Marketing Ninja

Today I spent some time reading about the final liquidation sales at Circuit City and the recently-filed bankruptcy of Black Angus restaurants, and it made me a little sad. Did Circuit City do a lot of stupid things that upset customers over the years? Of course, but it’s still sad to see a giant ride off into the sunset never to be seen again.

So what went wrong? Circuit City and Wal-Mart invented the concept of "big box retail" – how did such a colossal company fail in the middle of the golden age of electronics?

Circuit City failed because it committed a fatal marketing error: being stuck in the middle, otherwise known as "trying to be all things to all people." When you’re stuck in the middle you tend to do a lot of contradictory things, like starting up a high-end personal electronics assistance service (Firedog) despite the fact that your company is a command-and-control low-margin retailer. Let’s consider a positioning matrix for the electronics retail market as a whole less Circuit City:

I came up with a lot of different matrices before I settled on this one – there are several ways to define this market (that’s always the challenge) but this is what I settled with.

I’m an Amazon.com guy – I want high-end goods but I don’t want or need service. High end goods, no or low service. That’s how I roll. Of course you can buy the low-end stuff off of Amazon too, but let’s keep things simple.

In the top-right corner of the matrix are all of the specialists. These companies deal with customers who want $10,000+ high-end home theater systems or audio systems for cars. Typically these guys are local businesses.

In the top-left corner are the high service / low cost goods companies, like Best Buy. I know there are a lot of people who whine and whine and whine about Best Buy’s service, but give me a break – you’re getting a pretty decent high level of service for what you’re paying for. If you want a Best Buy service rep to help you pick out a pair of cheap in-ear headphones for jogging, they will gladly spend a few minutes helping you. The goods aren’t particularly high quality at Best Buy, but the service level is high.

In the bottom corner are the low service / low end goods retailers like Wal Mart. You can buy a lot of cheap stuff at bargain prices but you don’t really get much in the way of service.

You can disagree with my depiction of the electronics retail market all you like (I would welcome it), but given my reasoning, where would you put Circuit City on this matrix? Hmmm…

The "high end" home theater equipment and car audio equipment sold by Circuit City is obviously a far cry away from the expensive systems retailed by the specialists I mentioned earlier, but that’s part of the problem.

When you’re stuck in the middle you end up half-assing everything because your company is being pulled in several different directions at once. Circuit City’s roots are in the low end / low service quadrant, but as new entrants like Best Buy and Amazon started appearing in the rear view mirror it did what any dumb, fat, and happy mega-corporation would do: try to expand into the quadrants of those new entrants in order to starve them out.

This rarely works, Circuit City being yet-another cautionary tale to that effect.

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