Correction: A previous version of this story erroneously said that the company was founded in the 1930s, and that two former executives declined to be interviewed. The company was founded in the 1940s, and the film maker did not approach former CEOs Rich Sharp or Phil Schoonover.
A local filmmaker has turned his lens on his former employer, which also happens to be one of the biggest corporate flameouts in Richmond history.
Tom Wulf, 50, just finished “A Tale of Two Cities: The Circuit City Story,” a self-financed documentary that traces the company’s history from its birth on Broad Street to its demise in 2008 and 2009.
The film premieres tomorrow night at the Virginia Film Festival in Charlottesville. Wulf, who moved to Richmond to work in training for Circuit City, said he wants to have a local showing in a month or two.
(You can watch the Trailer below.)
“I had a picture that hung on my wall of [Circuit City founder] Sam Wurtzel, and when I left the company I sent that picture back to Alan, his son. Then I asked him if he’d grant me an interview because I had an idea about a documentary,” Wulf said.
Throughout the movie, Sam Wurtzel is painted as the ballast and spiritual leader of the company. It was his emphasis on customer service that helped the company get off the ground, initially selling TV sets to African Americans from a shop on Broad Street. Then the company added other appliances and soon branched out to other markets.
Through interviews with Alan Wurtzel, former Circuit City presidents and rank-and-file support staff, Wulf explores how one of Wall Street’s darlings went into a slow decline and then collapsed in 2009 after suppliers would no longer lend the company inventory. But that was really just the straw that broke the camel’s back.
The film is broken into two parts: One that explains how the company started in the 1940s and grew as Wards (the name wasn’t changed to Circuit City until the 1980s) and one that explains how it lost its competitive edge over the past 20 years (same-store sales began slipping, Best Buy gained market share, gambles didn’t pay off) and eventually collapsed.
“In the end, Circuit City put so much emphasis on shareholders and spent so much energy driving up the P/E ratio and stock that they forgot the customers,” Wulf said.
“The company also was on top so long, it didn’t pay attention to competition,” he added. “They stopped listening to the customer service associates.”
Several major figures are not in the film, including former chief executives Rick Sharp and Phil Schoonover, who was voted the worst CEO in America by a national business magazine in 2008.
The film uses lots of videos – former Circuit City ads, internal management training videos and news reports – as it chronologically tries to explain what made the company so successful through the 1980s and what made it sluggish over the past 15 years.
For example, to show how the company kept changing its marketing strategy and slogan, Wulf cuts to old ads. One has the tag line, “We’re with you.”
That was changed in 2004 to, “Just what you needed.”
None of those changes mattered much, according to Wulf’s account. The company made several blunders, such as signing 30-year leases on buildings that were eventually situated in sub-optimal neighborhoods and gambling millions on a failed video rental disc.
Perhaps most fatally, the documentary posits, the company purchased almost a billion shares of its own stock this decade. If it hadn’t done that, the film suggests, it would have been able to weather the recession instead of filing for bankruptcy protection and then liquidating.
The film, which is 95 minutes, also has powerful interviews from some of Richmond’s top business leaders and from Alan Wurtzel.
Wurtzel speaks candidly and at one point says that during the Schoonover years, the company was just grasping for straws.
“If it didn’t have a good margin, we did not want it,” Wurtzel said of the policy to not stock as much merchandise as archrival Best Buy. “So we did not have games, which was key to attracting kids, and we did not have as many models of computers.”
For Wulf, the film is intensely personal. The former TV journalist left the news business in the 1980s to work as a sales representative for Circuit City in Atlanta. Wulf then worked his way up and was hired in Richmond to work on management training. He then worked at CarMax for 12 years.
Aaron Kremer is the BizSense editor. He has several ideas for documentaries. Please send news tips to Editor@richmondbizsense.com.
I wonder if Wulf includes how Circuit City mistreated employees, the class action suites, moving away from commissioned sales professionals. I believe Circuit City’s end really started with the mistreatment of employees and customers. Business really is about people. I think the company lost it’s way when Wurtzel was out of the picture.
I arrived in Richmond in 1985 as Vice President of Design and Construction at Circuit City. While the job didn’t work out as planned I remained a loyal customer for many years. In my opinion there were three major missteps that Circuit City made :
The first was Divex, the alternative to video rentals at Blockbuster. The cost of the development was hugh and it was never taken into account that the film studios , as well as competitiors wouldn’t support it. It was a time when Best Buy was close to bankrutcy and , in my opinion, the re-allocation of the dollars spent on Divex could have been the nail in Best Buy’s coffin so to speak.
The second mistake was eliminating white goods ( household appliances). This was a “bean counter ” decision rather than a merchandise decision. Giving up the #2 position in the market behind only Sears and basically telling your customers to shop at the competition was nuts ! The margins might have been lower in white goods , however, what wasn’t taken into account was that the same customer also bought TV’s stereos, and cameras. The white goods were sold off at fire sale prices and replaced with CD’s;tapes and games. Not a very good trade off.
