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Circuit City Stores, Inc.

Company type	Public (NYSE: CC)
Industry	Retail
Founded	1949
Headquarters	Richmond, Virginia, USA
Key people	Philip J. Schoonover CEO George Danny Clark Executive Vice President & President of Circuit City-Retail Stores
Products	Consumer electronics
Revenue	$12.43 billion USD
Number of employees	46,000
Website	http://www.circuitcity.com,

Circuit City (NYSE: CC) is a dealer and retailer in brand-name consumer electronics, personal computers, and entertainment software.

It is a Fortune 500 company, and the third largest consumer electronics retailer in the United States in terms of annual turnover with over $11 billion USD in sales. Only Best Buy and Wal-Mart have larger turnovers. As of March 28, 2007, Circuit City operates 643 Superstores and 12 other locations in the US . Circuit City Superstores range in size from 15,000 to 45,000 square feet (1400 to 4000 m²). Circuit City's international segment comprises of over 800 retail stores and dealer outlets in Canada. Circuit City's Canada locations are operated by InterTAN Canada Ltd which Circuit City acquired in May 19, 2004. InterTAN runs The Source by Circuit City (formerly Radio Shack) chain in Canada (some of them now called La Source in Quebec) as well as THS Studio UpClose, and G-Wiz.

History

The first Circuit City logo.

In 1949, Samuel S. Wurtzel opened the first Wards Company retail store in Richmond, Virginia, at 705 West Broad Street. By 1959 Wards operated four television and home appliance stores in Richmond. The company continued to grow and acquire more stores in other locations including Albany, New York; Mobile, Alabama; Washington, DC; and Costa Mesa, California.

In 1984, the company officially changed its name to Circuit City and became listed on the New York Stock Exchange. The company, who leased floor space from the Zody's department stores as well as other department stores, began obtaining retail stores and turning them into Circuit City Superstores. The first of these replacements occurred in Knoxville, Tennessee; Charleston, South Carolina; and Hampton, Virginia.

In 1990, Circuit City established the First North American National Bank to operate their private-label credit card. In 2002, Circuit City began offering a co-branded Visa credit card. They sold both of these operations in 2004 to Bank One (Now Called Chase Bank). Other companies owned by Circuit City included CarMAx which succeeded from Circuit City in 1999, and Potapsico Design in 2001.

In 2003, Circuit City converted to a single hourly pay structure in all stores, eliminating commissioned sales. Many previously commissioned sales associates were offered new positions as hourly "product specialists", while 3900 salespeople were laid off, saving the company about $130 million a year.

On February 11, 2005, a hedge fund headquartered in Boston, Highfields Capital, offered to take over Circuit City for $17 a share, arguing that existing management had failed to maximize shareholder value. The offer was rejected by Circuit City's board on March 7, but doubled its own share buyback program. As of February 28, 2005, Circuit City held cash, cash equivalents, and short term investments of 1 billion USD.

On June 27, 2006, it was announced that Philip J. Schoonover would succeed W. Alan McCollough as Chairman of the Board of Circuit City Stores, Inc.

In August 2006, at a Las Vegas convention, the name for Circuit City's upgraded in-store and in-home services crew was unveiled as "firedog," which provides in-home, in-store, and online computer and home theatre technical support and installation.

On February 8, 2007, Circuit City announced that it planned to close seven domestic Superstores and a Kentucky distribution center to cut costs and improve its financial performance. News media reports also mention that 62 stores in Canada will close.

On February 23, 2007, Circuit City announced that Chief Financial Officer, Michael Foss, would leave the company. This unsettled investors and analysts concerned about management turnover. "This represents the third departure of a senior executive in the past six months, and the second departure of a top-five executive in the past month" said Goldman Sachs analyst Matthew Fassler in a client note. Chief Executive Office Phil Schoonover’s "hand-picked team is turning over faster than we would like to see in a turnaround situation."

In a press release on March 28, 2007, Circuit City announced that they had laid off approximately 3400 of their associates who were paid above the salary range for their position in order to cut costs. Those positions will be re-staffed with associates paid within the market range for their position. Associates that were laid off due to the "wage management" decision were provided severance and offered a chance to return after ten weeks, at a market-based salary. The Washington Post reports interviews with management concerning the firings.

