Tuesday, February 03, 2009

Short Circuit

Among the carnage of the recent economic meltdown was Circuit City, a company that is a model for how not to run a business on a macro AND micro scale.

First, the macro. In the late 1990s, Circuit City launched a new movie format called DIVX/Digital Video Express. The way it worked was that you could rent a movie, and from the time you started it, you had 48 hours to watch it. Afterward, it would become unplayable. But it wouldn't play in a regular DVD player: you had to buy a specific DIVX player. The format was owned by Circuit City, but they were not exactly forthcoming about their new format. They presented it as a compatible service to DVD, and not a competing format.

Eventually, internet chatrooms caught hold of the scam and, in a grassroots effort, started sites like FightDivx.com, which played a part in the format's demise around 1999. (They lost $114M on DIVX.)

But the company was known for all sorts of underhanded tactics. Lots of examples are available. Circuit City had to pay the state of New Jersey over $170,000 in a class action suit over false advertising.

In California, the unfortunately named Muammer Gonlugur, an employee of Circuit City, successfully sued the company for unfair arbitration practices. It doesn't sound sexy, but reading the court document is to read the very definition of predatory hiring.

Basically, the way Circuit City treats their employees makes Wal-Mart look like Wegmans.

My own experience with Circuit City wasn't horrifying or really that memorable. But it was indicative of how they do did business. It was Christmas 1998, and I wanted to buy my dad a portable CD player for Christmas. (This was the Christmas after college when I was living back at home and wasn't paying rent so I had money to burn for the first time ever.)

I saw an ad in the paper selling portable CD players for $39.99 (at the time that was a bargain-basement price), and it was a brand name. So I ran to Circuit City. When I got there asking for the cheap players, oh surprise, they were all out. But, if you're still interested, we have a few more players over here you can look at. Long story short, I walked out of Circuit City with a wonderful portable CD player -- for $119.99. A classic bait and switch, and I fell for it. But after the buyer's remorse I felt, I stopped blaming myself and started blaming Circuit City for luring me in.

The more I read about them throughout the years, the less surprised I got. And now they are reaping what they sowed. They chose the quick buck instead of earning their customers' trust.

And so if there is anything positive about the tens of thousands of people who lost their jobs, it's that maybe the next business that comes along to fill Circuit City's empty spaces will be one of integrity and honesty.

And if not, they, like MCI/WorldCom and Enron before them, will collapse into rubble as well. Here's to the demise of shitty business!

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