Shoppers Short-Circuit Retailer Over Firings

By Amy Joyce
Washington Post Staff Writer
Saturday, May 5, 2007

When Carole Fisher read the news in March that Circuit City fired 3,400 employees so it could replace them with lower-paid workers, she knew one thing: She would never shop there again.

"They weren't going after the big guys, they were going after the little guys again," said Fisher, 71, of Ellicott City. "It seems to me the little guy gets screwed pretty routinely when a company is having trouble."

Although she needs to replace her kitchen television, she'll shop elsewhere. It will be her little way of trying to fix what she thinks is wrong with corporate America.

From the company's point of view, that's what it was trying to do: fix a problem. Circuit City had been in a holiday price war with Wal-Mart and Best Buy over flat-panel televisions. Its bottom line was suffering.

Bill Cimino, Circuit City spokesman, said the company was simply trying to be candid. Such firings are not uncommon in retail, he said, but Circuit City was "honest and open about what we did. And we were that way with our employees and felt it was appropriate to be that way with everyone else."

The company was trying to keep to a defined pay scale, but some managers had given workers raises that moved them above the limits. That had to be corrected, he said, because the company had to compete with other chains on wages as well as prices.

But this is a time when many people, hearing tales of corporate greed and crime, are looking at business skeptically. Earlier this week, after Circuit City said it would report a first-quarter loss because of low sales of big-ticket items, analysts said sales might have been harmed by customer reaction to less-informed salespeople replacing more experienced ones.

Some shoppers disputed that, saying price was paramount.

Cimino said store traffic has not dropped since the layoffs, although sales of more expensive items have. That would point to economic reasons for a slowdown, rather than consumer discontent, he said.

Competition over prices remains intense. Yesterday, Circuit City had a 42-inch Panasonic plasma TV on sale for $1,519.99 and Best Buy had it for $1,518.99. They will both go back up to $1,599.99 after the sale. But Wal-Mart had a similar Magnavox for $1,098 and a 50-inch Panasonic for $1,348.

Bouba Cisse, a college student who was shopping at the Circuit City in Rockville the other day, said he was looking for deals. He shops there about once a month for DVDs and electronics. Though he had a couple of friends among those fired, he said as long as he found better deals than at Best Buy, he would shop at Circuit City. "I'll come here regardless," he said.

Another Rockville shopper, Rick Kranias of Kensington, was looking for a navigation system for his minivan. He said he always researches products before he shops and doesn't require customer assistance. He had to wait about 10 minutes for an employee to approach him.

"If I was clueless about what I wanted, I probably would have sought someone out or been ticked off," he said.

Others shared Fisher's anger.

"I think consumers are becoming more and more outraged at the internal dynamics of providers of service to them," said Kenneth Siegel, an organizational psychologist in Los Angeles. "From boardroom scandals at Hewlett-Packard to Wal-Mart's union-bashing efforts, companies need to be careful with what they project into their markets. Very little goes unnoticed, and a lot produce strong feelings."

That's how Devona Wyant, 61, of Lincolnton, N.C., said she felt about the Circuit City firings.

"The thing that bothered me is that the American work ethic in the past has been you're loyal to your employer, give them your best, you start working your way up the ladder," she said. "It seemed as though they are being punished for doing this."

She and the 15 people who are part of a neighborhood online news discussion group said they would no longer shop at Circuit City. "The consensus generally was: 'I don't see the reason why I need to go there anymore,' " Wyant said.

Circuit City had said it expected the firings would reduce expenses by $110 million in fiscal year 2008 and $140 million a year starting in fiscal 2009.

"We could have closed a large number of stores that could have impacted thousands of more associates," Cimino said. "We did this to protect as many people as we could."

Brooks Holtom, assistant professor of management at the McDonough School of Business at Georgetown, said companies often "overlook unintended consequences" of reductions and cost cuts.

"I would hope someone with a strategic view of 'How do we create value in this enterprise?' would have raised their hand and said, 'How might this be perceived in the marketplace?' or 'Is this what we want to do to customer service?' " he said.

Gary Cleek, 57, of Kingsport, Tenn., said the firings were enough to make him stop shopping at Circuit City. "I don't view someone who works for a living as a commodity."

Staff writer Michael Rosenwald contributed to this report.

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