Circuit City failed because they were a terrible operation in every imaginable way, be it customer service, product availability, technical knowledge and value. There is not sifficient space on this forum for me to chronicle all my horror stories with this outfit.
As an example, I purchased a laptop computer with Windows Vista Home Premium (another decision I have since regretted), which came with 1G memory. I had heard that 1G was inadequate, so I decided to have Circuit City install an additional 1G. When I started to use the laptop, I encountered sporadic problems with it locking up, so I took it back to the store for testing. After two weeks, they informed me that there was nothing wrong with the machine, so I took it back, but continued to have problems. Circuit City informed me that they would not warrant the machine or exchange it with another. I then took it to an independent shop, who told me that the problem was that the additional memory that Circuit City had installed was the wrong speed (it was too slow), and after replacing it with the correct memory, the laptop has performed flawlessly ever since (except for unrelated Vista issues). When I returned to Circuit City with the bill from the shop and the removed memory for credit, they just told me to take a hike.
So, I don't think deep discounting of product would have saved them. Brick and mortar stores survive on good service and technical support, and Circuit City had neither.