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Circuit City's 37" flat-panel display average pricing -- Image courtesy of Current Analysis
Despite brisk sales in the fourth quarter, low prices and lower margins on flat-panel TVs are forcing Circuit City to trim its store count

Circuit City is closing stores in North America and reshuffling its corporate ranks to compensate for disappointing margins on its flat panel TV business.

Along with closures of more than 60 stores in Canada and a handful of underachieving stores in U.S. cities, the electronics retailer has streamlined its reporting structure. Executive VP and chief merchandising officer Doug Moore has left the company, while David Matthews, former president of Circuit City’s multichannel direct sales operations, has been promoted to an unnamed position.

Circuit City is closing stores in North America and reshuffling its corporate ranks to compensate for disappointing margins on its flat panel TV business.

Along with closures of more than 60 stores in Canada and a handful of underachieving stores in U.S. cities, the electronics retailer has streamlined its reporting structure. Executive VP and chief merchandising officer Doug Moore has left the company, while David Matthews, former president of Circuit City’s multichannel direct sales operations, has been promoted to an unnamed position where he will oversee the company’s merchandising, marketing, services and supply chain teams.  Former president of retail sales George Clark will take over as executive VP of multichannel sales, in charge of all domestic and international retail stores and Circuit City Direct.

The store closures will primarily affect operations north of the U.S.-Canada border. The company will shutter 62 Canadian stores operated as The Source by Circuit City, as well as a support center in Barrie, Ontario. South of the border, seven underperforming Circuit City stores in cities such as Muncie, Ind., will close, along with a distribution center in Louisville, Ky. The retailer will also cease operations of Rapid Satellite, and online reseller of DirecTV service that Circuit City bought in 2005 and has subsequently tried to sell.

Circuit City CEO Phil Schoonover said the moves were designed to counter an unexpected downturn in prices and margins for hot-selling LCD and plasma TVs. He also warned that this round of store closures, resulting in the loss of about 400 jobs in the United States and Canada, will be followed by further unspecified cost-cutting actions in the next six months.

Circuit City executives began warning of the downturn early in the year, to the puzzlement of Wall Street analysts and industry observers. The company had actually boasted of record sales in December, including “strong double-digit comparable store sales growth in flat panel televisions.” Why then was the company unable to capitalize on those sales? The answer  points too overly aggressive pricing and possibly some ill-advised choices in inventory management.

According to Sam Bhavnani, principal analyst with market research firm Current Analysis, Circuit City dropped its  prices for large (37 inches and up) flat panel TVs to levels that were significantly lower  than its leading competitors. On a cost-per-inch basis, Circuit City’s average price on these TVs was only $51/inch in January 2007, compared to $62 for rival Best Buy. Relative to discounter Costco, Circuit City was charging only $5/inch more in January 2007. A year ago, its prices were $11/inch more than Costco’s.

There are also indications that Circuit City’s inventory levels on certain flat panel TVs were extremely high during the run up to the 2006 holiday sales season, leading the retailer to discount heavily at the expense of healthy margins. For example, promotions such as the sales of 32-inch Olevia LCD TVs for as low as $475 during the Black Friday period undoubtedly contributed to the retailer's shrunken profits. The departure of chief merchandising officer Moore could signify where the company laid the blame for those ill-fated product decisions.

Circuit City currently operates 655 retail locations in 158 U.S. markets, along with more than 800 retail stores and dealer outlets in Canada.

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Aggressive my @$$
By Chadder007 on 2/13/07, Rating: 0
RE: Aggressive my @$$
By GaryJohnson on 2/13/2007 5:06:58 PM , Rating: 3
I purchase a 37" LG LCD from Circuit City in December 2005 for ~$2400; the updated version of the same LG panel is now ~$1250 at circuit city.


RE: Aggressive my @$$
By walk2k on 2/14/2007 2:04:53 PM , Rating: 2
Prices on flat panels/projection TVs have tumbled across the board, not just at CC. In the last 6 months, but especially in the last few weeks, since Xmas and the Superbowl, the same TV you could have bought for $2800 6 months ago, and $2200 in November, is now going for $1500! It's pretty ridiculous actually. Not that the prices are finally coming down, but that they were GOUGING us for so long on these big-ticket items.

Oh, so now that prices have come down into the "non-RIPOFF" area they have to lay people off? Sounds like bad management to me.


RE: Aggressive my @$$
By spwrozek on 2/13/2007 6:15:36 PM , Rating: 2
My father just picked up a 50" LG plasma for $1799. It was $1000 dollars off, originally $2799. Same TV is $2437 shipped on bestbuy.com, no best buy even close to where I live so not sure about in store price. Sounds like a good deal to me...