Finally, Circuit City eliminated its commissioned salepeople. Not only did they eliminate the knowledge that these sales people had but they were also the trainers for new employees. This was done strictly to reduce cost, ( again the “bean counters” at work) and emulate what Best Buy was doing. It also, however, reduced sales. Isn’t it interesting that HHGregg uses the commissioned sales model that Circuit City had used and they are a chain that is expanding !
The one major Circuit City success that was left standing is CarMax, a brilliant concept. Thank goodness it was spun off as a separate company !
One moral to take away from the demise of Circuit City is this. The company was created and expanded by merchants and taken down by MBA’s and senior management that bought in to what the “bean counters” were telling them.
End of story
Brian Glass you said it all…worked there for 6 years and everything you said is accurate!
Brian’s terrific & concise analysis from an “insider’s” perspective is so consistent & explanatory with my experiences as an “outsider” (customer).
Having worked integrally as part of the metropolitan Richmond’s business community since 1983, I try to support “home grown” business’ & none were more successful than Circuit City in its heyday.
However, when we built our home, my wife & i didn’t have the option of purchasing the appliances there, so Best Buy enjoyed those “big ticket” sales. While the margins may not have been as aggressive as Circuit City wanted, I’m sure the volume of sales in that category more than made up for it. Also, other higher margin items were purchased due to the convenience factor that we were “already in the door”.
The other factor that was extremely obvious to me as a consumer (& Brian addressed); was the transition away from commission sales personnel. There was no longer an impetus to have be knowledgeable about the product, extra courteous to the customer & anxious to assist. I could actually “feel” the pent up hostility as it was reflected in the blase “take it or leave it” attitude.
I went to Circuit City to purchase my first HDTV & the pronounced lack of all of all the aforementioned lead me to Best Buy; where I received an “education” in plasma, LED, etc. Subsequently, over time, I’ve purchased 4 more HDTV’s from Best Buy. It’s my understanding that their salespeople also aren’t on commission, but the training must emphasize & somehow reward performance as my experiences there have always been rewarding(like shopping Circuit City when they were consumer oriented as opposed to “stock value” oriented)
I just couldn’t help sharing how Brian’s explanations of the philosophical changes in the business were felt almost “point by point” from a consumer with virtually no inside knowledge of the company.
Wanted to buy a HD television.
Went to Circuit CIty (support the locals, I thought), although there were a half a dozen sales associates there, no one could give me a straight answer to a question about a price on a floor model. I left.
Went to Best Buy down the street. Saw a model that looked good to me but it was up on one of the high shelves. Could not find a free sales associate who could bring it down and answer a few questions. I left.
I went to WalMart down the street. No sales associate in sight, but a basic, decent model was there on lower shelf at a good price. I brought it up to a front register and took it home within minutes.
My personal concern about the company began when Rick Sharp, then CEO, purchased a large parcel of real estate in Goochland County for development of million dollar plus homes. From experience as president of a local company, I am convinced that a CEO needs to spend full time on running his publicly held corporation without distractions of trying to pad his pocket by diverting attention to personal investments. Sharp did some very good things like starting Carmax, but previously pointed out blunders, and not listening to those in the field about ways to save money or improve sales, indicate the ivory tower had lost touch with reality.
“In the end, Circuit City put so much emphasis on shareholders and spent so much energy driving up the P/E ratio and stock that they forgot the customers,” Wulf said.
Same old, same old. Change “Circuit City” to “Best Products” or “Helig-Meyers” and the statement is still true. There’s always a fine line line to be walked between satisfying Wall Street and keeping the business viable from a customer point of view, and each of these three companies failed to successfully maneuver that line.
I have a friend who worked in CC … was a VERY competent computer tech. He was fired from an $11 an hour job to be replaced by people who had no clue but would sit around and blunder for $7 an hour.
As one commenter said, “I wonder if Wulf includes how Circuit City mistreated employees, the class action suites, moving away from commissioned sales professionals.
And another, “One moral to take away from the demise of Circuit City is this. The company was created and expanded by merchants and taken down by MBA’s and senior management that bought in to what the “bean counters” were telling them.”
I’ve just seen another great institution nearly destroyed by a “business school graduate” and this institution (WRIR) is now on the mend now that an actual former business person who learned it by DOING it is back in charge, things are looking up!
I believe that is also what is killing “Brand USA”, our last P.Resident was a “business major” and look what HE did for business!
He sure “gave us the business” !!!
One thing I have learned from BOTH of those “business majors” was that America values cute cheap people who can make the deciders FEEL good much more than actual talent, knowledge and experience.
Looks like there’s a reason so many engineering graduates leave the USA after taking classes here. I suspect the classes will ALSO be moving to overseas schools soon. Did you know that just a few months ago, New Zealand was the first country south of the equator to build and launch a rocket into orbit using a rocket they built in their country from their parts??? The Tolkien Trilogy is being filmed in NZ as well. In southern OZ they are advertising across the world for talented workers to move there because they have a labor shortage! The USA is rapidly losing one of the FEW advantages it USED to have.
Brand USA is following in CC’s footsteps for the same reasons.
