Bankruptcy Filing

I got the news about retail giant Circuit City,filing for bankruptcy protection on the 11 of November and it was not a real surprise considering all the problems that the company had been facing of late.The problems included stiff competition from main rivals Best Buy and WalMart and other minor retail electronic companies that are now all over the place.
I worked for Circuit City for a period of five years,starting from January 1994 through December 1998.Prior to joining Circuit City,I had been working for Radio Shack in the Langley Park Location.I had to apply to work for Circuit City for a number of times before I was finally given the opportunity to work for them.I had applied to work in the location at Wheaton Plaza in Wheaton,Maryland about twice but I got a postcard note for them claiming that my services were not needed at the time.I got my break through a former co-worker of mind,who had left Radio Shack and was employed at the Circuit City Store in Beltsville,Maryland.I had always wanted to join Circuit City and I went to the location in Beltsville during the early days of January 1994 and talked to Doug Polsenberg.He introduced me to the store manager at the time,a guy named Joe Via.With my prior retail experience and a good word from Doug,I was given the paper work that kick started the hiring process.I fill out the application and left,heading to the Radio Shack Store,this time at the one in Beltway Plaza.I had requested to be moved to that location after getting tired of working at the Langley Park Location.
I got a call from the Manager at the Beltsville store saying that everything went okay and that I can report to the store for work.By everything being okay,it means that they have done a background check on you in the retail sector to make sure that you have not been involved in any shady dealings in your prior retail working life.I then had to leave Radio Shack right away.What rival retail outlets do,is if you leave to join one of their competitors,they let you go on the spot.No need for the required two weeks notification.I left for the Circuit City store in Beltsville,MD and the first thing that they did was get the managers at the various departments to personally interview you.Based on the interview,you would be placed in one of their departments.I ended up in the Ace Department.The Ace department is like the beginners department in the Store.That is where I was placed.You mainly get to sell items like walk-mans,headphones,portable CD players,boom-boxes,a lot of accessories,Cordless phones and land-line phones and lastly Walkie-talkies.Later on,the cellphones would be moved from the Car Stereo department to the Ace department.
The first two weeks,I spend in the store going through training.This is training for the whole store.They give you books to read and fill out answers to questions at the end of the reading.If you do not know something after reading the training manuals,you go to the floor and talk to somebody that already works in that department and they help you with the answers.This is how you get to meet the other employees that you are going to be working with.The two weeks came and went and the next step is to head for Richmond for the final training session before you could be placed on the sales floor.
Richmond,located in the state of Virginia is were Circuit City has their Headquarters.I must say that I was impressed by the manner in which Circuit City was been run at the time,even before heading for Richmond.Coming from Radio Shack,where we were paid peanuts to work,Circuit City was a major move in terms of potential earnings and total improvement in working conditions.The sales persons that I met all seem to have their product knowledge down to an art form.This was all around the store,from the Video,Audio,Soho(the computer department)Road Shop,Car Stereo,Major Appliances,Ace,and Front Desk help,everything was running smoothly.The Stores were extremely well kept and organized.The Managers of the various departments were very knowledgeable also.They had to be,employees working under you turned to you for answers and solutions,each time that they encounter a problem.So you have to have your stuff together as they say.
I made the trip to Richmond with an old but reliable car of mine.The drive was fine.I was given proper driving directions from the store.There was one other person that attended training at the same time that I did.The individual was from Texas and was hired to work in the Soho department,selling computers and accessories to go.Lodging was provided to us at a Holiday inn located close to the Circuit City headquarters in Richmond.This was paid for in advance.You got one meal,I believe super at the Holiday Inn,the breakfast and lunch were provided for in the training facility.The cost for your driving to and from Richmond was paid back to you in a future paycheck after providing the company with your mileage.This is an estimate and the company took your word for it and paid you the requested amount.It was a trust based system.
While at Richmond I got to do some other things like driving around the town when training was over to take a look at the city.Richmond is a lay back city and a little bit old fashion, but it is not a bad place to live at all.Things are relatively cheap there and you get to see some historical sites.I did get the breaks of my car fixed while at training.The cost was 200 dollars US and the mechanics did a pretty good break job.
The one week of training went very well.The training person himself had worked as a sales person for Circuit City,making it all the way to a whole floor sales person before going the route of trainer.As a whole floor sales person,you get to sell in every department that you choice to.You are not restricted like the rest of the other employees.For example,I was hired to work in the Ace department, if I venture to sell out of my department,it would be like taking money out to the pockets of those working in that department.
You are giving in training,all the technical knowledge that you are going to need in the sales floor.You get to know the history behind the different products.The different companies that sell these products.Terms like Spread Spectrum,high fidelity,super bass,mega bass,digital signal,analog signal are all broken down to you in the one week of training.At the end of the week, there is a quiz that everybody passes.The company did a very good job in the week of training and you had to be a total dummy not to come out of the training ready for sales.
