Did Poor Forecasting Help Bring Down Circuit City?

A week ago Circuit City failed to find a buyer and received permission from the U.S. Bankruptcy Court to liquidate the company’s assets, including closing its remaining 567 U.S. stores. The failure of the consumer electronics company could be in part to a trend that was identified by the IHL Group back in December. The research found that the consumer electronics sector had the worst product availability. This was translated to a 25.7% out of stock rate for Circuit City, which actually faired better than Office Depot at 26% and OfficeMax at 30.6%. This meant that one out of four customers failed to purchase at least one item they wanted when they entered the store.

With the out of stock levels being so high at retailers like OfficeMax and Office Depot, there are likely to be a number of reasons behind the lack of inventory. Retailers will often blame, sometimes quite rightly, that the suppliers fault. However, poor forecasting on the part of the retailer can quickly lead to unavailability of popular products. If other retailers want to avoid the same fate as Circuit City, they may want to improve their relationship with their suppliers as well as improving their forecasting.