Monday, January 19, 2009

The Fall of a Great Store and What We Can Learn from It

Over the weekend, I found myself thinking a lot about Circuit City. According to the Wall Street Journal, they’ll be laying off around 34,000 people nationally as they begin liquidating their 567 stores. What a train wreck! It’s horrible to see a once-powerful retailer lose their way and for so many people to be out of work. And as I thought about it, I wondered if there weren’t some lessons in this mess for entrepreneurs.

First, Circuit City got clobbered when Best Buy came on the scene. So for entrepreneurs, we should always be looking over our shoulder and see who is sneaking up on us. While we might have the best product or service going, we should be mindful of competition, be it from a huge company or from a brand-new startup. Or to paraphrase the words of the immortal Satchel Paige… "Remember to look back. Someone is probably gaining on you.”

A second place where Circuit City took a hit was in their sales staff. Whenever I had to get information on an electronic product, I always went to Best Buy because I always found their staff to be more knowledgeable. I also found that it was hard to find people on the sales floor at Circuit City. Again for entrepreneurs, that means that customer service is king. I always tell my students that customer service is the easiest place for the small company to beat the big guys…and here is a great example. Best Buy once was the small start-up and they used friendly, knowledgeable employees as a way to grow their business.

I’m also not sure that Circuit City reacted to the new realities of the marketplace. Best Buy was always tinkering with their warehouse stores to make continual improvements. My local Best Buy now has a guitar store in it, removing the automotive section that wasn’t all that popular. I really like the TV section which includes a great place to try out the new big screen and learn about home theater options. The last time I was in a Circuit City they didn’t have that store within a store concept working. In addition to that point, I’ve heard from a number of women that they felt Circuit City was a “guys” store whereas Best Buy seems friendlier to the woman customer.

As entrepreneurs, we need to be listening to the marketplace, and watching businesses big or small…observing both success or failure…and learning in the process.

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