Better pay and more training for employees is good for the bottom line? Yuh-huh, maybe so. Last month, Circuit City fired about 3,400 employees because they were “paid too much”– that is, between $10 and $20 an hour. Yesterday, the Washington Post
reported the retailer expects a first-quarter loss and analysts are citing the job cuts as the reason.
Analysts said Circuit City had cast off some of its most experienced and successful people and was losing business to competitors who have better-trained employees. “I think even though sales were soft in March, this is clearly why April sales were worse. They were replaced with less knowledgeable associates,” said Tim Allen, an analyst with Jefferies & Co. In particular, the televisions showing disappointing results are “intensive sales” requiring more informed employees, Allen said. “It’s a big-ticket purchase for somebody. And if they feel like they’re not getting the right advice or are being misled by someone who doesn’t know, it would be definitely frustrating. They will take their business elsewhere.” …. Mike Baker, a research analyst with Deutsche Bank….also said Circuit City’s situation is mostly a result of its loss of informed workers. Best Buy “will fare better because of market share gains driven by weakening customer service at Circuit City,” he wrote. “We believe that Circuit City’s store labor change . . . likely has had a worse than expected impact on Circuit City’s service levels and has enabled [Best Buy] to take share.” …. Circuit City’s prices and return policies are comparable to those of its competition, so what’s left is the sales experience, said Samuel Culbert, professor of human resources and organization at the University of California at Los Angeles. “There is nothing more important than relationships in commerce.”