Spolsky: Why Circuit City Failed, and Why B&H Thrives

http://www.inc.com/magazine/20090501/why-circuit-city-failed-and-why-bh-thrives.html

by wyday • 17 years ago

185 79 17 years ago

edw5193• 17 years ago

"...in order to reduce shoplifting and employee theft..."

Shoplifting, maybe. Employee theft, no. The Hasidim already have the world's best deterrent to employee theft: you are banned for life from the community. Period. No warnings. No discussion.

Imagine if wall street had that rule.

boundlessdreamz• 17 years ago

How do they know who has done the theft ?

edw5193• 17 years ago

Doesn't matter, that's the point.

Would you be willing to risk everything important to you, not just your job, but your family, friends, home, and community, on the chance that someone may have seen you take a $5 item?

param• 17 years ago

I am sure that its just the owners who are Jews. Employees would be regular folks, and theft just means getting fired - no different from other stores.

cjbos• 17 years ago

I think all employees are Jewish as well, or at least I haven't seen a non Hasidic Jewish guy behind the counter any of the half dozen times I've been in the store.

jonknee• 17 years ago

I am sure you haven't been to B&H before.

Confusion• 17 years ago

I seriously doubt there are only Hasidim working there...

Edit: hmmm wait, this tab was obviously already open for quite some time... a dozen comments have materialized, including some I'm now duping. Sorry.

crux_• 17 years ago

Random anecdote: I interned, back in the day, at a consulting firm working w/ their website; at the time -- and perhaps still? -- they worked in gender-segregated areas when on site.

More randomness for the hell of it: I read the Yiddish Policemen's Union the other week and cannot recommend it highly enough. (It's a noir detective alt-history set in a Jewish analogue of Hong Kong in Alaska, where the local organized crime are Hasidic, the slang name for them is "black hats.") (It also manages to be a page-turner without any of that guilty feeling of "I just read 300 pages without thinking a single original thought" that so many page-turners leave you with.)

joshwa2• 17 years ago

Incidentally, I don't think the conveyor system is to reduce theft-- it's due to the lack of space. 35k ft^2 is only enough to keep display models of most items out on the sales floor (I'm guessing their total product line is >300k SKUs)

Most of their store inventory is in the basement warehouse (and plenty of other inventory must be off-site entirely). There's simply no other way of fulfilling that much volume in a real-time retail environment.

coglethorpe• 17 years ago

"I had read on the Consumer Reports website that Circuit City's liquidator had actually raised the price on many items for the going-out-of-business 'sale.'"

That I can believe. I made the mistake of going in to Circuit City's going-out-of-business sale to find a wide screen TV, only to find they were all at least $200 more than I'd spend at Sam's Club or Costco. It seemed they had no care if they sold any merchandise whatsoever.

flooha• 17 years ago

Wow, I had EXACTLY the same experience. We were going to buy a TV and thought "What the hell, why not?" and stopped in at the CC going out of business "sale". It was a joke. The TVs were $300 to $500 more expensive than Sam's Club. I had the feeling like they didn't actually want to sell anything. It was ridiculous.

noodle2• 17 years ago

this is how pretty much every liquidator operates. if you see a "going out of business" sign, avoid it at all costs.

all the "good" stuff will be marked up to or past MSRP and then marked back down again to the level of their original costs just so that they can legally advertise huge-sounding discounts. they mark something up so that they can then put a "30% off" sticker on it and run an advertisement, despite the price not actually changing.

you won't find anything worth buying until the final days when they really do discount items. but by then, the "good" stuff is gone because the liquidators have tricked unwitting consumers into buying it up.

dugmartin2• 17 years ago

Don't confuse markup with discount. A $1 item that is marked up 30% and then given a 30% discount has a final cost of 91 cents.

pchristensen2• 17 years ago

I went on the final day and got a $1900 laptop for $1080. Not much selection, but they coincidentally had exactly what I was looking for.

alnayyir2• 17 years ago

Would you mind sharing the model of laptop? I might be in the market soon.

Just curious

raganwald2• 17 years ago

I love the CEO blaming the economy. When times are good, these weasels take home bonuses for their managerial success. But the moment things go wrong, they are right there blamestorming everyone and everything else.

Schmucks.

edw5193• 17 years ago

Sometimes I wonder if this is a chicken and egg scenario.

