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Closing 155 of its retail locations wasn't enough to prevent bankruptcy for Circuit City

The state of the global economy and that of the U.S. economy are making things difficult on many companies in the U.S. as sales fall and credit terms tighten. Consumer electronics retailers and computer manufacturers are among the companies that are feeling much of the economic pressure.

One of the biggest retailers to find itself in a serious economic crunch is Circuit City. The consumer electronics retailer announced today that it is filing for Chapter 11 bankruptcy to protect itself from creditors after cash flow problems began to prevent it from completing its turnaround efforts.

The bankruptcy filing is far from the first sign that the electronics retailer was suffering. Circuit City announced just last week that it was closing 155 of its stores across America. The massive store closures would eliminate 17% of Circuit City's U.S. workforce.

Reuters reports that out of the last six quarters Circuit City has reported a loss in five of them. The consumer electronics leader is Best Buy followed closely by Wal-Mart according to Reuters. Losing the competition posed by Circuit City in the markets where its stores are closing would at a glance seem to be a good thing for other consumer electronics retailers.

However, Circuit City is having massive liquidation sales at the closing locations that could prove to be a big problem for Best Buy – at least in the short term. In the beginning stages of the liquidation sales discounts at Circuit City are said to be at least 30%. As time goes by and the stores get nearer to closing, the discounts will only get bigger. The discounted merchandise could pull important holiday shoppers from the more stable electronics retailers into closing Circuit City stores.

Analyst Dan Binder from Jefferies & Co told Reuters, "Longer term, you've got Best Buy, who's dominant in the sector, taking share. But in the short run it could feel the pain of the liquidation activity."

Filings from Circuit City for Chapter 11 showed the company had $3.4 billion in assets and $2.32 billion in debt as of August 31 with more than 100,000 creditors. Circuit City first started to consider closing stores in October. At the time the Wall Street Journal reported that the closing of the stores was an attempt to stave off Chapter 11.

Only a few weeks later Circuit City announced on November 3 its plans for closing the 155 stores across the country. A big factor in the decision to file Chapter 11 was the fact that Circuit Creditors had tightened credit terms extended to the retailer considerably. Some creditors were even requiring upfront payments before shipping goods.

Circuit City CFO Bruce Besanko wrote in a court filing, "In large part, a Chapter 11 filing is due to three factors, all of which contributed to a liquidity crisis that prevented the company from completing its turnaround goals outside of formal proceedings: erosion of vendor confidence, decreased liquidity and a global economic crisis."

Best Buy had said previously that it would consider taking over locations that rivals closed. There is no word from Best Buy on whether it will take over any of the Circuit City stores that are closing.

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RE: Thank goodness for...
By FITCamaro on 11/10/2008 10:32:09 AM , Rating: 2
Actually it's places like Newegg that have put CC in the situation they're in.

I try to support local businesses whenever I can. For computers though I go to newegg. For TVs, DVDs, etc, I go to a B&M store. But yes typically I go to Best Buy. Their DVD selection is way better.

RE: Thank goodness for...
By MrBlastman on 11/10/2008 10:37:23 AM , Rating: 2
I know I am to partially blame - I have been buying computer parts for years from places such as Monarch Computer(RIP - they were good while they lasted... well, until they corrupted themselves) and NewEgg. However, Fry's and Microcenter suprisingly have improved dramatically in their high-end and hardcore enthusiast parts and I find myself actually spending a couple of extra bucks at the local stores rather than online.

Circuit City I would use to buy mundane things like Routers, an occasional software title and well, that is about it. I don't buy much. The other things like cables and wiring I would order online.

I think we are witnessing an evolution of businesses. Either they adapt and cater to the right market, or they fail.

RE: Thank goodness for...
By amanojaku on 11/10/2008 10:48:21 AM , Rating: 2
I used to go to CC because I loved the fact that I could get my money back without any questions if my purchase was defective in any way. I stopped going there for a few reasons that weren't entirely related to CC:

1) Prices - Online prices are generally cheaper
2) Taxes - I live in a state and city with higher taxes than most places
3) Shipping - Generally free online, and usually within a few days
4) Inventory - I get a better selection online

B&M usually can't compare, unless you REALLY need something NOW.

RE: Thank goodness for...
By Parhel on 11/10/2008 1:26:04 PM , Rating: 2
I used to go to CC because I loved the fact that I could get my money back without any questions if my purchase was defective in any way.