Max,
Undoubtedly, Circuit City’s downfall was caused by poor management. This wasn’t just MBAs at the top, however. The management failings at Circuit City appear to have been across the board.
The last time I shopped in a Circuit City was October 2008. At the time, I worked in IT consulting and up until that point our company spent at least several thousands of dollars per month with Circuit city. Not much, but bigger than the average customer walking in the door. I stopped by that October to pickup a simple computer monitor – I saw it listed online and called beforehand to ensure it was in stock. When I arrived, it took four salespeople (plus the store manager) over thirty minutes to find the item. You can’t blame this incompetence on senior management – these retail staffers were absoutely clueless. You could maybe convince me that the sales reps’ lack of knowledge was due to the fact that they were minimum-wage replacements – the same cannot be said, however, for the store manager. Further, there were many folks, even back then, wiilling to work for minimum wage who were not “dumb as bricks!”
It’s sad to see Circuit City go down. I was an employee there for 7 years. Some of the things that I was reading here are not 100% true. When the company got rid of their appliance section, they did so to make room for the expansion of computers, software and hardware. CD’s and DVD’s were always in the stores. CD’s and DVD’s brought many loyal customers into the stores week after week while picking up batteries and other things they saw while grabbing the latest flick off the shelves.
The company lost lots of money and respect when they fired all of their experienced commissioned based employees to compete with Best Buy where no one was on commission. With the rise of the internet, it was almost assumed that 75% of the customers would do a little research on their own before coming into a store. Also due to customer feedback based from the entries most customers left from their customer code on their reciepts, more than 50% of the customers did not like the pressure that commission based sales men gave. This could be a reason why stores such as Tweeter went out of business!
Someone below. said that they came into a circuit city store for help with a TV and did not get any help and then went to Best Buy and got a lesson on LED, LCD and Plasma tvs. This is a lie due to the fact that LED tvs were not sold in Circuit City Stores or Best Buy stores when we went out of business.
Circuit City lost lots of money renevating all 600+ stores they owned. After renevations were done, more renevations took place. First with the removal of appliances, to the lighting/ceiling renevations, entertainment renevations, then new signage, carpets and shelving for all 600+ stores. Circuit city also lost lots of money opening up to many stores while the economy was heading downhill. Stores in our area still had the grand opening signs next to their store closing signs. To many under preforming stores were still open while other stores were opening up as well.
New computer systems were purchased a select amount of stores under the name Magellen. This new system was a flop and was never fully integrated into all stores. Circuit then purchased a system from IBM. 100% paid for, all stores were wired to run this new system but about 25% of the stores used this system, the other stores never got what the company paid for.
The biggest issue with the stores were how unorganized shipping/warehouses were. Out of the 7 chirstmas seasons I’ve worked, I never understood how we were always sold out of so many necessary things. Things that were not even door buster items. Isles had empty peghooks and shelves all through out the months of Oct – Jan. But when the company went into liquidation, items that were 3-4 years old were coming into our stores by the truck load. 1st generation ipods, The original playstations and xbox units. Why were these items not in the stores when they were needed. They were lost in the distribution centers and tied up in inventory.
When our new CEO took over and hired friends with little experience to over see our company and not do anything and get paid very well, this is when we went under.
To Dave S… Magellan was being developed from within to work with DPS by Circuit’s own development team and with Patapsco Designs… It was to be completed into all stores over a 7 year period as it was being deployed and developed at the same time. That brings us to DPS, As old as the system was it was a workhorse after its last upgrade to its mainboard, its downfall was that it was a plain green/white screen AS/400 like terminal looks… Perception was wow all this cutting edge technology and you have this to cash me out on? (This is why Magellan was born, to have the rockhard inv control with a fancy interface) How many inventory sytems developed in the the 80′s/90′s allowed you to check inventory in any store? Go to Walmart and say I want this… I want to buy it here (Maimi, FL), but I wanted it picked up here…(Seatlle, WA) They will tel you go online… at CCSI you could do that in store… (Granted you had to pay the taxes of where it was picked up at….) And be fairly accurate.
Schoonover and his CIO Lackeys decided to go to IBM and purchase rPOS which was to be rolled out over 18 months to all locations…4 years later it was only rolled out to certain markets. And when things would break, they would go for weeks sometimes months untouched by IBM, as the ADT/QualEx folks was not allowed to repair those devices.
IBM also said thay could provide the same support as the inhouse STS (Store Technical Services) techs could perform, faster cheaper better right? What happened, IBM outsourced it to ADT where they hired the let go STS Techs in a 7 year deal, at 3 and a half years ADT exercised a get out clause as SLA’s set up through IBM was designed to fail and a missed SLA means more money for IBM. Then the ADT (former STS techs) went to QualEx where most road down the with the ship..
I was there after the doors was closed to the customers after the store associates was let go. with only a few managers left ensuring the security of propritary information.
Brian hits the nail on the head in many ways. It is sad that it was ran into the ground in the way that it was. I really hope that the former Executives realize that if the founder legacy had been followed that there would still be a Circuit City around today.