Circuit City goes bankrupt: What it means for you

With 721 stores, Circuit City has been among the nation's top electronics chains, especially in categories like LCD TVs, where only Best Buy and Wal-mart sell more sets. The announcement that the company has filed for Chapter 11 bankruptcy protection and plans to close 155 stores might have you wondering what it all means to you.

The good news for consumers is that Circuit City has asked the bankruptcy court for authority to honor gift cards, as well as returns and exchanges. Authorization, the company said in an FAQ, "normally is granted." Still, if you have a gift card to use or a return to make, do it fast, because there's no way to tell what will happen down the road.

The stores scheduled to close began holding clearance sales last Wednesday; the company expects them to finish up "no later than the end of the calendar year," though with the poor economy there's no telling how quickly marked-down items will be scooped up. Circuit City will continue to operate 566 stores in 153 U.S. markets. You can also shop online (www.circuitcity.com) or by phone (1-800-843-2489). In any case, if you buy something, assume that all sales are final.

Indications are that Circuit City credit cards will be unaffected and warranties on products bought at Circuit City will be honored.  A "letter to guests" on the company's investor Web site assured customers that warranties are provided by a third party not impacted by the Chapter 11 filing. However, we echo our usual advice that buying an extended warranty doesn’t make financial sense for most consumers, and that’s especially true in this situation.

For more information on how to deal with a bankrupt business, see our video above, check out our advice on ConsumerReports.org, and visit Tightwad Tod's blog on the subject.

—Nick K. Mandle

UPDATE: Nov. 13, 2008

As a commenter has correctly noted, I should have more strongly cautioned readers about the hazards of shopping at liquidation and clearance sales, such as those being offered at Circuit City’s closing stores.  Going-out-of-business sales can be lucrative for the retailer seeking Chapter 11 protection and actually raising prices on products (in order to meet the store’s creditors’ crunch) is not uncommon. Consumerist.com has it from a "disgruntled" Circuit City employee that "TVs are 10% off the MSRP" at a closing store, "but in many cases Circuit City was already selling them for 30% off the MSRP."

Consumers hunting for true bargains at liquidation sales should venture in with some skepticism. Here’s what we recommend:

• Check for complaints. Phone the local Better Business Bureau or state consumer agency and ask about the liquidation sale.
• Haggle. The salespeople need to sell the inventory, so don't settle for the first price.
• Comparison shop. Write down model numbers and check prices with competitors both online and in the area. Include shipping, delivery, and setup charges.
• Check for a warranty. Ask to see the product warranty to learn whether you'll be covered if something goes wrong.
• Pay with a credit card. You'll have more standing to get a refund than if you pay by cash, check, or debit card.
• Assume sales are final.

For more more tips, see our report on "How to protect yourself if a store goes bankrupt."

As always, caveat emptor.
—NKM

Comments

[Matthew Tomlinson]

I have been recently trying to have my Xbox360 serviced by Assurant Solutions, the company who honors the CCA Protection Plan. The service is horrendous. With one experience I have logged over an hour and a half on hold (two phone calls) and I still have not gotten anywhere. My first phone call, after waiting a half hour on hold, I was given an incident number and told I had to call back to troubleshoot the unit (RROD). When I called back to troubleshoot, I waited over an hour on hold before giving up and emailing them once again.

This company is clearly giving consumers the run-around in attempts to not honor the protection plans.

[Mark]

There going out of business sale isn't necessary. It just hurts their image. I was in a store and it was only 10% off of their already high in store prices.

[bottom feeder]

The key is to remember the all mighty MSRP. When a store says %20 off, they are talking 20% off MSRP, usually not 20% off their "standard" price (though some will explicitly say that, 20% off our already low prices). CC is not unique in this regard. Consider Linens-N-Things. Really, what's the point of having things 10-20% off when you can use one of their (or BB&B) easily aquireable coupons for 20% off anyway. Usually I don't bother until they get to about 40%, figuring that most retailers have a 30-40% differential in retail/wholesale. Past 40%, it's a bit of a crapshoot though. Good to befriend an employee so you can find out exactly which days the markdowns occur (e.g. from 40% to 50%).

[Chris McCoy]

Just left a Circuit City Liquidation Store where the prices were marked 5, 10, & 20% off while the real Circuit City stores and website had better prices (example 50 inch Samsung Plasma LIQ= $1399, Website $999). I'll be waiting for the ax to fall for I buy anything there.

[Nicholas Kolman-Mandle]

To: geekpryde

Thanks for the comment. You're absolutely right. Liquidation sales do not always equate to truly lower prices. The original blog skimmed over this issue, but I've updated it (above) to flesh out what buyers should know about shopping at clearance sales.

Nick Kolman-Mandle
Asst. Editor

[Eddie Bryan]

Gee, that's interesting about the liquidator.
I was one of those who immediately thought "deals."

[Eddie Bryan]

I bought a CD Ipod car player a year ago around Xmas.
I got a 4 year warranty.
Won't that still be good?

[Sony Bravia]

Circuit City in my area is not closing even though they have terrible customer service apparently they still do enough business to be one of the good ones. Anyways Id rather shop online these days, much better deals.

[geekpryde]

"The stores scheduled to close began holding clearance sales last Wednesday...though with the poor economy there's no telling how quickly marked-down items will be scooped up."

You do realize that the many (or most) items are actually being marked-UP by the liquidator, correct? There are plenty of posts from customers and employees about this tactic on other forums and sites. People hear "bankrupt" and they think "deals", which is why this tactic works, since customers for the most part dont actually do any price comparisons when shopping at a so-called "clearance sale". I am a little suprised to find Consumer Reports parroting the CC liquidators press release.