Are they blaming everyone else because they failed or did they fail because they were too busy blaming to act?

Tamerlin3• 17 years ago

My theory: Yes.

When things start going poorly, they cast blame.

Since they were busy casting blame rather than doing their jobs, things got worse.

dugmartin2• 17 years ago

"blamestorming" - my new favorite word of the day.

raganwald2• 17 years ago

My understanding is that the word describes a particular kind of group behaviour where everyone is blaming everyone and everything except themselves. So I misused it to describe a CEO blaming other people, it would be more accurate to think of a management meeting where the CEO, PResident, and various VPs are all weaseling out of responsibility by trying to pin it on something else.

Vehemently!

A colleague introduced the phrase to me in conjunction with Hurricane factors. So walking into a meeting to discuss why a particualr release was late, he would whisper to me, "Stand by for a Force Three Blamestorm!"

adnam• 17 years ago

And "aggressively unknowledgeable" is the phrase of the day.

Tamerlin3• 17 years ago

It sounds a bit like my management here, though it's not as severe; the dev manager picks a date out of his ass, and if we hit it, he takes credit for being a great manager, and if we don't, we get blamed for not working hard enough.

djahng• 17 years ago

Yup, and it happens all the time. Take credit when things go right, spread the blame when they don't.

stuff4ben2• 17 years ago

While B&H rarely has the best online price, they always have a fair price. Typically you can see other online retailers undercut B&H in price. However, B&H has the upper-hand in customer service and advice which, to me, is worth the extra premium. When comparing against regular brick and mortar stores, B&H beats them hands-down.

maukdaddy2• 17 years ago

Exactly. A good example of not competing on price alone, but overall value. I'll gladly pay a little more to order from their website vs. some fly-by-night yahoo store.

Any time I'm in NYC I try to visit B&H just to absorb the atmosphere and play with all the awesome toys.

stuff4ben2• 17 years ago

I've ordered several thousand dollars worth of equipment from them but have never been to their store. Would it be odd that I plan a trip to NY just to visit the B&H store?

yan2• 17 years ago

I love Beards&Hats. Always have to stop by when I'm in the area; the whole place is like a small electronics amusement park.

carterschonwald• 17 years ago

I've actually spoken with people who work at B&H, and apparently they're a multibillion dollar company, and eg get on the order of 1-2 million dollars in equipment orders from Brazil each month alone!

pie• 17 years ago

The frenzy of confused customers and hurried salespeople on a typical afternoon at B&H can be a little overwhelming, but this is all trumped by the dazzling selection of equipment. The place feels more "professional" than Circuit City's "consumer," and I think this is the key difference between the two. Stepping into Circuit City always felt a little gross, something like a necessary evil.

jasonkester• 17 years ago

FYI, the actual article is here:

http://www.inc.com/magazine/20090501/why-circuit-city-failed...

That will save you an interstitial ad and 30 seconds of page load before the "printer friendly" link shows up.

Somebody might want to re-point the item.

ciupicri• 17 years ago

You're right, but wouldn't be fair to let INC earn some money from that interstitial ad?

spatulon• 17 years ago

That format may be printer-friendly, but it is significantly less readable on-screen. The text fills the browser window, making each line far too long to read comfortably.

Bloated pages (both visually and in terms of file size) are a problem, but linking directly to printer-friendly pages is not a suitable fix, IMHO.

Avoiding advertising also bothers me (even more than the actual advertisements bother me) in general, because I like information, and information generally costs money to acquire - especially high-quality, reliable information. Newspapers and their investigative journalism appear to be going away, and that makes me sad.

Note: I'm not familiar with Inc. magazine, so discussing quality journalism may or may not be entirely relevant in this context.

Nwallins2• 17 years ago

> The text fills the browser window, making each line far too long to read comfortably.

This is easily rectified by a single click and drag to resize the browser window to your preferred column width.

I for one much prefer print links for reading articles.

hasseg• 17 years ago

> That format may be printer-friendly, but it is significantly less readable on-screen. The text fills the browser window, making each line far too long to read comfortably.

Best of both worlds: Open the "printer friendly" version of an article and execute the readability javascript bookmarklet: http://lab.arc90.com/experiments/readability/

marcusbooster4• 17 years ago

B&H is a fine store, but comparing them to Circuit City is not apt. They operate more like Amazon than any brick-and-mortar store -- the vast majority of their product is shipped online.

