Why Circuit City is Losing Money and How it Can Help You
Customer Service is king. Today Circuit City’s stock has dropped to a lowly $5 per share. Do you know why? They are terrible at running a business. As a customer I can buy electronics anywhere. The markup on electronics is extremely low. Where companies like Circuit City (CC) make money is on the add-on items such as cords, wires, etc. They also make the majority of their money from their warranty. When I worked for Circuit City the majority of my paycheck was for selling their Extended Warranty called ESP.
If I didn’t sell enough of their add-on warranty I would lose my job. I was in fact very good at selling this. I was the top salesman on the West Coast and possible the country. One day at a hoorah meeting they called me up and asked me if I believed in the ESP and do I buy it myself? Simple question I suppose so I gave a simple answer. I said NO. I hate them, always have and always will.
Well 2 weeks later the top warranty salesman was no longer working at Circuit City! I was already leaving but they sped it up. See how much it means to them? These add-on items are the way they stay in business.
Well over the years Circuit City has changed their pay structure. I was guaranteed a small amount but if I wanted any real income I had to sell the add-on items and especially the warranty. Almost everyone in the store was on commission.
They have now removed the commission and put people on a low salary. They thought this would make more money. They would pay me $60000 a year (1995) and now they can pay someone slightly more than minimum wage. That sounds like a win except then what will they sell to the customer? NOTHING. They won’t sell. They are a cashier now. No matter how hard you try to get them to sell the warranty and add-ons they don’t care. They won’t super-size it.
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Heh, this is not the first time someone lost money because he tried to save it.
By doing that, CC lost their unique selling proposition. And without that it’s hard to make something in a big sea of business. Yes, it’s a good lesson for all who want to learn.
So how does that help US?
Anyways, same thing at GNC - great commissions on everything when I started out but they got greedy and limited it to 4% of GNC product… that means I had to sell $150 of a crappy inferior product to make the same amount I would have on 1 bottle of a better $30 product.
I turned the number 26 store in the region to number 1 in everything and after dropping commissions, they let me go because I was late twice. The real story was because each week I would mail the VP telling him all the things that were going wrong with the store that weren’t being fixed…. aaaanyways….
Glad to see you found another living.
Sam