this along.

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1 comment:

Marybeth aka Beff said...

Hi dickmac! I saw your article reprint in your myspace blog about Ayaan Hirsi Ali. Just finished her book, Infidel, and would LOVE to talk to you about it. I'm not a member of myspace so I couldn't comment there. Please send me an email at

Thanks! Beff aka Marybeth aka the Nun Chick