Circuit City: Looking for Margin in All the Wrong Places

Circuit City: Looking for Margin in All the Wrong Places Through the 1990s, Circuit City's CEO Richard Sharp ran the business around a single organizing principle: gross margin. The result was a commissioned salesforce pushing step-ups and extended service plans, a product assortment that excluded video games, CDs, and home computers, and an internal credit bank whose profits were used to mask deteriorating store economics. Meanwhile Best Buy's average store went from $10 million in revenue in 1987 to $28.5 million in 1997; Circuit City's moved from $11.6 million to $15.5 million. This case examines how margin obsession — in product selection, store format, sales culture, and internal reporting — turned off an entire generation of electronics customers and handed Best Buy the market.

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