Circuit City Liquidates
By David Dorf on Jan 16, 2009
As a former Circuit City employee, I was saddened to hear that CC will be liquidating after not securing a buyer interested in preserving the retail chain. All remaining 567 stores will be liquidated in order to settle its substantial debts, as reported by the AP. These are tough times in retail. As reported by the Wall Street Journal:
Tight credit has limited retailers' ability to reorganize. No major retailers that have filed for creditor protection since January 2008 have remained in operation. Among those to liquidate are Linens 'n Things, Bombay Co., Mervyn's LLC and Sharper Image Corp. Steve & Barry's LLC and Goody's Family Clothing Inc. were among the rare retailers to exit bankruptcy last year -- but both are now liquidating, too.
The article goes on to assign some blame:
Retail experts have cited the 2005 overhaul of the U.S. bankruptcy code as one reason so many chains are closing their doors. One such change shortened the period in which a retailer may accept or reject store leases. Retailers used to get a year or more to make those decisions. Now they are given 210 days. Once they accept a lease, the landlord then has an administrative claim against the bankrupt company.
CC was a leader in the multi-channel space. They were one of the first retailers to offer buy-on-the-web, pick-up-in-the-store in a repeatable process. Their web site was built in 9 months and was fully integrated with their store systems. In fact, behind the web site were actual store servers (CC-130s for those that know) so the e-commerce sales looked just like store sales. This allowed mixed channel transactions and provided very accurate inventory tracking. In the 1990s their infrastructure and software systems led the industry, but they were slow to upgrade and began to loose their competitive edge.
Starting around 2002 Best Buy, Amazon.com, and Walmart began to significantly eat into their sales as their out-dated stores were failing to attract customers. It's unfortunate that the remodels and re-locations took so long. Given more time, I think CC could have survived and maybe even thrived. I'm sorry to see CC go.
Update: Below is a timeline I put together using stock prices from Yahoo, the Circuit City investor site, and some news articles. As you can see, CC really peaked and crashed with the dot-coms between 1998 and 2000. They were rebuilding through 2006 at which point problems became apparent and the steady decline began.