Circuit City is sliding faster and faster down the slippery slides of a porcelain bowl. Why? Two basic choices: 1.) Circuit City self-destructed from assuming customers are stooges who will put up with whatever stores dish out; or, 2.) Best Buy has eaten Circuit City’s lunch, every crumb of it, by meeting customers half-way.
Currently, Circuit City is trying to fend off an unwanted if not technically hostile takeover tender from Blockbuster. Venture capital firm HBK, with almost 10% ownership of CC, is pushing management to be more receptive. And HBK itself has said it might enter the fray in an attempt to take the chain private. But you know what? In traditional fashion, both parties are apparently viewing CC’s troubles as financial. Too bad financial suffering’s the symptom not the cause—the cause being either : treating customers so horribly that buyers gave CC the “rats leaving a sinking ship” treatment; or, suffering so badly in customer relations relative to BB that customers went where they could get more respect.
Hey, either way, customer relationships are the root cause, so who cares?
Potential buyers had better care. “Just” reversing bad customer relationships to become “above average” can be accomplished. BB itself proved that with a near miraculous recovery from being on customer black lists. But gaining parity with BB will require becoming well above “above average” with customers—and for potential acquirers wanting a relatively quick cash out on buying CC, that should be a big red flag. That would be a miraculous recovery, one requiring heavy investment in CC’s business.
No matter. Almost any entity that does the deal will have its nose stuck in spreadsheets, with the customer aspects of the business just a minor factor.
Know what? I hope whatever buyer “wins” CC gets fried for forgetting about customers. Which will happen.
Dick,
Your comments hit close to home, particularly in light of CompUSA closing shop in December.
In the mid-nineties, CompUSA had 300 million in cash assets, and was doing 30 million in end-year annual profits. Ten years later, the company was gone.
The cause?
As you’ve mentioned, treating their customers so poorly that other options–any other options–seemed more reasonable.
1. Draconian return policies
2. Hamstrung local management (“I can’t do that without calling corporate”)
3. Poorly trained / uncaring / unqualified staff
These are all symptoms of an organization that is going to fail, and fail soon in today’s market.
Can you believe that Circuit City, with the CompUSA example staring it in the face, followed the very same formula?
The worst part of all is that Best Buy has managed to succeed simply by being “barely adequate” or just a shade below mediocre. Best Buy still doesn’t have great service by any means, but they at least “get it” enough to not be absolutely horrific, like their competition.
And I completely agree with you about Circuit City.
I think what’s so interesting is that corporations in today’s Web 2.0 community connected-age still manage to convince themselves that poor service and customer hostility won’t get found out. There is no anonymity, you HAVE to be customer-centered now, because there’s no other choice. As a company, you will either make the necessary choices to implement customer-centered values, or you will fail.
-Steve
See the MIT research study which demonstrates that the value of Web leads decreases 1000 percent in the first 24 hours.