Best Buy Mass Layoffs: Circuit City 2.0

[ClownLoach]

Nearly 20 years ago, Circuit City famously made a fatal mistake in deciding to dismiss their most experienced, tenured, and highest producing salespeople in an effort to lower payroll expenses. The company lost so much in sales overnight that they began a death spiral that ended in closure. This case is still in business textbooks today that discuss the ineptitude of upper management in making this profit grab decision which cost the company more than it saved from the minute the layoffs were executed.

Best Buy has decided to follow in their footsteps and eliminate their most highly paid, expert level in store help positions known as Consultants. These employees are the ones who are actually trained hundreds of hours each year by the company, vendors and manufacturers while receiving top wages for their high productivity. They focus on the highest dollar and most complex sales and could actually tell you and show you the difference between a $299 no name TV and the top of the line models that retail for thousands. They would go out to your house and design kitchen appliance installs or home theater rooms. Basically the model at Best Buy was that the commodity quality products that you could get at Costco, Target or Walmart as well get sold online without assistance; but the higher end stuff that needs to be seen and touched gets sold by these guys. Most of these high end items aren't necessarily sold online either, like ultra high end audio brands. The profit of selling one ultra high end TV may be more than selling a truckload of the commodity level model, and that's before custom installation services and other add-ons.

Maybe Best Buy has decided they don't sell enough quality product to justify having the trained help that is required to sell it. Maybe they will just stop selling high end entirely. But if they're going to only sell the commodity level product that is also sold at all the other low service stores like Walmart and Costco then they are never going to win against them on any attribute - not price, selection, service, policies, experience, environment, or convenience - and as such they close the door on any reason to even operate retail stores in the first place. I saw the disaster unfolding firsthand at Circuit City when I had to escort my Top Performing employees who carried the entire store P&L to their lockers to clear them out, then walked them out the door and sales plummeted immediately. Although Best Buy is saying they can apply for other positions there really aren't going to be any with the same level of compensation or status, and obviously they're not going to pay for the extensive training either so the service level is going to be reduced. Yes, business keeps shifting online but you can't see the difference between a 4K edge lit LCD and a 8K OLED on your iPhone. Seems like a really bizarre decision for a company that made a net profit of $1.8B last year.

https://www.cnbc.com/2023/04/14/best-bu ... shift.html

[veteran+]

My godson was one of those employees let go!

Top performer to boot!

[ClownLoach]

My godson was one of those employees let go!

Top performer to boot!

The reason business textbooks tell the story is that the writers find it utterly laughable. The company make it clear that they were only dismissing the most productive, highest performing individuals. Every company winds up doing layoffs every now and then. But who in their right mind sets out to only fire the best? And to see it repeated is utterly bizarre. I know much of the Best Buy management got offered top dollar to come over to Circuit City and try to turn the sinking ship around in a failed effort. Then the situation reversed and many of them came back to Best Buy with hundreds, if not a few thousand Circuit City managers and corporate people. So it's entirely feasible that the same people responsible for this textbook example of negligence two decades ago are somewhere in the Twin Cities making the exact same decision again.

Maybe they think the outcome will be different this time. But I don't think the average minimum wage sales clerk could upsell to a superior quality TV that may cost $1000+ more than the commodity model. I know the differences, but that's because I worked in the industry for a decade. The difference between the basic Samsung $499 edge lit LCD TV and the Samsung $1499 back lit localized dimming QLED TV is breathtaking if you have the right source and the right kind of room. But in a brightly lit warehouse environment they look the same. The black on the screen of the $1499 set is so dark you'd think it was turned off, and then if a light is shining in the picture it can be so bright it's like staring into a floodlight. How do you harness that technology to get that picture that is so much better than the entry level model, but at the same time not have the blinding floodlight it's capable of generating on the screen? If you didn't know then you'd either take it back because you didn't see why it was worth $1000 more and then exchange for the cheaper one, or you would think the blinding light effect is a defect. When set up with the right sources and the right settings for the room - that TV is as good or better than the best movie theater screen and it's absolutely worth the expense.

I don't know if the average person can see the difference in quality on a showroom floor if they're not shown. And worse, I don't think the average person understands that sometimes buying the best TV or whatever else without upgrading other components like their audio receiver will result in no better quality than the cheap model. I am always amazed when I see a new 4K TV hooked up to a basic cable box or old fashioned DirecTV or Dish and the picture is no better than a Pre-HD TV, then when I ask the person is disappointed that it doesn't look as good at home as it did at the store. I don't think you need to know quite as much today as you did a decade ago to get a great picture, but I would not be the least bit surprised if more than 75% of home TVs are hooked up to the wrong source, are using the wrong cables (and no you don't need 24KT gold diamond ultra luxury mega cables for a good picture, but you wouldn't believe how many people are using old cables where an HDMI for $20 is all they need for a 4K picture from their Blu-ray player they use to stream Netflix), or other easily fixed issues that cause their TV to perform well below it's capabilities. It's like trying to put 87 octane instead of racing fuel in a Ferrari then wondering why it drives as slow as a VW bug. But to figure this out someone who understands these basic things needs to talk to the customer. Best Buy no longer will have that person. And if they don't have that person anymore then exactly what do they have to justify shopping there over Costco, Walmart, Sam's, Target, etc.?