March 28, 2007
Circuit City Cost Cutting
I have never been a big fan of Circuit City and we usually go to Best Buy in the Murphy Family. I did buy a camcorder there a few years ago for which the salesperson knocked 200 dollars off the price just so I'd buy the 200 dollar extended warrenty. I later decided I was $200 down on the deal and haven't been back. So I don't see the latest news as out of character: Circuit City to Fire 3,400, Rehire Cheaper Workers .
``Firing 3,400 of arguably the most successful sales people in the company could prove terrible for morale,'' Colin McGranahan, an analyst with Sanford Bernstein & Co., wrote in a note today. ``The question remains as to whether Circuit City can rebuild in time for the all-important holiday season.''
I'm thinking that firing 3,400 of arguably the most successful sales people could prove terrible for more than just morale, I'm thinking perhaps, just perhaps, it could prove terrible for sales as well. Although if the salesman who moved money from the store's pocket to his own is one of the highly compensated ones, maybe not.
Since I'm not one of the people being fired, I can be detached and think that this will provide a nice economics case study in cost cutting. Arguably (i.e. I'm leaving wiggle room for later) it will be used as a case study in business school - but I will leave it up to an excercise for the reader to decide if it will be held up as an effective, an ineffective, or a disasterous way to cut costs.
Posted by Kevin Murphy at March 28, 2007 12:01 PM | EconomicsYou know very little about electronic retail if you don't know the value of a service plan on a camcorder, further more the amount of money CC pays its top sells compared to what they make for the company is unbelievable in the companys favor, for example, an employee who sells gross 1 million dollars in sales for CC make about $28,000 a year and that is one of the people fired to day.
Posted by: whatthef at March 28, 2007 1:21 PM
