Monday, February 23, 2009

Learn lessons from the failures...

A newly designed Circuit City store (St. Louis...Image via Wikipedia

Previously I have discussed how important it is for you to know thy enemy and to keep appraised what they are doing right and wrong in order for you to be more competitive. However, it is also important for you to learn from those that fail since as the old saying goes "Those who do not learn from history are condemned to repeat it".

In the retail sector there has been many failures over the last year including such names as Steve & Berry's, Circuit City, Mervyn's and others.

Today I am going to give a couple of examples of things you can learn of what went wrong at Circuit City and how to use those as lessons in your own business. By studying your own competition including those who don't make it, you will learn valuable lessons to improve your business and insure the same thing doesn't happen to you.

Among the issues that Circuit City faces was the lack of a niche, customer service, and the layout of their newer format stores.

While I may start sounding like a broken record, it is critically important that you have your own niche away from the major competitors. In the case of Circuit City, it could not separate itself from its major competitor Best Buy. The only major difference between the two stores was that Circuit City eliminated appliances several years ago which seem to contribute to their problems, not help them. Otherwise, they seem to try to emulate Best Buy not set themselves apart from Best Buy.

Following up on their attempt to emulate Best Buy, Circuit City eliminated their commissioned sales staff a few years ago and put them all on hourly. At the time Circuit City said it got rid of the top of sales ladder because they would have wanted too much money and in my experience it was clear that they kept the mediocre people and that led to poor customer service.

Let me give you one of my personal examples. I wanted to buy and item and the only store to have it in my state was Circuit City (otherwise I would have gone to a local competitor). I walked into the store and immediately found it in a looked up case. There was two employees standing just a few feet away but neither one of them would come over to help me. Finally I went over to the customer service counter to ask for a manager in order to get some help.

Instead of coming up to the counter and helping the customer personally which should have been done, the manager calls on the phone, tells the customer service person to find someone to help me because he had better things to do. Finally someone did respond to the calls by the customer service counter and I got the item I needed.

Clearly Circuit City failed from management down to take care of the customer. While in many cases this could have been an isolated incident, I heard many similar stories from other people which showed that Circuit City was failing in this area.

Finally, Circuit City also had problems when it came to their new format stores. The last new Circuit City store to open near me was in their newest format and I took a drive over to check it out one day. While the store was nice and new, the whole layout of the store was confusing. There was one department that was spread over three different areas of the store. How confusing would this be to the average customer? Stores need to be logically set up so that people can come in to them and find what they need easily.

That is just three examples of what where major problems at Circuit City. These are valuable lessons to learn so that you do not suffer the same problems as they did.

Learn from your successful competitors and learn from the failures so that you do not make the same mistakes they did.

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