RE: Aggressive my @$$
By Oregonian2 on 2/13/2007 6:43:05 PM , Rating: 2
That's one of the reasons I like Circuit City. You can go onto circuitcity.com and get prices that often (not always) is a lot lower than their instore price, buy it online, then go pick it up at the store! Cuts into their store sales if one assumed one would buy it there instead, but at least in my case, it increased their sales because I'd buy it from some other online seller rather than pay their regular store price. I recently bought a $100 something from them that way rather than buy from Newegg.com where it ended up about the same price overall (where Newegg would have been cheaper than CC's store price). Now, I have not done this for an HDTV as yet, but have used this method for other sales (and yes, sometimes I'll buy other stuff when I'm in there so the scheme of getting me in the store works a little bit too). :-)


RE: Aggressive my @$$
By hergieburbur on 2/13/2007 7:17:01 PM , Rating: 2
Just thought I'd let you know, they will price match against their own website as well. I was able to get $50 off the price of my HDTV last year by having them do so.


RE: Aggressive my @$$
By xphile on 2/13/2007 8:20:59 PM , Rating: 5
I know its all probabably standard practise over there in the US, but coming from New Zealand we'd never experience that here, the retail and internet price is always the same and always as low as they advertise. I find that really funny, it's like - "Oh and by the way, yes we will pricematch OURSELVES" I mean how much of a no brainer is that?

Versus:

"No I'm sorry sir we simply can not sell it to you at the same price as we could sell it to you, but if you order it online we can, then you can pick it up"

"Um right ok then...

well um, do you have any PC's whatsits I can look at instead? Maybe one where you could show me how that interweb thingy works...

Hey I know why dont we start by looking at your web site...

Oh look thats just what I wanted to buy, and its SOOO much cheaper...

Oh look Ive ordered it...

Any chance I can pick up my order while I'm here"


RE: Aggressive my @$$
By hergieburbur on 2/13/2007 8:35:25 PM , Rating: 2
I understand its a stupid practice and they would be asinine not to do it, but I wasn't sure if the previous poster realized that they would do it. Just wanted to point it out.

And yes, it should be one price no matter the source, unless its a web only special or something like that.


RE: Aggressive my @$$
By kamel5547 on 2/13/2007 10:07:35 PM , Rating: 2
YOu'd be surprised how many stores do say that.

The common line is its web pricing only, we won't match it. SInce you can't find anyone(pretty much) willing to price match the web they know either you'll go online and buy it or pay retail.

Of course a lot of stores don't let you pick-up internet orders either ;)


RE: Aggressive my @$$
By gerf on 2/14/2007 7:08:50 AM , Rating: 2
The US is a little larger than NZ as well, which leads to, say, California stores charging a different rate than Indiana stores. The online price can't vary by location, so you have some variation.

The reasons for variation, erm, vary. Shipping, taxes, demographics of an area, store size/margins all probably factor into it.


RE: Aggressive my @$$
By walk2k on 2/13/2007 6:22:39 PM , Rating: 2
I don't really understand why CC sucks so much. They just opened a brand new store up here. Now the old store was stuck back on a side street in a low-traffic area but the new one is right on the main drag where a lot of other stores are (Best Buy, Toy R Us, Target, etc) Pretty nice store inside too. I went in there on a busy Saturday right after Xmas - totally empty. In contrast, the Best Buy a block away was PACKED with people. I just don't get it.

CC has pretty much the same prices as the other stores, so why are they empty? They sometimes have killer deals on close-out items too. I bought a pair of Polk towers there that were going for $800-900 EA for $500 a pair!


RE: Aggressive my @$$
By TheDoc9 on 2/13/2007 7:54:45 PM , Rating: 2
The fact is that the execs don't want to take the blame for cutting so many jobs and closing so many stores, so in this case they blame there most expensive product - TV’s!

How did they make they're money about 10 years ago when no one bought huge screen sets? It's complete BS and they had this planned for months. Remember they posted record profits for the time period they said hurt them the most! LOL! Execs NEVER tell the real reason for ANYTHING! If only to conceal the real reason and simply manipulate prices in the future (In this case, trying to inflate flat screen prices in the future for even bigger profits!)

It reminds of a perfect example; A few years ago Bill Gates went on record saying that they had to outsource to other countries because people in the U.S. didn't meet the standard. In reality, he was trying to manipulate wages - History has shown that it was a complete success, and along with the help of other companies in America tech wages are no better now than a low level McDonalds manager in some cases!

/steps down and takes a deep breath.


RE: Aggressive my @$$
By wiiz3rd on 2/14/2007 9:14:10 AM , Rating: 2
"In this case, trying to inflate flat screen prices in the future for even bigger profits!"

Like that is going to work.


