USA: Collapse could flood market with heavily discounted products

CE retail expresses concern over Circuit City

US consumer electronics retailers and distributors have expressed concerns over the impact the collapse of Circuit City could have on the market.

Many of the worries focus around the inevitable fire sale that would follow even a small number of store closures, posing the risk of the market being flooded with heavily discounted products.

Only a fortnight ago, KeyBanc Capital Markets analyst Bradley Thomas warned that the retailer might be forced to close as many as 300 stores.

Those suggestions were echoed by the executive vice president of Home Entertainment Source Jim Ristow. He warned that there were three likely scenarios; firstly that the firm could enter Chapter 11 and emerge as a new company, although he admits in the current economic environment, obtaining the necessary loan would be difficult.

Alternatively, it could enter Chapter 11 and be bought by a rival; a scenario that would likely see the new owner sell 300 to 400 of its poorly performing stores. Or, the firm’s management could choose to dissolve the company. It is the latter two that worry Ristow the most, although he noted particular concern over the last of the two.

The dissolving of the firm would result in billions of dollars of consumer electronics entering the channel at heavily discounted prices, warned Ristow.

However, while any influx of heavily discounted products could hurt the industry over the vital Christmas period, any collapse is less likely to hurt in the long run claims the president and CEO of the consumer electronics association.
Speaking to Twice, Gary Shapiro said: "Whatever happens to [Circuit City] will happen to them, but it will not make or break the consumer electronics industry in the long term.

"Circuit City is a painful moment for the industry because it has such a legacy, but it is a short-term painful moment," he added. "[The industry] will survive no matter what happens with Circuit City, and five years from now we will be hearing about another retailer having another painful moment."

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