WhereIsAtlas · Retail

What Happened to Circuit City?

For a decade it was America's second biggest electronics chain, then it was gone in a year. The story of a category killer that gutted its own best feature.

Circuit City had a real differentiator - knowledgeable, commissioned sales - and then cut it to save money, leaving nothing to justify its higher prices against a leaner Best Buy and an internet that sold everything cheaper.

The #2 electronics giant

For much of the 1990s a trip to buy a TV or stereo in America meant one of two places: Best Buy or Circuit City. Circuit City, born in Richmond as a 1949 TV shop called Wards, grew into the country's second-largest consumer-electronics retailer, running hundreds of big, familiar Superstores with commissioned salespeople who could actually explain a receiver.

Then, in a fast year between 2008 and 2009, it was simply gone. How did the chain that helped define the home-entertainment boom disappear while Best Buy survived?

The Superstore era

Circuit City's rise was built on the Superstore: cavernous showrooms filled with rows of televisions, stereos and appliances, staffed by commission-based salespeople who knew the products. It was a shopping experience, not a warehouse, and it made the chain a household name during the VCR-to-DVD boom.

By the 1990s it had hundreds of Superstores, its famous "We're responsible" ad campaign in the culture, and a strong position as the device-and-appliances destination.

The arms race it lost

Best Buy ran a leaner model: lower prices, fewer commissioned salespeople, bigger stores and later a service business (Geek Squad). Amazon and Walmart added relentless price pressure on exactly the electronics Circuit City sold. Consumers increasingly wanted the best price and fast delivery more than a knowledgeable pitch.

As the market shifted, Circuit City was stuck selling the same devices at higher prices and higher costs.

Missteps that removed its own edge

Circuit City made a string of decisions that removed its differentiator. It walked away from PC retail in 2000. In 2003, to cut costs, it eliminated the commissioned sales staff whose expertise justified the premium - a move that gutted the very service that set it apart. It also tried a smaller "The City" format that never scaled.

Each change traded away what made Circuit City special while the competition got cheaper and smarter.

A year from peak to gone

By 2007 the chain was losing money. It filed for Chapter 11 on 4 November 2008 and, with no buyer and the credit market frozen, liquidated in 2009 - closing about 567 US stores and roughly 34,000 jobs.

Best Buy, with its lower-cost model and service arm, endured. Circuit City became a case study in a category killer undone by its own cost-cutting and a more efficient rival.

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