RE: Aggressive my @$$
By TheDoc9 on 2/14/2007 5:26:38 PM , Rating: 2
The thing is it's already working, flat screen prices have remained flat and even increased over the last 3 months. I've been following them very closely as I intend on buying one. Not to mention them wanting to keep the prices high for future OLED and possibly - vaporware SED markets.

If the lcd market continues it's plunge, then these new markets will have no chance to compete without extreemly cheap incentives.

Now you can find cheap lcd's that suck and are several generations old, those are still falling in price. But not the Samsungs/Sony's or even Sharps.


RE: Aggressive my @$$
By peldor on 2/14/2007 8:46:54 AM , Rating: 2
They're a high pressure sales place even more than BB. You can't buy a CD without four salescritters trying to detain you.

At least, that's why you don't see me there very often.


RE: Aggressive my @$$
By Crazyeyeskillah on 2/14/2007 9:33:10 AM , Rating: 1
What an obnoxious group of individuals in CC. . .I'll have the same idiot ask me 3 times in a row if i need help, like he forgot the first two times that i was irritated and wanted to leave the store for him harassing me. . .I hope they all lose their jobs, just a bunch of rednecks and nerds playing with tv's and pc's, stick to your cars where people don't need to have any concept of professional business engagement.


Dang
By MonkeyPaw on 2/13/2007 6:07:55 PM , Rating: 2
This is sad news to me. I like CC, if only for the fact that they are the least pushy of all the electronics stores in my area. BB is far more annoying, IMO.




RE: Dang
By FITCamaro on 2/13/2007 6:25:16 PM , Rating: 2
I used to work for Best Buy and worked in a Circuit City as a Sprint rep in college. Both were the same once CC went to hourly instead of commission. What is good about Circuit City is that they tend to have a few of the higher end TVs that Best Buy doesn't have. Now that Best Buy has its Magnolia(?) brand store inside some Best Buys though, thats kinda changed.

Circuit City's biggest problem now is that their extended service plans are much more expensive than Best Buy's. I mean I got a 4 year warranty on my 42" DLP for $200. The TV was $1000(2 weeks later CC had it even more on sale for $900 so I got $100 back hehe). Circuit City's is $325. I actually check the price of that if I see something I'm looking at buying. Every time, Best Buy's had the cheaper service plan.


Too Much Competition.
By Mitch101 on 2/13/2007 4:46:06 PM , Rating: 3
I think what kills them is that anyone can sell LCD panels because shipping on them is fairly inexpensive causing much more competition in the market. Unlike the days of a heavy tube television and monitor where shipping a single unit costs more than the unit itself.




CEO Salary Cut
By Harkonnen on 2/13/2007 5:37:10 PM , Rating: 3
Its always the lower level employees that suffer. I don't see that CEO taking a cut in his salary for his company's shortcomings.




RIP Radio Shack
By MrTeal on 2/13/2007 5:51:22 PM , Rating: 3
I know that even before CC bought them and rebranded them The Source that Radio Shack hadn't been itself in quite awhile, but I'm still going to miss them. It was great to be able to find all sorts of components for electronics projects at the local mall instead of having to mail order them. Now I probably will have to get everything through Digikey.




Circuit City, not Circuit
By JonathanYoung on 2/13/2007 6:39:01 PM , Rating: 1
Sorry Steve,

You made the first change, but there's still an error...

"Despite brisk sales in the fourth quarter, low prices and lower margins on flat-panel TVs are forcing Circuit to trim its store count"




RE: Circuit City, not Circuit
By Serlant on 2/13/2007 7:18:13 PM , Rating: 2
Also is it me or is the first and second paragraph just repeated in the third and forth?

I'm not being picky thats a pretty glaringly obivous mistake. Also whats circuit city i've never even seen one :O

Damn uk :(


By jpichichi on 2/13/2007 9:50:00 PM , Rating: 3
Ok, so yeah, basically they sure did slash prices considerably. I purchased a 32" top of the line Samsung LCD for $1059.00 where it was the advertised special at CompUSA that week for $1200.00. They sold it at below internet prices, which lets be honest, is ridiculous. The week before the superbowl, the in-store prices were even crazier. It looked like outright pricing errors, of course, I was too disoriented at the time to jump on it, b/c I didn't know if prices had fallen like that across the board or what was going on. One example was a 52" Panasonic LCD projection TV for $1000.00, it was a hyper sweet deal, if you were to buy it today it would be at least $300 more.

It's too bad that dropping their prices like that was just a mistake, rather than something that made them the new place to go to. I assume they were hoping to sell extended warranties, cables, and other high markup to make up the difference but deals like that people were just grabbing up the TV's and dashing out of the store happy as could be.

I know we're a cynical bunch, but I tell you, I saw the drastically low prices myself. For me, this is how the story of the bizarre low prices at Circuit City ends.