If your purchase is defective, any reputable retailer should allow you to return it.

I stopped shopping at Best Buy for that reason. I bought the original Baldur's Gate, and there was glue all over the first disc. I couldn't get it off, and the discs were unreadable, yet they would not allow me to exchange it for another copy of the same software.

Say what you will about Circuit City, but at least they wouldn't have done that.

RE: Thank goodness for...
By Reclaimer77 on 11/10/2008 6:24:23 PM , Rating: 1
I stopped shopping at Best Buy for that reason. I bought the original Baldur's Gate, and there was glue all over the first disc. I couldn't get it off, and the discs were unreadable, yet they would not allow me to exchange it for another copy of the same software.

You are flat out lying or simply not telling the whole story.

RE: Thank goodness for...
By Parhel on 11/11/2008 10:33:40 AM , Rating: 2
No, it's true. I argued up and down with customer service, and even got a manager involved. They said "you can't return opened software." I said I wasn't returning it, I was exchanging it. No go. I had to contact the manufacturer to get a replacement disc.

Interplay apologized to me, and told me that a lot of people had the same problem. The disc was physically glued to the cardboard sleeve because the discs were inserted before the glue had dried. In my case, only the first disc was affected, but they wanted to replace them all.

I know it wasn't the official Best Buy company policy, and I know that you can find idiots who aren't capable of understand their company's policies working just about anywhere. I've occasionally bought stuff from other Best Buy stores, but the one that ripped me off is the closest to my house, and I'm not going to shop there again.

RE: Thank goodness for...
By badmoodguy on 11/11/2008 2:13:12 PM , Rating: 2
You are flat out lying or simply not telling the whole story.

Bzzzt. This was a known problem with BG. They totally screwed up the packaging while trying to save a few bucks by not using normal cases for the multiple disks. My version was also hosed but I downloaded the disk instead of bothering with getting it fixed.

RE: Thank goodness for...
By TomZ on 11/10/2008 11:59:51 AM , Rating: 2
For TVs, DVDs, etc, I go to a B&M store.

Why? B&M's have ignorant salespeople, high prices, and limited selection. I can typically beat any B&M price by a large margin (e.g., $949 vs. $1499 for a TV I've been researching), and buying online is faster and more convenient. Just a few mouse clicks and my purchase shows up at my door.

RE: Thank goodness for...
By MrBlastman on 11/10/08, Rating: 0
RE: Thank goodness for...
By TomZ on 11/10/2008 12:16:28 PM , Rating: 2
The TV picture quality is a strong function of the picture settings - and in my experience, most stores don't have the picture settings optimized for their display models. So I don't trust that at all.

No, I'd prefer to go online and read expert reviews, compare features and specifications between makes and models, shop for prices, and make my decisions that way.

RE: Thank goodness for...
By MrBlastman on 11/10/2008 12:22:30 PM , Rating: 2
Back in the mid-90's, no matter how well you played with the picture settings on a Zenith tube TV, you could never get it to look as good as a Sony Trinitron tube. It just couldn't be done. You're right about picture settings being optimized, but you can only optimize so much.

If you had to, you could play around with the picture settings yourself in the store. Sometimes there is no replacing from an actual experience. You'll get a more accurate gauge with your own eyes than that of someone else - considering that we all see things slightly differently from each other.

Of course, I'm a snob when it comes to buying monitors and TV's. I don't trust what someone else says on the internet about it - I need to see it in person.

This is why I think stores still serve a purpose - there are many consumers that like to see and touch things first. Then there are others who just don't care. A TV is a TV and a computer is a computer, regardless of the specs. For them, there is online.

RE: Thank goodness for...
By Suntan on 11/10/2008 12:55:25 PM , Rating: 5
Hah, that's funny stuff. To say in one sentence that you are a "snob" about TVs, then argue that seeing them setup in a place like CC as your reference evaluation is rather commical.

If I want to evaluate a set on my own, I'll do it hooked up to my equipment, in my room lighting after it has been properly calibrated. not while it is sitting out on a rack of shelving while being fed a bad signal that is being split with 64 other TV sets. If I want to eval a proper Tv in a proper setting before bringing it home, I'll go to a specialty HT store that cares enough to have their demo sets ISF calibrated by certified technicians (and actually employ ISF certified technicians.) How many of those do you see at CC?

