Circuit City fired 3,400 experienced staff to save money — sales fell and it went bankrupt

Circuit City was founded in 1949 as Wards Company in Richmond, Virginia, and grew into the second-largest electronics retailer in the United States. At its peak it employed 60,000 people and earned nearly $1.6 billion from large appliances alone in 1999. The company pioneered the big-box electronics retail model and was once larger than Best Buy.

The decline began with two critical decisions. In 2003, Circuit City eliminated commissioned sales and converted to hourly pay, laying off 3,900 experienced salespeople to save $130 million per year — a move that damaged its service advantage over Best Buy. In 2007 it laid off another 3,400 higher-paid associates. An earlier bet on DIVX, a disposable DVD alternative launched in 1997, lost $114 million and was discontinued in 1999. Circuit City also declined a chance to buy Best Buy for $30 million in 1988.

Circuit City filed for Chapter 11 bankruptcy on 10 November 2008 with $3.4 billion in assets against $2.32 billion in debt. It converted to Chapter 7 liquidation on 16 January 2009, closing all stores by 8 March 2009. Over 30,000 employees lost their jobs.