By the time Alan Wurtzel retired as chief executive of Richmond-based Circuit City Stores in 1986, the company his father founded in 1949 was well on its way to becoming one of the top big-box electronic retailers in the nation, a trendsetter with its superstores.
But the company imploded in 2009, unable to keep up with a changing retail landscape and competitors such as Best Buy and Wal-Mart. Wurtzel, 79, who lives in Washington will be back in town Oct. 17 to speak about Circuit City's collapse as part of the University of Richmond's Robins School of Business executive series.
He's also written a book, "Good to Great to Gone: the 60-Year Rise and Fall of Circuit City," which charts the company's trajectory from the first television retailer in Richmond, at a time when WTVR-TV, the South's first television station, was on air only four hours a night, to the company's ignominious bankruptcy. "The demise of Circuit City was like losing a child," Wurtzel says. Style Weekly spoke with Wurtzel about what went wrong.
Style: For a long time, Richmond was a cutting-edge, national leader in terms of retail, with businesses such as Best Products, Heilig-Meyers, Circuit City, Thalhimers and Ukrop's. What happened? Why aren't we innovating anymore?
Wurtzel: I don't think it has anything to do with Richmond. … It has to do with the fact that retail models … [and] strategies have a limited life. … The growth of the Internet weakened Circuit City. … It's what's known as creative destruction under capitalism: New forms of retailing emerge and prosper and last for a while. The flower blooms and begins to fade and a new form of retailing takes over.
CarMax was an innovative retailing strategy that Circuit City incubated and grew. It survived its parent, and it's thriving, and that's partly an Internet model. CarMax is still growing and making very good money and has a very good future for another decade at least. Circuit City's problem … is that they weren't innovative enough. Circuit City didn't move fast enough to change its approach to the market. Customers were no longer interested in a full-service store, which we mistakenly continued to be.
[Electronics is] the most tumultuous segment of retailing. Think of all the innovations in the last 60 years, from black-and-white TVs to today's portable computers or the iPhone. In 60 years, Circuit City successfully navigated from mom-and-pop stores to audio stores in malls to freestanding superstores but then it got frozen. It didn't continue to adapt and adjust.
Some say the writing was on the wall for Circuit City when it stopped selling appliances — even though it was the second-biggest appliance retailer in the country. Others cite the company's ill-conceived Divx-DVD format war, or when it fired all its best salespeople in an attempt to copy the Best Buy warehouse format. What was the pivotal moment in Circuit City's downfall?
[Wurtzel spends a couple of minutes talking about the selling points of Divx, which stands for Digital Video Express, which in essence allowed DVD players to play encrypted videos that could be disposed of after viewing.]
In retrospect, [Divx] was a dumb idea. … It was trivial; it was a diversion. It was a bit of a black eye but it was not a material factor. The real problem was that the company believed [in] the sales model where every customer needs to talk to a salesperson and can't pick it up and carry it out like a grocery store … without encountering a salesperson.
I argued for a mixed sales floor where you can either pick it up or you could talk to a salesperson if that's what you wanted. The management at the time didn't believe it would work. … When the company realized its model wasn't working. … The leadership of the company was unable to develop a clear and consistent, bold strategy to remodel the stores.
[Former Chief Executive] Alan McCollough … wasn't willing to pay the price to remodel the stores. It would have been a billion dollars or more but it could have been done. They were unwilling to do that.
It seems that Richmond's great retailers reacted too late to changes in the marketplace. Why?
I don't think Richmond's any different than everybody else. All over the country department stores have gone out of business. Like Circuit City, many other electronics and specialty chains are struggling. I think it's human nature to believe in what you have and not to see around the corner. … One of my principles is you have to run scared and we didn't. Richmond retailers, like many other retailers, didn't run scared enough. They didn't confront the brutal facts and say: "Oh my God, this doesn't work. It won't work! I've really got to do something radical!"
You lament the decline of the company your father founded while making it clear you had nothing to do with it. However, you were still vice chair of Circuit City's board until 2001. Do you take any responsibility for its failing?
Absolutely I do and I said in the book … the Circuit City board failed in a number of ways. It failed in picking the right leaders … [and] I take responsibility for that. The board and the management were too focused on what Wall Street thought and not nearly enough focused on what the customer or what Main Street thought, and that was the source of our demise in the last 10 years. S