Why Circuit City (And Others) Went Bankrupt As Soon As The Goin Got Tough

As you know, we’re in a recession. Everything seems to be getting worse and you’re now seeing a bunch of giant companies like Circuit City going out of business.

A lot of people are getting scared by this, but why?

I’m going to show you something in a minute that’s going to amaze you when you see the amount of money Circuit City is wasting.

It’s kind of pathetic actually.

So here’s the story…

The other day I was doing some wedding preperation stuff with my fiancee and we were driving around up by the Circuit City by our house.

In a span of probably less than 1 square mile, we saw 2 kids holding up “going out of business” signs for Circuit City.

I’m going to let you think about how stupid that is for just a minute.

Figure it out yet?

Think about it, they’re paying those 2 kids to stand there and hold up a sign all day long. Let’s say they’re paying them $8 per hour and only 2 people are doing it per store for all their stores in the U.S. and Canada for 10 hours per day (they’re open longer than that, but I’m being conservative to prove a point).

At $8 per hour, for 2 kids per day, for 10 hours…that comes out to $160 per day per store. With a total of 1,332 stores in the U.S. and Canada (according to Wikipedia) – they’re spending a whopping $213,120 PER DAY on something that they shouldn’t even be paying anybody for!

Hmmm….and we all wonder why these big companies are going out of business.

Because they have no concept of money management!

In times like these, the stupid companies get weeded out and the smart people stand out and start making more money because the stupid companies aren’t there to steal it.

My prediction is that the majority of the big companies out there are going to start dropping off like flies. They’re just too big and clumsy to keep up with the pace of the economy.

I guess we’ll see if I’m right…

4 Responses to Why Circuit City (And Others) Went Bankrupt As Soon As The Goin Got Tough

  1. Bob February 22, 2009 at 1:02 pm #

    You DO know those two kids with signs are — without a doubt — driving more than $8 / hour of business to each Circuit City… right?

    Going out of business sales make a killing.

    • admin February 22, 2009 at 5:48 pm #

      I’m sure they are, but that doesn’t change the fact that they’re completely unnecessary.

      All they have to do is put some rocks on the bottom platform of the sign to hold it down- no way they’d blow away. My point was that they’re just wasting tons of money when there are several obvious alternatives.

  2. Ryan Healy March 10, 2009 at 10:47 am #

    It’s probably hard to measure, but my guess is that Bob is right: Each kid is driving more than $8 an hour of business to the store.

    On a side note, one of the reasons stores now hire people to hold signs is because it is illegal in most places to post signs up anywhere, even if the sign is being held by rocks on the ground.

    It used to be different, but all the rules changed when Herbalife started telling all their MLM people to post signs on street corners driving people to 800 numbers. The number of junk signs literally exploded — and most cities outlawed signs unless they were being held by a person.

    So — While it may seem silly to hire somebody to hold a sign, in some places it is the only way to legally get a sign up.

    Ryan

    • admin April 18, 2009 at 3:33 pm #

      Hey Ryan,

      I actually thought I responded to this…I guess not haha.

      Anyway, I never even thought of that! Great point on the “legalities” of the whole case. That puts it all into perspective.

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