And customer service isn't exactly what comes to mind when thinking about B&H. The operation is run to be efficient and maximize profit not to enhance the "customer experience", though often the two intertwine.

They've found a good niche but if they tried to put one of these stores in every city across the country, as they say, "it wouldn't scale".

voidpointer• 17 years ago

Why exactly wouldn't it scale? The challenge is to make sure other stores are run in the same dedicated fashion and not by some dimwit that only hires other dimwits in order to cut costs. Retail chains seem to become prone to this once the whole organization gets big enough to put in place metrics that measure store performance mostly on a revenue basis and those in charge start to manage by the metrics instead of looking at reality because there is no more incentive for them to do just that.

marcusbooster4• 17 years ago

It just doesn't make sense to add more operating costs when your product is shipped online.

But there's also the place it has in the community. From their Wikipedia article (so take it for what it's worth): "Surpassed only by the Diamond District in terms of Orthodox employment, the company is a vital part of the community's financial health, with hundreds of Orthodox Jews on staff."

That doesn't scale either.

wglb3• 17 years ago

But they were a force in that market long before there was a web.

marcusbooster4• 17 years ago

They were popular in the pre-web photography market serving New York artists and other professionals. They were not popular with general consumer electronics like a Circuit City (and I wouldn't say they are today either).

chops• 17 years ago

The most amazing thing is that the prices are so low that I don't even bother to comparison-shop anymore.

This is how I feel about Newegg.com. I used to be a daily visitor to pricewatch.com, which compares the prices of electronics, until I found myself regularly ending on up Newegg, and decided that it was easier to just hit newegg directly. Now I buy almost all my gear from them.

jrockway• 17 years ago

I feel the same way about Amazon. I find myself there for everything; books, MP3s, electronics, even parts for my bike. They are usually pretty reasonable price-wise, and since I have Prime, I know I will get my item in a day or so. It's wonderful. (No more dealing with places that have good prices, but ship your stuff whenever they feel like it, like a week after you order. With Amazon, you always know how long it will take, and that they are not absconding with your money.)

weaksauce• 17 years ago

I must second the notion that amazon + prime gives me 85% of my online goods. Newegg is still better at most of the nuts and bolts computer hardware stuff but not by much. I was frequenting pricewatch but found it a waste of time to evaluate a new vendor for such a marginal price difference(am I going to get my parts, are they going to sell my credit card number, How long is it going to take for ground to get to me, etc....)

Overall happy with paying a bit(not much) more for a lot more convenience and speed.(newegg gets to me in a day if I purchase by noon to noon-thirty, amazon in two.)

octane2• 17 years ago

Chances are during that time your income went up too, and you were no longer someone who really gave a shit about a $20 difference on a piece of gear and were willing instead to pay that $20 or whatever it was to an outfit like newegg to make sure their excellent service continued.

weegee• 17 years ago

I've purchased a lot of gear from B&H. This article is a little inaccurate, B&H opened in the late 1960s, my father bought his Nikon F FTn from them through the mail in 1969 and I still have the receipt for it.

dmh2000• 17 years ago

'Sony Guts!'

wglb3• 17 years ago

I love the phrase "aggressively unknowledgeable".

I have ordered much stuff from them; would love to visit them in person sometime.

AndrewWarner• 17 years ago

I wonder if someday, someone will ask why Inc failed, and the answer will be that they put big splash screen ads in front of articles.

I love this article. Thanks for posting it wyday.

jdfreefly• 17 years ago

B&H - Knowledgeable sales people. Honest business practices. Lowest prices or competitive prices.

Circuit City - Clueless sales people, (I was once told that a laptop I was looking at "has to run vista because of the drivers that are installed"), dishonest business practices and prices that are guaranteed to be significantly higher than what you see in other places.

The question is will B&H become a victim of its own success? As Joel says in the article, he doesn't even comparison shop anymore. I've been using B&H for years, and while I don't comparison shop, I almost always go with B&H because of their terrific customer service and I always know what I'm getting (none of that annoying "well, you know this model doesn't come with a battery" bullshit).

My experience tells me that eventually something will change in the mindset of the org, either the guy calling the shots will start to cash in on those years of trust, or his son will take over and he will cash in, or they become a publicly traded company where the board members care more about next quarters profits than a long term sustainable business. I would wager Joel's article will accelerate that process.

