Circuit City to File Bankruptcy Tomorrow?
At church this morning, a friend told me that Circuit City would be filing for bankruptcy tomorrow (Monday). He works for a company that supplies product to Circuit City and, according to him, his company had received notice of the impending filing directly from Circuit City. Of course, many pundits have been predicting that bankruptcy was in Circuit City’s near future but most thought that it would delay filing until after the Christmas shopping season.
Part of the hard truth associated with a bankruptcy filing by a big box retailer such as Circuit City is the reality-check message that it sends consumers who have been living on credit for so long. Much of the that credit has been used to make discretionary purchases. I can’t think of much that Circuit City sells that would fall into the “need” or “must have” categories. It’s mostly music, gadgets, electronics, and computers.
Although I feel sorry for Circuit City employees who will lose their jobs, the positive result from this consumer reaility check is that it may strike another blow against credit-addicted consumerism. Based on recent history, it seems that it takes a massively public business failure (e.g., Lehman Brothers) or near failure (AIG, Fannie Mae, Freddie Mac) to get the attention of U.S. consumers. It’s like shock therapy that jolts the clueless into a state of semi-awareness of their own bad habits. Gradual erosion of the economy or of their own financial condition has not been enough.
In summary, if my friend is correct about the Circuit City bankruptcy filing tomorrow, look for the silver lining: consumers will notice and may learn something that will positively influence their own future spending behavior.