(NYSE: ) is with cheaper models. What does Circuit City's replacing of its retail workers mean for workers and their salaries across the board? Is it unusual for a company to be so upfront about its plans to do something like this?
I think it's not unusual for companies to replace workers with lower priced ones -- it happens whenever companies outsource jobs. Layoffs and buyouts have been common as companies respond to pressures from Wall Street and global competitors. In 2006, for example, 72,000 U.
S. auto workers agreed to quit or take early retirement. And some companies, including Albertsons, Ralphs and Vons grocery chains, have adopted two-tier systems that provide lower wages and less valuable benefits to newer employees
However, it is very unusual for companies to be so upfront about what they are planning to do and why.
Circuit City's decision to fire 3,400 of its highest-paid sales staff and replace them with lower-paid workers is a risky strategy to cut costs that goes beyond the traditional layoffs, buyouts and hiring freezes used by struggling companies.
I think this is a risky move because the quality of service to customers will almost certainly decline since the higher paid people who were fired will take with them product expertise that consumers found helpful. Circuit City is gambling that the sales it loses as a result of the less experienced staff will be more than offset by the lower pay the new rookies receive.
I think Circuit City's move is a warning signal for many retail workers -- particularly workers whose employers compete on price, rather than service. If Circuit City's plan leads to a profit revival I think many other retailers will try it. And then the impact could be quite widespread throughout the economy as fired retail workers struggle to find employment elsewhere -- possibly in lower paying jobs.
Peter Cohan is President of , a management consulting and venture capital firm. He also and edits . He has no financial interest in Circuit City.
1. Lower wages than retail! How is that possible?
My personal experiences with Circuit City has left me with the impression that few of the employees there have more than just a superficial level of knowledge about the electronics the store sells. The idea that circuit city is going to eliminate the only employees that “Have a clue,” strikes me as a self-defeating proposition. In this age of HD, where today’s cutting-edge technology will be hopelessly obsolete in 2 years, consumers are looking for information.
They want companies that can solve problems I buy all of my Home Audio and HD equipment for a small independent guy. He does not stock much, but he will order what ever you want and at a price at times lower than Circuit City or Best Buy. The important thing is he knows how to take the equipment apart and put it back together.
When I came into buy a new DVD player, he remembered which HD TV I had in which room hooked up to which receiver; so he gave me the correct inter connects. More and more, Circuit City is becoming a display case for small shops to send customers to look and compare, then come back to them to buy. The reason for that is because many consumers just have little confidence in the information or advice they get at these “Big-Box Stores.
” Therefore they can only sell on price and the margins are too small to be profitable. I understand why they feel compelled to cut costs, but by getting rid of their most skilled employees and replacing them with minimum wage clerks is just going to guarantee the company’s downward slide. There is a reason new car dealers don’t replace their sales people with $7.
00/ hour people. Circuit City’s days are numbered. 3.
That's why we need a "maximum wage" A constitutional minimum wage based on the company's management's pay. Now when someone figures out how to outsource top management..
. 4. I was one of the people laid off and I can guarantee that the service will decline by leaps and bounds.
The seven of us that were laid off at the CC I worked at, ran the store. All of us had been there 5+ years. Circuit City states they gave us severance- 4-8 weeks pay doesn't go very far.
One of the guys that was laid off had been with CC for 20+ years and was number one in the company in selling warranty. They laid off the best people!!
! It just doesn't make sense. It is crazy that they think a 5 or 10 year employee could be replaced with an untrained $8 hour employee.
Good Luck with that CC. I'll be at Best Buy..
..with all of my former Circuit City customers!
5. I worked at CC when it was commision based, and made a decent buck, but I was unhappy and went back to school to get my degree. Soon afterwards they went to hourly pay and fired those people who were top earners in the commision system.
CC figured the people would quit anyway because the wages were less than good sales people earned on commision. The leftover people were not sales people they were register clerks, I can't wait to see how much worse it gets. I remember hearing CC management saying things like "since the internet most customers do their own research and already know what they want when they get to the store.
" -WRONG, people research but definately appreciate when someone can seperate the BS (marketing) from things that actually make a difference. A good sales person can get you the best bang for your buck. Guess I need to start shopping at BB
6.
While we're at it, let's downsize the FAA and, as Reagan once proposed, dismantle the Weather Service. I've seen C.C.
people do things for customers, even including a free install of a TV for a disabled friend, that Best Buy wouldn't dream of. That's thoroughly in the past now.
7.
I worked for circuit city back in the commision days and when they laid a bunch of ppl off i was one of them, i was rehired and i was getting paid $15.00 hr i was ranked 2nd in the district in services and volume wise averiging over 10% a day in servicses and i got hit again with a slap for doing good. I encourage PPl not to apply for a job at circuit city cause there is no growth in that company, just imagine when you evaluation comes up and you are due for a raise should we be Happy or should we be scared, I belive circuit city is going to shut down its entire stores, and i hope it happens.
they do not desrve for customers to buy at circuit city for the reason been that they care about themselfs and not about 3,400 emplyees. This Store has created major issues for familys that they just bought a house,or maybe they are having a baby, this ppl broke hearts and familys,its depreesing that you are loyal to a store and then you get a slap, DONT SHOP AT CIRCUIT DONT SHOP AT CIRCUIT CITY>>>SPREAD the Word
8. I definitely will no longer shop at Circuit City, not that I did much in the past.
Their prices are much higher than Best Buy. The only incentive was employees who knew something about the products I wished to purchase. Unfortunately this isn't just a retail issue.
Service workers across the board are feeling the pain of outsourcing to foreign countries or to companies who specialize in "customer service" for a company or product they know nothing about. In my last job, which I quit in November due to moral and ethical objections to their practices and ethics, the only thing that kept the occupational associates relatively "safe" was the presence of a union. However, my state recently passed the "right to work" measure which will effectively kill the union in less than five years.
Who will speak for the occupationals then? In an ironic twist, both our CEO and CFO stepped down last year supposedly in a "voluntary" retirement, in the face of declining profits and stock prices. At least one was under investigation for illegal business practices.
Both were given separation settlements in the hundreds of millions of dollars. When I took early retirement my separation settlement didn't even reach six figures. Go America!
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