That makes me wonder...perhaps the publicly traded corporate structure is not conducive to a company that wants to win on price, quality and customer experience.

redrobot5050• 17 years ago

Tell that theory to Apple's board. They seem to be doing alright.

jimbokun• 17 years ago

The key, I think, is that Jobs is a strong enough leader to ignore his shareholders and the Street. Had they heeded the "conventional wisdom" of the financial press, Apple would have ceased as a going concern long ago.

siculars• 17 years ago

i wager dollars to donuts that this outfit never goes public. most jewish orthodox businesses are closely held private entities. this is primarily due to jewish laws prohibiting monetary exchanges on the sabbath. hence the store being closed on sabbath (and other jewish holidays) even extending to the website. if b&h were to go public the number of non observant owners would outnumber orthodox owners and they would eventually want to make money 24/7.

i actually recently introduced someone to b&h in person for the first time and it was like watching a kid in a toy store for the first time. b&h is everything most people in this thread make it out to be - an electronic equivalent of willy wonkas chocolate factory. and it is also true that the staff there really know their stuff. they have no problem telling you whats shit and whats not.

anigbrowl2• 17 years ago

Something missing from this article and the commentary: B & H specializes in professional a/v equipment. Sure, they sell to the general public and they sell many consumer-level items as well.

But go look at their web page: http://www.bhphotovideo.com/ "The Professional's choice' - lots of high end cameras and camcorders, and so forth. A majority of their customers are highly knowledgeable as well, and they have a long-established reputation in the pro film/video community as a reliable supplier. That means they can sell a lot of items with a huge markup, because the customers are not looking for the best deal, but are willing to pay more for both customer service and equipment with lots of features. Although B&H caters to the general consumer, they probably don't make their biggest profits in that sector.

This is a very significant difference, and rather undermines the analysis in the article. It's like comparing a Ferrari dealership with a Ford one, or a professional medical supply business with a drugstore chain. There are useful lessons to be learned, but they're very different business models which (as commented) don't necessarily scale to different markets. If B&H were primarily targeting the general consumer, the overhead costs of educating every potential buyer would skyrocket.

Incidentally, the bit about the item being delivered to the counter where it is inspected, and then delivered to the point of sale etc. gave me quite a chuckle. Minus the high-tech and conveyer belts, this was exactly how department stores in the Soviet Union operated when I visited there in the 1980s. In fact it was one of the things you'd find in guidebooks - 'those crazy commies - they hate capitalism so much that they make the process of buying something wildly inefficient!' I would never have imagined I'd see this model praised in the pages of Inc.

htrbtrb2• 17 years ago

But it is efficient. It's like the system in Starbucks (there's a company that knows efficient) rather than the coffee shop where you have 6 people fighting over a single coffee machine and then the same six fighting over the till.

anigbrowl2• 17 years ago

True, but that's a process rather than a normal retail model. I mean, compared to pick something off the shelf and take it to the register.

paul7986• 17 years ago

I could not read that article due to the ad with the dude with the bug eyes staring straight at me. It annoyed and irked me. Yes may seem odd, but maybe Im not alone with this thought?

jodrellblank• 17 years ago

That's not an ad, it's a picture of the author - Joel Spolsky.

quizzical2• 17 years ago

You mean that dude's name isn't "Related Content"? :)

quizzical2• 17 years ago

This is a strange article to give much attention.

He states that he doesn't actually know how B&H is doing financially so there isn't any proof that they are a successful business other than his description of personal experience. He states that they are not open for business as much as they could be which I would find annoying as a customer. The site shuts down that often? You gotta be kidding me.

Any business trying to compete on thin profit margins and/or is too dependent on loans to keep their business running is certainly not going to thrive in this economy. Unfortunately, I don't think customer service will be the deciding factor for many companies right now.

But yeah, as far as personal experience I avoided Circuit City too as the only experiences I had were so negative. I wouldn't say other stores like Best Buy have any more than a tolerable customer experience on average.

ShabbyDoo• 17 years ago

You can browse the site on Saturdays -- you just can't place an order until sundown (sunset? I don't know the rules).

Spolsky: Why Circuit City Failed, and Why B&H Thrives

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