Lastly, right now I am researching in an effort to decide if I want to buy a new computer monitor. I'm looking at an Ezio CG241W. Please let me know which CC or BB in my local area that has one on display so I can look at it before buying because right now my only option is to buy it from a reputable online store that has a liberal return policy and evaluate if it meets my needs in real world usage.

The idea that people only buy online if they don't care is a crock. However, its the only weak argument you have left to make to defend CC so I can see why you are clinging to it.


RE: Thank goodness for...
By MrBlastman on 11/10/2008 3:16:46 PM , Rating: 2
What part of what I said, in the context of the thread stream, indicated I was referring directly to Circuit City? TomZ referenced B&M stores, with which I directly retorted.

You are grasping at straws here. :)

Look, if I want to review a lineup of TV's, weather I go to Hi Fi Buys, Best Buy, Fry's, Circuit City or any other B&M store (even the high end ones), if all of the TV's share the same awful signal, or good signal, they will equally have an equal opportunity to display their quality to me. If it is a bad signal, they will all use that same bad signal, allowing me to judge them among their peers. I'm not looking to evaluate a TV on its own at this point, I am simply looking to weed a few out from the rest and at that point I can begin a more targeted approach to what suits my tastes or not.

Are you implying it is entirely plausible to sit at home on your couch and order three or four different TV's via the internet, have each delivered one after another and try them one after another?

I would dare say that is inefficient both on your time and of our postal system for delivery costs and time spent. It is sometimes far easier to walk up to a display to get a general idea and then narrow things down.

RE: Thank goodness for...
By Suntan on 11/10/2008 3:56:26 PM , Rating: 3
That would be the original post of yours where you were lamenting the loss of CC.

Get off it. The reality is that you *can* get a very good sense of what to buy with online research. Then you can order it and verify that it meets your needs. You can return it if it doesn’t. The idea that people buy online because they don't really care what they get is a crap argument.

I’m still waiting to hear which CC has my monitor so I can see it in real life prior to buying it…


RE: Thank goodness for...
By MrBlastman on 11/10/2008 7:51:15 PM , Rating: 1
You either are thick headed or you have a sunburn inside your head... I can't seem to figure out which it is. :)

It is far easier to size up a product in person than through a website.

RE: Thank goodness for...
By orphen193 on 11/11/2008 11:06:58 PM , Rating: 2
one thing i would say about what you said is that there are no ISF techs at any CC they use a dvd to cali your tv where on the other hand BBY has them each store has 2,the one near my house has 3 tvs that are ISF cali so you can see what it looks like with it on and off

RE: Thank goodness for...
By Suntan on 11/10/2008 12:28:49 PM , Rating: 2
Agreed. Looking at them side by side on a wall at a B&M store is an exercise in false hope. When's the last time you got a favorable reaction from a CC or BB store employee when you asked them to hook up a DVD player so you could run your DVE disc to setup the TV properly?

Further, the last big TV I bought wasn't even available at local B&M stores. I could have bought one that was available at the local store, but I would have paid more and not gotten the features that were important to me.

Come to think of it, all of my major electronics devices have been bought site unseen (and based on online research) for quite a few years now. It works for me.


RE: Thank goodness for...
By FITCamaro on 11/10/2008 12:57:33 PM , Rating: 2
Games online are only a few dollars cheaper once you add shipping than just getting it at the store. DVDs I get on sale. And again I can have it that day.

For TVs, I do research online. Then buy it where I see it cheapest. I don't want to have to ship back a defective TV.

It's also just nice to get out. I don't want to just sit at home every second I'm not at work.

RE: Thank goodness for...
By Suntan on 11/10/2008 2:02:54 PM , Rating: 3
It's also just nice to get out. I don't want to just sit at home every second I'm not at work.

So the only options are work and BB/CC?


RE: Thank goodness for...
By Omega215D on 11/10/2008 1:30:03 PM , Rating: 2
I am lucky to have a good Microcenter within driving distance and for stuff other than computers I have a store known as B&H Photo and Video

They have much lower prices on cameras, MP3 players etc and carry more of a selection than Best Buy or Circuit City which only carry the usual iPod and such. I also have a J&R near me as well but their return policies aren't that great (refunds are a pain to get).

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