Thursday, May 03, 2007

Business 101 Revisited

It was only the end of March when Circuit City announced this brilliant decision and I weighed in on what a bad idea it was. Didn't take long to start hitting the old bottom line.

Circuit City's Job Cuts Backfiring, Analysts Say

Circuit City fired 3,400 of its highest-paid store employees in March, saying it needed to hire cheaper workers to shore up its bottom line. Now, the Richmond electronics retailer says it expects to post a first-quarter loss next month, and analysts are blaming the job cuts.

The company, which on Monday also revised its outlook for the first half of its fiscal year ending Feb. 29, 2008, cited poor sales of large flat-panel and projection televisions. Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees.

"I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates," said Tim Allen, an analyst with Jefferies & Co.

In particular, the televisions showing disappointing results are "intensive sales" requiring more informed employees, Allen said. "It's a big-ticket purchase for somebody. And if they feel like they're not getting the right advice or are being misled by someone who doesn't know, it would be definitely frustrating. They will take their business elsewhere."

I wonder if the the geniuses who decided that customers didn't want someone knowledgeable and experienced to explain big ticket electronic items to them before they pay big bucks still has a job? Any idiot off the street can sell electronics, isn't that right? Payback was pretty decisive and quick on this smart move wasn't it.

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