Hot on the heels of the announcement that CompUSA and Tweeter
are closing 126 and 53 stores respectively is word that Circuit City is firing
3,400 employees and bringing in lower-cost workers to fill their roles. The
company says that the move is aimed to help realign its cost and expense structure.
"These actions represent the execution phase of the
work initiated this winter to accelerate Circuit City's transformation. We
expect to deliver improvements in our selling, general and administrative
expense rate while maintaining appropriate investments to drive our key
strategic initiatives such as digital home services, multi-channel and home
entertainment," said Philip J. Schoonover, chairman, president and chief
executive officer for Circuit City. "Unfortunately, a number
of Associates are directly impacted by the actions, but we are making Circuit
City stronger for the long term."
This move comes after Circuit City announced in
February that it was closing 62 stores in Canada along with seven underperforming
stores in the United States.
The 3,400 employees affected by the job cuts represent 8% of
Circuit City's total work force. Employees will be given four weeks’ worth of severance
pay and will have the option of reapplying for their positions at a lower pay
grade after a 10-week hiatus.
"This strategy strikes me as being quite cold,"
said Bernard Baumohl, an executive director for The Economic Outlook Group.
"I don't think it's in the best interest of Circuit City as a whole."
Likewise, Timothy Allen, an analyst for Jefferies & Co.,
said that the move could
end up backfiring for the company. "It's definitely going to have some
cost-savings, but I think the bigger impact could be seen in weaker, poor
service," said Allen. "I have a feeling the people they're letting go
have probably been there longer, have more experience, more product
Jose Macias of San Diego, California was fortunate
enough to skate through Circuit City's jobs cuts in 2003. At that time,
employees making more than $18 an hour were fired -- Macias was making $17.70
an hour at the time. This time around, Macias wasn't so lucky. His hourly rate
translated to $18.72 an hour which is well above the full-time pay cap up
$15.50 for his department.
"I dedicated seven years to them. Loyalty gets you
nothing," said Macias.
Circuit City also plans to outsource its IT infrastructure
operations to IBM in order to reduce costs by roughly 16%. This separate move
will affect an additional 130 employees -- 50 of which will become IBM employees
while the other 80 will be fired.
quote: There was one guy in Tampa I heard about who was making $100,000 a year because he was a good salesman. It's not a bad thing to be a good salesman but when your supervisor makes $35-40,000, is full-time, and has more responsibility
quote: I would consider firing people for being good salesmen to be outstandingly bad business practice.
quote: Compusa did the same thing(fired best salespeople). You see where they are. You need to base commission off of the contribution margin of the product(profit), and sales people who convince someone to buy something instead of just standing there and letting them walk out of the store should be retained. Circuit city needs to go back to business school and learn the basics.
quote: I would say paying someone who works the sales floor $100,000 a year salary would be a pretty self destructive business practice too.
quote: a "lockout" includes the closing of a place of employment, a suspension of work by an employer or a refusal by an employer to continue to employ a number of his employees, done to compel his employees, or to aid another employer to compel his employees, to agree to terms or conditions of employment. A strike or lockout is unlawful, at any time, if there is no union , or where there is a union and the requirements of the Code in acquiring the right to lockout or strike have not been met
quote: It's not a bad thing to be a good salesman but when your supervisor makes $35-40,000, is full-time, and has more responsibility, thats a problem.
quote: Most people who go into a place like Circuit City already know what they want and are already committed to spending X amount of money on something.
quote: A knowledgeable sales staff is vitally important (and the principal reason many people choose to shop in a physical store rather than online).
quote: understood when CC fired people when they went to hourly because with the commissioned pay there, the floor employees were at times making twice what their full time managers made. There was one guy in Tampa I heard about who was making $100,000 a year because he was a good salesman. It's not a bad thing to be a good salesman but when your supervisor makes $35-40,000, is full-time,
quote: Define the word "fair" in this context.
quote: A B&M retailer who charges only 5% more than the lowest-cost online vendor will not make a profit, nowhere close to it.
quote: The fact is, even with "unfair" prices on their merchandise (which, for some items can be double or more the online price) Circuit City still LOSES money.
quote: Your concept of "fairness" would bankrupt them in a month, and put all 45,000 workers out on the streets.
quote: Sorry, false. There isn't a single B&M retailer......
quote: Translation: you can't name a single counterexample to contradict me,
quote: Just another thing to think about, many of the "low price" stores on amazon (or anywhere else) are themselves local mom & pop B&M stores that now sell online. Take a look at all the online listings for camera stores. Many are local businesses in NYC, that continually undercut one another for business. Are you asserting that none of them make a profit?
quote: Can you not read?
quote: so you'll substitute a little sarcasm and hope it passes for a logical argument?
quote: if you honestly believe the vendor made a profit on it, you're mistaken.
quote: It was a vendor who simultaneously operated both a B&M storefront and an online operation. That's a whole different proposition entirely. I'm surprised you don't see that yourself.
quote: The more profit a business receives from online operations, the less it requires from the storefront itself.
quote: Sarcasm doesn't work...data does.
quote: I don't need to know detailed financials to understand that the cost of running a B&M store is larger than a 5% markup.
quote: What nonsense is this? I never said anything of the sort.
quote: That item you bought for a "full $20 cheaper" than any online merchant...if you honestly believe the vendor made a profit on it, you're mistaken. They may not have even made a gross profit on it, and certainly not a net profit.
quote: Whups, you're confused again. The original statement (made by you actually, and challenged by me) referred to a 5% price difference between two vendors. Not a 5% markup, which is a wholly different thing.
quote: Sorry, it doesn't fly. I don't need to know detailed financials to understand that the cost of running a B&M store is larger than a 5% markup.
quote: I'm still waiting for an example of an B&M retailer able to show a profit while maintaining an average price base within 5% of the cheapest online vendors. Just one example will do.
quote: There are several B&M stores that remain competitive with online offerings. Keep in mind, that I am talking about out of pocket costs (is there any other?), so if a local store is charging 15% more, but 10% of that is taken up in shipping/handling charges from the online store, and the net effect is a 5% difference, I'd probably support the local B&M. Tax is a wash since your legally obligated to pay tax to your state. Once again, the 5% is just a ballpark number. Put it this way, I know a good deal when I see it, so I'll stand by my original comments.
quote: Afterwards, you admitted the 5% figure was pure nonsense...
quote: the bottom line is the owner of Circuit didn't survey all the employees he fired to find out who was still busting their ass on the job
quote: Out of all the "big" retailers, I liked CC the most for their prices, buy online-pick up at the store programs, etc. But I will no longer support them. This is so low class.
quote: An hourly rate of 3 and a half times the federal minimum wage...for a job which requires zero education and very little commitment or skills?
quote: I research products on my own and don't expect the employees in the retail electronics stores to know much (and don't trust anything they try and tell me), but I also don't want them to act like unlocking a product that I'm going to buy is a burden
quote: especially when they're losing money and need to cut costs fast
quote: because the enterprise still employs over 40,000 people
quote: they posted a net loss of $16M
quote: loyalty, however noble and honorable, counts for very little in the world of retail
quote: We live in a free market economy pal, it's called capitalism, and it's the way the world works. Don't blame Newegg, Amazon, and Price Watch for the questionable business practices of Circuit City.
quote: If you can adapt, you will survive. If you can't adapt, you will fail. Simple as that.
quote: "It's definitely going to have some cost-savings, but I think the bigger impact could be seen in weaker, poor service," said Allen. "I have a feeling the people they're letting go have probably been there longer, have more experience, more product knowledge."