Business model

A newly designed Circuit City store.

In 2001, Circuit City introduced a new Superstore format which was much more in-line with the "Big Box Retailer" store design than its prior layouts. The newer stores have a brighter, more open sales floor to allow customers to browse the merchandise easily. The format allows putting all products, except those that are too large for a customer to carry themselves, on the sales floor. In 2007, new store formats include a 30,000 square foot store aimed to eliminate previously under-utilized space. Approximately one third of new store openings will be in a 20,000 square foot store format to be utilized in smaller trade areas or as urban fill-in locations.

Circuit City has also developed, in partnership with IBM, its first online virtual-reality store based completely within the 3D virtual world of Second Life. The store was opened in December 2006, and houses 3D representations of actual product carried in stores. Online consumers can shop in the virtual store much like they would in a real store. The Second Life virtual store project was created as part of Circuit City's "Multi-Channel" initiative to branch into other areas of retailing in addition to a standard store environment.

Domestic segment retail operations are overseen by the President of Retail Stores. Domestic retail operations are divided into 2 divisions. The two divisions comprise 10 regions which are under the supervision of Regional Vice Presidents. The 8 regions comprise 67 districts, which are overseen by District Managers who regularly visit stores to monitor store operations and meet with Store Management. The Source by Circuit City is currently overseen by Steven Pappas, President of InterTAN.

Domestic segment Superstores are typically staffed with an average of 56 full-time and part-time Associates including sales support personnel, such as customer service associates, product specialists and stockpersons; in-store technicians and installers; supervisors; an operations manager; an assistant manager; and a store director.

Major products and services

• Home Entertainment Equipment: Televisions, DVD Players, Receivers, Speakers
• Imaging Equipment: Digital Cameras, Camcorders, PDAs, Cell Phones
• Technology Equipment: Personal Computers (PCs), Laptops, Monitors, Computer Accessories, Computer Software
• 12-Volt (Car Audio) Equipment: GPS, Amplifiers, Speakers, Subwoofers
• Entertainment Software: Music CDs, DVD Movies, Console Systems, Console Games, PC Games
• House Care: Vacuums, Air conditioners, Small Refrigerators
• FireDog Service: Home Entertainment Installation, PC Checkup / Installation

Examples of services provided are narrowband, broadband, wireless telephone service through an exclusive partnership with Verizon Wireless (while also offering Virgin Mobile, foneGEAR and Amp'd Mobile), voice-over IP, extended warranty programs, satellite radio, computer repair, in-store pickup, car audio installation and in-home video installation.

Associates

At the time of its fiscal year 2007 Annual report, Circuit City had 43,011 hourly and salaried associates working in the United States, and 3,071 associates in Canada. Comparatively, in its 2001 report, Circuit City operated the domestic segment with 53,302 associates.

Associates in both the domestic and international segment receive frequent training through interactive E-learning courses hosted on the company intranet known as ccity.com. In the beginning, the E-learning courses were developed in conjunction with Circuit City's training department and DigitalThink. As of 2007, all coursework is developed internally and the deployed and hosted on a LMS system by Convergys. In addition to online courses, associate training tools include training workbooks, and management-driven in-store mentoring.

In March 2007, Washington Post article, it was reported that Circuit City fired 3,400 employees throughout the United States, stating that the employees made too much money, and would be replaced by new hires willing to work for less. Interviews with the company obtained by the Washington Post indicated that the fired employees were informed they could apply for any job openings after 10 weeks.

On May 9, 2007, the executive board of the Retail, Wholesale and Department Store Union (RWDSU, UFCW)issued a statement that they would support a lawsuit against Circuit City by three Oxnard, California Circuit City employees that were part of the group of employees fired for earning higher wages. The three employees are Daniel Weidler, 57, Michael Yezback, 59, and Eloise Garcia, 66. RWDSU President Stuart Appelbaum said, even though the three employees were not part of their union, "what happened to them and other Circuit City workers represents a two-fisted assault against all retail employees." In Appelbaum's statement, the union plans to file an amicus brief in support of the California workers. RWDSU represents about 100,000 throughout the U.S. and Canada and feels that if Circuit City is allowed to get away with their firing practice, other major retailers will follow suit.

