A Student of History

March 30, 2007

Circuit City: People Don’t Matter (2)

Filed under: The world today — John Maass @ 12:43 pm

At CNN.com today they have a short video clip on a story on Circuit City (see my post of 3/29 for details), and other corporate giants squeezing their workers.  The top 1% of incomes make 400 x average so the story goes….

I’m not shopping at CC anymore.  I found the following at a Yahoo business news page, and it described what could be a potential backlash against the retailer:

Analysts and economists said the move is an uncertain experiment that could backfire for the chain. The risks: Morale could sink and customers could avoid the stores. Also, knowledgeable customer service is one of the few ways Circuit City can tackle competitors that include Wal-Mart Stores Inc., they say.

“This strategy strikes me as being quite cold,” said Bernard Baumohl, executive director of The Economic Outlook Group. “I don’t think it’s in the best interest of Circuit City as a whole.”

While other companies, such as Caterpillar Inc., have introduced two-tiered wage systems, where newer workers make less, firing workers and offering to rehire them at a lower wage is very rare.

“I don’t think you’re going to find too many examples,” of this, said Ken Goldstein, labor economist for the Conference Board, a business research group. “That certainly has not been a trend we’ve seen.”

Circuit City Stores Inc., the nation’s No. 2 consumer electronics retailer behind Best Buy Co., says the workers being laid off were earning “well above the market-based salary range for their role.” They will be replaced with employees who will be paid at the current market range, the company said in a news release.

“We haven’t done something called (a) wage management initiative before,” said company spokesman Jim Babb. “All companies at one time or another need to go through and make sure their cost structure works with market conditions.”

1 Comment »

  1. Here is what Circuit City wrote to me in response to my e-mail to them about laying off the good “expensive” people they used to have:
    Dear Valued Customer,

    Thank you for sharing your thoughts. We value our customers’ feedback.

    As we stated in our news release yesterday, we are taking a number of actions to improve our cost and expense structure. We are holding ourselves accountable to our associates, our customers, our communities, and our shareholders to build a strong company that generates sustainable growth for the future.

    Our goal is to provide superior service while effectively competing against low-cost retailers. We are working towards this goal by making changes, such as announced yesterday, and with the help of over 40,000 associates who keep our customers at the center of everything we do. We hope you will allow our Circuit City team to serve you in the future.


    John S.
    Customer Support Coordinator

    Comment by John Maass — April 3, 2007 @ 3:13 pm | Reply

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