Circuit City Brand Autopsy: What Really Killed Circuit City?

By Muhammed Abdul Kalam · Published October 30, 2026

Circuit City starred in 'Good to Great', then fired about 3,400 of its best-paid staff in 2007 and was liquidated in 2009. That firing tells the story.

In 2001, Jim Collins’ bestselling business book “Good to Great” held up Circuit City as one of the best-run companies in America.

Eight years later, it was gone. Every store closed, every employee out of work. So how does a company go from textbook success to textbook failure in less than a decade?

The Brand, Before Everything Went Wrong

Circuit City’s story began in 1949, when Samuel Wurtzel opened a TV and appliance store in Richmond, Virginia, called Wards. Over the next few decades, the business grew into a chain of consumer electronics and appliance stores.

In 1984, it rebranded as Circuit City. It became famous for its big superstores and its sales staff, many of whom were paid on commission. They knew the products and they pushed hard to close sales, but they also helped customers understand complicated electronics.

Circuit City was an early pioneer of big-box electronics retail. You’d walk in, see walls of TVs and stereos and get advice from someone who actually knew the difference between them.

The business performed brilliantly for years. Jim Collins praised it in “Good to Great” for delivering stock returns far ahead of the market over a long period. For much of the 1990s, it was America’s biggest consumer electronics retailer.

What Actually Happened

The first sign of trouble came from a Circuit City invention. In 1998, it launched DIVX, a type of disc that you could buy cheaply and watch for 48 hours, then pay again to keep watching. It was meant to compete with rental stores and standard DVDs.

Customers hated it, film fans campaigned against it and it was shut down in 1999. Circuit City took a large loss.

Meanwhile, Best Buy was catching up. Best Buy’s staff were not paid on commission, and it created a more relaxed shopping experience. Customers liked not being chased around the store. Around 2001, Best Buy overtook Circuit City in sales.

In 2000, Circuit City decided to stop selling large appliances like fridges and washing machines. That removed a solid, reliable source of revenue and store traffic.

In 2003, it moved away from commission-based sales. Around 3,900 commissioned sales roles were cut, and the company shifted to hourly staff. The goal was to be more like Best Buy. The effect was to lose some of its most experienced people.

Then came the decision that defined Circuit City’s end. In March 2007, the company fired about 3,400 of its store employees, those who were paid the most, and said it would replace them with new workers at lower wages. It saw this as a cost-saving measure.

Customers noticed. The people who had given expert advice were gone. Stores felt understaffed and service quality dropped. Meanwhile, the 2008 financial crisis hit consumer spending, and online retailers like Amazon grew stronger.

In November 2008, Circuit City filed for bankruptcy. In January 2009, it announced it would liquidate. All its 567 remaining US stores closed, and around 34,000 people lost their jobs.

The media coverage made it worse. News stories about the firings spread widely, and many customers were disgusted. Some said they would never shop there again. Employees who remained were demoralised, wondering if they’d be next once they earned a raise.

The company’s store locations were also a growing problem. Many Circuit City stores were older and in less attractive spots than Best Buy’s newer stores. Investing in better locations would have cost money, which Circuit City was trying to save. So the stores got tired just as the service got worse.

The Moment of No Return

The March 2007 firing was the moment Circuit City sealed its fate.

Think about the message it sent. To employees: experience and skill are a cost to be cut. To customers: the people who helped you choose a TV are gone. To the market: this company is thinking about short-term savings, not long-term service.

In electronics retail, knowledgeable staff are part of the product. When you buy an expensive TV or camera, advice matters. Circuit City got rid of the people who gave it a reason to exist, and then asked customers to keep shopping there.

Look at what Best Buy did differently. It invested in services, launched Geek Squad and trained staff to help customers set up and use their products. When online competition intensified, it matched online prices and turned stores into showrooms and pickup points.

Service became its defence. Circuit City chose the opposite path.

The contrast couldn’t be sharper. Best Buy treated expertise as a reason to visit. Circuit City treated it as a line on a spreadsheet. One company is still here, and the other isn’t.

What Everyone Got Wrong About Why It Failed

The standard explanation is that Best Buy and Amazon beat Circuit City, and the 2008 recession finished it off.

All true. But other retailers faced the same pressures and survived. Best Buy itself nearly failed in the early 2010s but recovered by focusing on service and experience, including its Geek Squad support staff.

Circuit City’s biggest problem was that it treated its people purely as costs. The shift away from commission, the loss of experienced staff and the 2007 firings all chipped away at what made its stores worth visiting. It saved money in the short term and destroyed its long-term reason to exist.

There’s also a lesson about business books. “Good to Great” praised Circuit City’s past performance. But past success doesn’t guarantee future success, especially when leadership changes direction. Great companies can make terrible decisions very quickly.

Put those numbers side by side and the pattern is clear. The company cut its most experienced staff twice in four years, then lost everyone. Every round of savings made the stores less worth visiting.

It’s also striking how quickly the praise turned. In 2001, business readers were studying Circuit City as a model of greatness. By 2009, it was studied as a model of what not to do.

The Numbers That Tell the Story

1949: the year Samuel Wurtzel opened the store that became Circuit City.

About 3,900: the commissioned sales jobs cut when Circuit City dropped commission-based pay in 2003.

About 3,400: the store employees fired in March 2007 because they were paid too much.

567: the number of US stores that closed when Circuit City liquidated in 2009.

About 34,000: the number of employees who lost their jobs in the liquidation.

What Marketers Can Learn

First, your staff are part of your brand. In service-heavy categories, the people on the floor create the customer experience. The most iconic marketing campaigns in retail often celebrate the people behind the brand, because customers know how much they matter.

Second, cost-cutting can destroy brand value faster than it saves money. Circuit City saved on wages and lost its reason to exist. Before cutting, ask whether you’re removing something your customers value.

Third, don’t copy your competitor without understanding why they’re winning. Circuit City tried to become more like Best Buy but lost its own strengths in the process. Use simple marketing frameworks to figure out what customers actually want from you before you change your model.

Circuit City didn’t fall because it forgot how to sell electronics. It fell because it forgot who was doing the selling.