Tort and Regulatory Risk

Essay by harenUniversity, Master'sA, September 2009

download word file, 5 pages 0.0

Circuit City Stores, Inc. was an American retailer in brand name consumer electronics, computers, home appliances and entertainment media products. Circuit City opened its first store in 1949 and liquidated its final American retail stores in 2009, followed by filing bankruptcy and failure in finding a buyer. Founded in 1949, by Samuel S. Wurtzel opened its first Wards Company (not to be mistaken with Montgomery Ward's) retail store in Richmond, Virginia. In 1984, Wards Company officially changed its name to Circuit City and became part of the New York Stock Exchange (Wikipedia, 2009).

Business had begun to take off for Circuit City in the late 1980s, they were known for their exceptional service. However, Circuit City's downfall began in the 2000s. In 2000, they exited from the large appliances sales market (, 2008). Every showroom had needed to be refitted using the extra store space to expand its sales in computer, music, and software selection.

This project alone had cost the company $1.5 billion (Heller, 2003). Because of this, investors were upset and their stock price had dropped to nearly a one-third of its 52-week high. In 2003, Circuit City decided to convert to a single hourly pay structure in all stores, eliminating commissioned sales. Many previously commissioned sales associates were offered new positions as hourly "product specialists," while 3,900 salespeople were laid off, saving the company about $130 million per year (Willis, 2003). In early 2007, Circuit City continued its downfall by dropping starting wage for new employees from $8.75 an hour to $7.40 an hour (at the time minimum wage was $6.50 an hour). Approximately 3,400 employees were discharged from their positions with salaries higher than the cap for their position within the company being cited as the reason. These employees were replaced with new employees brought...