A few things that were exciting about the stay in Richmond included some nice stories from co-workers from the different regions.If you plan on getting your music listen to by a music producer,never record it in a a high grade audio tape.The producer would just take a look at the tape and put it for his personal use.
Circuit city at this time had began branching into car sales and the company had a used car sales complex in Richmond called Car-Max.Car-Max took used car sales to a different level.We did not get to visit the complex while at Richmond,but Car-Max turned out to be a winner for Circuit City,at least up to the period that I was with the Company.Car-Max expanded and the latest information that I had from the venture was when they had five locations,one of them being in Laurel, Maryland.The use of computer was put into play to make Car-Max a success.Information that I got from training at the time is that you can go to one of the car sales location and they would input your information on the computer and let you know what type of car you can afford.
There were a few rowdy characters in the training,a few of them from the New Jersey and Boston area.The Richmond training covered persons from the East coast of the US.Training was over and I drove back to the Store.There is something called I-95 bypass,this is if you plan on driving in the capital Beltway and you do not want to be border with traffic.You take the back roads and this would lead you all the way from Richmond to the Washington DC area.The traffic is way less,although the route seems to be longer from my personal experience.
The first paycheck that I received from Circuit City was for about 960US dollar.This was definitely a big jump for two weeks of work done.Training in the store and training in Richmond;including reimbursement for mileage traveled to and from Richmond.
The pay structure at Circuit City is commissioned driven.If you are not getting paid by commission you get a rate of about $6.75 an hour at the time,but nobody wanted to make that amount of money.The company would not keep you around if you were making that hourly rate.The way the commission system works is that you get a volume commission,that is for everything that you sell in the store, at the time you get paid one percent commission.Then there is the "spiff",this is where the money is.You could go on computer terminals and check out what the spiff is for each product or you could read if off the sales tags on the floor.This is not apparent to the customers,but we the sales persons knew what products were paying the most and that is what you try to push out of the store.Then there was the Extended Service Protection Plan.ESP is what it is generally called in the store and the company pushes this to death.The sales person also makes a lot of money selling ESP, but it is a very had sell to the customers for must of the products.ESP is an extended service protection plan that you buy for your product and it covers it for a period ranging from three to five years during which the product would be repaired free of charge.If the product could not be repaired then you get if replaced for free.The extended service protection plans are not cheap at all.For example,there are some products that you purchased for say $350 and you are required to spend an additional $150 to protect it for five years.A lot of sales person did sell it though and the top sales persons in every Circuit City Store sold extended service protection plans.You sell extended service plans and you can see your income hit the $40,0000 a year mark,which is pretty decent money for somebody working in a retail outlet.
Personally,with my little electronic background upbringing,couple with the fact that I was in the department that paid the least commission,the first few years,I average just under $20,000 a year.By the time that I left Circuit City in 1998 my yearly income had moved to just under $30,000 a year.The cellphones section had been moved from the car stereo department to the Ace department and I was the most experienced sales person selling cell phones,with knowledge dating back to my days back at Radio Shack.We made most of our money during the Christmas holiday period that starts from the fourth Thursday of November through the end of the December month.
Other benefits that you get included discounted health care benefits.I did not get to use this because I was hardly sick at all.You get discounts on employee purchases also.A lot of the electronic products that I owned,I bought at a discount while working for Circuit City.Televisions set,Video cassette recorder,Speakers,blank cassette tapes,musical compact-disc and video Cassettes,a lot of accessories.The Company also had a stock purchase plan through which you could purchase company stock at a discount.I made some money buying the company stock at a discount and selling them at current price occasionally.When I left the company in 1998,the company paid me some money for having vested five years of service with them.The company at the time was using Union Bank which was based in North Carolina for the investing of pension funds.After I left the company,I got a check from Union bank which I placed in a savings account.
At Circuit City,we worked for around 40 hours a week,with managers putting in more hours.There was no overtime pay,but during the busy Christmas holiday period you could put in the extra hours and make a lot of money selling.Schedules ran from around 9am in the morning when the stores opened to about 9pm in the evening when we closed.Sundays hours were different,the store was opened, I believed from 11am to about 6pm.We had Saturday morning meetings about once a month which were mandatory whether you were scheduled to work for that day or not.Also about twice a year,the store conducts a general inventory of stock.This usually runs from very early on Saturday through around 11pm or 12midnight.Whatever is not completed is done on Sundays.The Managers pick up the rest of the reconciliation beginning on Mondays until all the stock is accounted for.