Initiatives

Multi-Channel In the company's 2007 annual report, Circuit City lists Multi-Channel integration as one of its primary innovation initiatives. Circuit City defines multiple channels as the different methods that customers have of purchasing from the company; these methods include shopping in a store, ordering on the phone, on the web, or from a catalog. Circuit City places internet kiosks in its stores so if a product is out of stock, a customer can order it online. The company has also launched a test program that enables sales associates and shoppers in 10 stores in Boston and 10 in Florida to use wireless tablet PCs to study product specifications and compare products and prices from circuitcity.com as they walk through a store. According to Internet Retailer magazine, "The merchant also has been changing its entire business structure to break down barriers between channels by investing in new or more call centers, catalogs and web-selling technologies and changing the psychology of the company and its employees."

Supply Chain The supply chain encompasses the organization and processes involved in all of the steps between obtaining product from a vendor and having the product in stock at locations for a customer to purchase. In Fiscal 2007, Circuit City made improvements within its supply chain organization to help identify and react to consumer demand in a timely manner as well reduce the time between buying from a vendor and display of the product at the point of sale. Circuit City has set up a subsidiary, Circuit City Global Sourcing, Ltd (with offices in China, Hong Kong and Taiwan), to assist in obtaining inventory to sell. Most products are shipped directly from manufacturers to the 9 Circuit City distribution centers.

Six Sigma In 2001 Six Sigma was introduced as an initiative within Circuit City's annual report. Six Sigma is applied to Circuit City's operational side such as supply chain and distribution centers. Circuit City applies Six Sigma methodology to its critical operational processes to measurably increase customer satisfaction while driving down cost. In May 2004 the Director of Six Sigma for Circuit City announced that Six Sigma was being applied to important company projects and had been used to streamline the hiring process from as much as 18 days down to 8 days. Six Sigma has since been applied to open box sales, pricing markdown reduction and testing processes such as determining the sales impact of bundling products with accessories. As of 2006, Six Sigma intititives have ceased to exist.

Community involvement

Heart of the City In early 2006, Circuit City rolled out their "Heart of the City" initiative which is a label for the company's ongoing encouragement for all associates to volunteer for charitable causes. Volunteering is not compulsory, but is encouraged through district and store management. Each store has a monthly donation budget that it can use for donations to charity. In addition, stores organize events such as softball games, car washes, and bake sales to raise money for charities in their own communities. Included within the "Heart of the City" initiative are corporate donations and partnerships with organizations nationwide. As of June 2006, Heart of the City has developed an "Umbrella", which they consider the people and organizations they support through the program. There are four programs that fall under this umbrella which include Boys and Girls Clubs of America, United Way of America and as of December 2006, the newly created "Associate Relief Fund" which was originally an idea to help those associates directly affected by Hurricane Katrina. The Associate Relief Fund will now go to help any associate in need of assistance who otherwise wouldn't receive any.

Boys & Girls Club of America Starting in 2001, Circuit City has partnered with the BGCA for their annual ImageMakers contest. This $5 million initiative, funded by the Circuit City Foundation, helps BGCA develop a state-of-the-art photography curriculum, host a photography competition, provide photography resources and involve Club members in the art of photography.

Habitat for Humanity Circuit City is a Build Partner with Habitat for Humanity. As recently as March 2006 Circuit City made charitable contributions to the Richmond, VA. Habitat. Circuit City associates volunteered, and assisted in the construction of several houses near the Richmond area that same month.

American Red Cross In the wake of Hurricane Katrina, Circuit City announced on September 9, 2005 the donation of $1 million to the American Red Cross Disaster Relief Fund. In addition to the corporate donation, Circuit City associates participated in a "Drive for a Million" fundraising effort, which included a variety of projects (bake sales, car washes, etc.) at Circuit City locations across the country to benefit the American Red Cross Disaster Relief Fund.

United Way Circuit City makes charitable contributions to various organizations through the United Way and lists this organization in its "Community Involvement" section of its website.

