Monday, October 20, 2008

Circuit City continues tailspin

Circuit City is an example of corporate karma at work. Already in trouble, a few years ago it decided that it would be a good idea to fire its most expensive (read tenured) line level employees and replace them with cheap labor. Retail workers across the country breathed a sigh of relief when the results were disastrous.

Today it has been reported on multiple sources that CC is looking at closing 20% of its stores to try to stave off (the inevitable) bankruptcy. You can read an actual article here and here.

While I feel sorry for the store level employees that will lose their jobs because a bunch of rich suits are boneheads, this is a classic example of a company reaping what it sows. Maybe they should lay-off 20% of the employees that make more than $100,000 and reduce the salaries of everyone making more than $100,000 by 20%?

I'm sure more than one vendor is considering kicking the legs out from under Circuit. If it goes into a desperate price cutting frenzy to try to draw in sales and keep market share, it will negatively impact prices across the whole consumer electronics spectrum. Vendors will have to decide whether or not Circuit is valuable enough in blunting the dominance of a couple of players to offset the price damage they could do in their death throes.

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