Echo...
By Micronite on 2/14/2007 12:53:26 AM , Rating: 1
Was it just me or was there an echo on the first part of this article.

It's nice that flat panel prices came down. Unfortunately for me (but fortunately for those who are in the market) the TV I bought for $2,200 a year ago now goes for $1,300.

Notice Costco has the overall best price per inch and with a return policy like they have, it is quite appealing. It's no wonder Circuit City is having a hard time competing.




RE: Echo...
By walk2k on 2/14/2007 2:01:52 PM , Rating: 2
Costo is/will be changing their return policy on TVs.


:(
By Spartan Niner on 2/13/2007 7:11:42 PM , Rating: 2
Circuit City may not have good prices normally, but that's true of any retail store. What I like about CC is 1) They're not pushy/annoying like BB 2) Their close-outs/clearance prices can sometimes be HOT 3) BB sucks ;)

Perhaps the executives at the company should "trim" their salaries before "trimming" low-level staff.




eh
By ElJefe69 on 2/13/07, Rating: 0
RE: eh
By Samus on 2/13/2007 10:48:36 PM , Rating: 2
Until CC does away with REBATES like Best Buy and Office Max have, or at least improved there rebate systems, such as how Staples has easy rebates (which still aren't as good as no rebate at all) then I will not shop there.

I HATE REBATES! I HATE REBATES! I HATE REBATES!

And the dude in charge of CC is named Dave Matthews? Ohh dear God.


...........
By SixDixonCider on 2/13/2007 9:36:21 PM , Rating: 2
I know it sounds strange that some retail stores do not honor their online price, but there is a reason behind it. Typically the online arena is very competitive because there is not quite the huge overhead that a typical brick-and-mortar store has. Brick-and-mortar stores pay wages to their employees whom reside in your city. If everything were to be purchased online, more local stores would lose heavy revenue. A similar (but not exact) example can be expressed towards mom and pop stores. Mom and pop stores are important to a diverse community, but are driven away by big-box stores that have the same products, but lower prices.
I'm not saying "if you buy online, you're evil". I myself, am a wooter. I'm saying please take that into consideration if a brick-and-mortar store does not honor their online prices, they need the higher profit to pay for their higher employee count, demonstration units, higher electricity, ect.




BB FTW
By therealnickdanger on 2/14/2007 8:59:23 AM , Rating: 2
I've got a friend pretty high up at a competing retailer that we'll refer to as "BB" and he was saying that killing CC with TV markdowns has been in the works for well over a year. BB makes so much revenue from other products, they can afford to narrow their margins on big-ticket items. They were counting on running CC into the ground by doing "whatever it takes" to keep HDTV customers in the store. Looks like their strategy worked!

I've never had a pleasant shopping experience at CC. Good riddance.




What CC needs to do
By razor2025 on 2/14/2007 1:57:23 PM , Rating: 2
Circuit City needs to bring back commission sales back. If they can't compete with BestBuy in low-price attrition war, they simply need to change the nature of the game to "better service". Plenty of people hate BestBuy for their lack of service, so why don't they fight back on that front? Not everyone goes for the lowest denominator on TV and service, so they should simply bring up their service level to distinguish themselves from the competition. In order for that to happen, Circuit City needs to better train and compensate their employee so the grunts on the retail floor are much better quality than the BestBuy droids.




Its the RED!
By MustardTheoRy on 2/15/2007 7:27:48 PM , Rating: 2
The main cause for empty stores is the physiological effects of the color scheme RED, its very obtrusive to the eye and is a threatening color. Mixed with white is a no sales situation. Also your return policy over the last seven years and not honoring buyers insurance on in store bought items. Poor training and attitude of employees on how to act and treat customers. The stigma associated with the name Circuit City. If you resolve those issues especially the color RED your company might make aprofit and open some new stores in Canada again.




Kids!
By timmiser on 2/16/2007 4:33:23 AM , Rating: 2
I recently purchased an Onkyo THX A/V reciever from CC.com and saved about $500 over the B&M store price. The funny thing is I went into the store to take a look at it before ordering online and the kid salesman came up to me for assistance and to give me advice.

I asked about the Onkyo THX receiver but he was bent on selling me a non-THX Denon. I told him that the Denon didn't have the THX certification and he had no idea what THX was! I told him all about the THX select surround and quality standards. <Blank stare> Then he recommended some of those Monster cables and their high quality and that I would need them. So I talked to him about the concept of digital audio and video and how it was different then analog audio and video. Even used an MP3 analogy that maybe he could relate to by telling him you can download an MP3 with a dial up modem, copy it to 10 different computers, send it through the internet via email, and it will STILL play at the same original quality!! <blank stare!>

The poor kid argued to the very end that I had no idea what I was talking about!





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