Real estate

A Circuit City store

Due to the expansion of Circuit City stores in the 1970s-1990s, the company has accumulated a surplus of unused real estate with a presence in nearly every major market in the country. Although a typical retail location is approximately 30,000 square feet (2700 m²), they have numerous freestanding and in-line locations ranging from 2,000 to 50,000 square feet (180 to 4500 m²). They also have office, service and distribution surplus locations scattered across the country. During Circuit City's 2005 fiscal year (March 1, 2004 through February 28, 2005), the company disposed of approximately 1.2 million square feet (108,000 m²) of vacant retail space. In January 2007, Circuit City's vice president for real estate announced plans on opening up 200-300 stores in the next two years, a large increase from the current trend of 10-12 stores a year.

firedog

Main article: firedog

During fiscal 2006, the domestic segment launched the firedog brand to provide home theater installation and PC services in-store, at home and remotely. The brand name captures the attributes that the company wants its technicians and installers to embody: helpful, knowledgeable, friendly and reliable. The decision to build an integrated brand for both PC services and home theater installation was based on customer research and was more cost-efficient than building multiple brands. As of the business model change on May 31st, firedog now includes Roadshop installation. The main competitor to firedog is Best Buy's Geek Squad.

Criticism & Controversy

Circuit City has been involved in a number of lawsuits involving consumers and Circuit City employees. Circuit City was initially opposed to the Federal Do Not Call List. A lawsuit focused on Circuit City's inability to produce a Do Not Call List policy from ten stores that were randomly selected.

Circuit City was also sued for advertising fraud. In a 2004 New Jersey court case, Circuit City agreed to pay $173,220 in settlement and investigation reimbursement costs due to a false advertising claim. The court found that important information pertaining to sale items was purposely obscured within the advertisement, thus potentially deceiving to their customers.

In 2004, Harris and Kaufman, Attorneys at Law, successfully represented a class action suit of Circuit City employees caught in an unfair arbitration agreement. The court's ruling in Gonlugar v. Circuit City Stores, Inc., found the store's arbitration agreement to be "tainted with illegality". The arbitration agreement was found to be so one-sided that it was unconscionable. Harris and Kaufman maintained the arbitration agreement bound only the employee to arbitration, required the employee to pay fees to Circuit City for initiating the arbitration (Circuit City paid no such fee), imposed a shortened statue of limitations on the employee (not on Circuit City), and prohibited class actions.

Circuit City's City Advantage Plan was also challenged in a United States District Court within Massachusetts. The plaintiffs' claim concerned Circuit City's cancellation of their warranty plan without full disclosure of the plan at the time of sale. The plantiffs cited breach of contract, unjust enrichment, and violation of the Massachusetts Consumer Protection Act. Circuit City requested the matter be dismissed, however the court upheld the plantiffs' claim that the monies paid for the protection plan would be reimbursed as well credit for the return non-working goods.

During the week of August 31, 2007, The California Supreme Court ruled that Circuit City employees may sue the store for labor law violations, even though the store had the employees sign arbitration agreements years ago. The arbitration agreement, which Circuit City insists all 46,000 employees must sign, calls for employees to waive their right to sue their employer and establishes a cap for damages regarding any wrongdoing on the part of corporate or management. The California high court indicated that the Circuit City employee waiver violated the state's labor laws.

Circuit City-owned brand names

• Anika
• Centrios
• Circuit City Rewards
• ESA
• firedog
• i-next
• Liquid Video
• NexxTech
• Roadshop
• Sector 7
• Verge
• Wasaki
• Element

Slogans

• "The Intelligent Choice" (mid- to late-1980s)
• "Where Service is State of the Art" (1989-1995)
• "The Right Prices Right Now" (1995-1996)
• "Price, Selection, and Service" (1996-2000)
• "Imagine That" (2000-2001)
• "We're with You" (2001-2004)
• "Just What I Needed" (2004-April 2007)
• "Circuit City Makes it Simple" (2005 Christmas Season)
• "It's Holiday Time in the City" (2006 Christmas Season)
• "Work Hard, Play Harder" (2007 Back to School Season)

External links

• Circuit City official website
• Circuit City Rewards official website
• firedog Official Website
• The Source by Circuit City