There are a number of reasons I believe brought Circuit City down to its knees.The first is competition, mainly from Best Buy at the time that I was working there.Best Buy has their headquarters in Minneapolis,Minnesota and around the mid 1990s, they embark on a plan to expand into the East Coast of the US.For the first time Circuit City was going to face some very stiff competition.Best Buy is structured a little bit different from the way that Circuit City was structured.They had the advantage of share size over Circuit City.You walk into a Best Buy location and it looks like a giant warehouse outlet.Their share size allowed them to carry more products and they could them achieve a better economic of scale.At the time that they arrived the East Coast,they opened a lot of stores in the Washington DC metropolitan area,one of which was based in Laurel,Maryland.That was the closest to our Circuit City store in Beltsville.But throughout the Region,each location that Circuit City had a store,Best Buy had one.Our Managers at the time told us not to worry at all about Best Buy.The reason is that,they do not have trained sales persons.This is true.Unlike Circuit City at the time that used commissioned sales persons to push their products out of the store,Best Buy relied on the fact that the customer would get their information on the product that they need elsewhere and come to their store and purchase the product.At the time we at Circuit City thought that was not a brilliant strategy but it turned out that they were right.
Circuit City would eventually move away from the commission based sales structure around the early 2000s, but they made the move when Best Buy had already overtaken them as the number one Consumer Electronics retailer in the US.
Another thing that did Circuit City I believe was the fact that they started to loose a lot of their trained sales staff.There are a couple of reasons why this was happening.The first is that the pay structure that Circuit City operated on was very unstable.For example I would take a top sales person working in say the Video department.You join the company the first year and lets say you make about $45000 selling.The next year you might see that income drop down to about $35,000 or $30,000.This is because the same products that you have been selling are no longer paying the high sales commission that you got on them the past year.So you basically do the same amount of work and got paid less for it.This would explain why at times when a customer walks into a Circuit City store,you would find a lot of salespersons just standing around talking to each other and completely ignoring the customer.A lot of them are looking at the money that they are going to make selling to you and it was not as much as it used to be.A way that the company fought this out was to get new store managers for the different locations.The new managers would then get hungry sales persons from the street,train and motivate them.
Upper management did not care at the time about people leaving, because you could get people of the street and train them to be making $30,000 a year and they would be very happy doing it.So the veteran sales persons,seeing their income dropping year in,year out,had to leave the company.A lot of people left this way.I would take the example of our car stereo department.When I joined the company,there were four experience sales persons there selling cellphones and car stereo.Before I left the company they had all gone to join a cell phone Company called Sprint Spectrum which had moved into the area around the 1996-1997 period.When I left the company in 1998,I was one of the top sales persons in the whole store and by far the best at selling their cellphones.I left for Sprint Spectrum,who at the time were specialized in selling cellphones and services.The departed sales persons were replaced of cause with persons making less money and with of cause less product knowledge.
Back to competition.Whatever Circuit City was selling,you could find another outlet that was selling the same products.There was retail outlets that specialize just in music,video,audio,major appliances,cell phones,car stereo sales and installation.Bell Atlantic mobile,Cingular Wireless,Com USA,Maya Ermco,Sprint Spectrum(later on Sprint PCS)Target,Radio Shack,WalMart.So the profit margins were all dropping by the day.You could go on the computer screen and check out the profit margin of a product and quite a few of them were coming up on the negative.
Circuit City's upper Management has to take a lot of blame for the Company going under.You look at the stock performance of Circuit City and it was always trailing that of Best Buy starting from around the mid 1990s.When Best Buy moved into the East Coast around the 1996 period,their stock labored at around $5 and our managers were all saying,"see their stock in going nowhere".This changed though in a hurry during the stock market boom of the nineties.The stock took off big-time and hit the 90 dollar mark in hurry.I remember Best Buy having a number of stock splits.
Circuit's City upper management reacted to change very slowly I believe, and when they reacted they did not seem to have a real strategy.They decided to stop the commission based pay scale when it was already too late.They went to an hourly based pay system and instead of sticking with it, they tempered with it by getting rid of people who they claimed were making too much money.They could not make up their mind whether they wanted to close down some stores or not.When they finally started closing down stores,it was too late.The company complained a lot about cost,but spend a lot of money redecorating their stores.This is something that I never get to understand.You walk into a Circuit City store and it already looks awesome and later on you hear that a store is being redecorated.You redecorate a store that does not need any remake and you threat store employees poorly.The poor treatment of employees was reflected on how customer service started declining in the Circuit City Stores.
They idea of filing for bankruptcy is to keep away your creditors,while you go through a process of re-organization.The plan is that you would reemerge as a stronger company in the future.Re-organization hardly works out in reality though.Right off the top of my head,I can not name a few companies that had filed for bankruptcy protection and emerged as a stronger and more efficiently ran unit.The problems that got you into bankruptcy in the first place do not go away.It is very difficult for you to get credit in terms of loans which are needed for any going entity.I just feel bad for the employees who are going to lose their jobs during this tough economic period.Hopefully though,they have learn a lesson and gain a lot of training while working at Circuit City that they could use in another company.