What We Can Learn from Circuit City

With the announcement today that Circuit City has been unable to find a buyer and is therefore going to be forced to close its remaining stores, lost in their demise could be one of social media’s more significant lessons.  E-commerce is a sufficiently small piece of their business that no amount of success as an e-tailer would compensate for their shortcomings as a retailer in this gruesome economy, but don’t throw out the baby with the bathwater.

Circuit City was one of the early retailers to make what at the time was a highly controversial decision.  These retailers make big bets on inventory, stocking large volumes of products that they think are going to be successful and even going so far as to strike preferential deals with manufacturers to secure allotments of hot products.  Given these bets, you would imagine that it would be highly controversial to open up their corridors to dissenting opinions.  However, Circuit City was one of the relatively early brick-and-mortar retailers to host user opinions.

And what did Circuit City discover?  They found that people who read user opinions on their site were 2-5x more likely to purchase than those who didn’t read the user opinions.  Of course, this is a complicated equation that raises all sorts of cause-and-effect questions.  It isn’t a simple matter of getting people to read user opinions.  Those who read such opinions are probably already more inclined to purchase.  Whatever the relationship, however, Circuit City experimented with and capitalized upon the power of their user community to their benefit.

No, it wasn’t enough to save the chain but in these tough times, when retailers are questioning whether the hassle of user-generated content is worth the outcomes, it’s worth remembering the outcomes Circuit City produced.  Those would put their heads in the sand, pretending that if they don’t support engagement with their users and  buyers that it somehow doesn’t exist, are only kidding themselves.  If we all haven’t figured out the ultimate power of social networking and how to harness it in the advertising and selling cycle, early pioneers have already demonstrated that there are tangible returns to be achieved.  Let this perhaps be Circuit City’s lasting legacy.

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