Maybe it Isn’t the Economy (Stupid)

Struggling retailers are blaming the economy – tight credit, the threat of rising joblessness and plunging consumer confidence. All are fair concerns. But perhaps they mask other operational or strategic mistakes these companies have been making all along.

For Circuit City, the end certainly seems near. It has the rest of the week to find a buyer or it will have to liquidate. Court’s orders. It has said that since 75 percent of its sales are made with plastic, the credit crunch has really pinched. But what about its decision in 2007 to trim its top-performing salespeople because they were also making the most money?

What about its decision to launch other businesses – like DVD rentals and CarMax – at a time when it was the No. 1 electronics retailer of the 1990s? “Circuit City was a fantastic growth story in the 1980s,” a retail analyst told The New York Times. But the ventures “sucked away money and attention” from the core business, he said, “opening the door for Best Buy to come in.”

Smart retailing is smart retailing, in good times and bad. I don’t think you become dumb just because the economy slumps. In fact, that’s when the smartest retailers will kick into gear.

I think the retailers in and flirting with bankruptcy, the ones blaming the economy, probably planted these seeds several years ago, even before the banking and Wall Street debacles.

-Steve Kaufman, VMSD Editor