We All Compete With Amazon
by Peter High, published on Forbes
11-10-2014
In recent speeches at conferences, I have asked the executives gathered to guess the industry that the company with the best stock performance in the US during the 1980s represented. The three guesses most often offered are energy, financial services, and technology. Each is a reasonable guess. Only once has someone guessed the correct answer: retail. That the highest flyer of the 1980s came from retail is all the more remarkable when one considers the capital intensity of retail during the 1980s, before the advent of ecommerce. Physical stores needed to be built, inventories needed to fill those stores. Of course, employees needed to fill those stores, as well.
Circuit City was that top performing stock. The company went public in 1984, and in less than six years as a public company, it returned 8,265 percent. The company was a pioneer in the big-box retail segment, and much of its success could be attributed to creating a new customer experience bringing together nearly all aspects of consumer electronics together under one roof. Now, as customers visited stores to purchase a television, they could see the VCR that would go with it. They could see how different sound systems fit together and determine which computers and which peripherals were right for them. Knowledgeable sales associates demystified the complexity of consumer electronics for curious but intimidated customers.
It continued to perform remarkably well in the 1990s, and it used the windfall from its strong performance to start a number of other companies, including Divx Video, North American Banking Company, and in 1993, CarMax, today a $12.5 billion company.
Their success continued in the early part of last decade, as the company was featured in Jim Collins’ bestselling book Good to Great in 2001. Collins profile of Circuit City indicated that it had a number of practices that companies no matter the industry should follow. Remarkably, only seven years later, the company entered Chapter 11 protection, and the following year, the company was liquidated. It went from good to great to gone. (This was the title of a book written by Alan Wurtzel a former CEO of Circuit City whose father was the company’s founder.)
