Al's Emporium: Big Boxes, Black Holes
07/02/2012| 07:50am US/Eastern
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By Al Lewis
When a big-box retailer gets sucked down a black hole, it often takes shareholders with it.
Best Buy founder Richard Schulze plans to get his investors off the spaceship before this happens. Last week, he said he was considering a bid to take his Enterprise private.
Until just a few years ago, astronomers believed black holes to be stationary objects at the centers of galaxies. Now they theorize that some black holes roam the universe. They say these things can form when two low-mass galaxies collide. The black holes at their centers are ejected and then merge into a cosmic vacuum cleaner rolling through space.
If one of these objects were to roam into our solar system, everyone on Earth would feel exactly what Mr. Schulze must be feeling now: stretched. Cosmologists say unimaginable gravitational fields would eventually pull everyone into strands of spaghetti.
As this occurred, we could argue about whether black holes really existed, or whether Republicans or Democrats knew best what to do about them. We could imagine black holes might be stopped by lowering interest rates and rocketing bales of money at them. But eventually, every atom in our bodies would be run through the pasta maker.
The roaming black hole that Mr. Schulze is staring down has been identified as Amazon.com, an Earthbound death-star that eats everything in its path.
You might remember a time when independent book-store owners lost out to corporate chains. Well, Amazon.com ate Borders. And now it's eating Barnes & Noble, and soon it will eat up the entire book publishing industry with its e-books. This, for instance, is part of the reason why "Curious George" publisher Houghton Mifflin Harcourt filed for bankruptcy earlier this year.
Amazon remains one of the few forces that can make Apple shudder. Amazon's Kindle is a cheaper and easier-to-read format for e-books than Apple's iPad, and its MP3 downloads easily compete with iTunes.
Amazon also is eating Netflix, which ate Blockbuster, which ate the independent video stores long ago.
Amazon sells clothing. So there goes J.C. Penney and Sears. Amazon sells toys. The last of the big-box toy retailers, Toys "R" Us, is still trying to reinvent itself after going private in 2005. This just goes to show that going private doesn't change the theory of gravity.
Best Buy once ate Circuit City, yet today it has become little more than a showroom for Amazon. People go to Best Buy to check out the merchandise before they order it from Amazon. One of Best Buy's plans is to open smaller stores. But there's already a small-store format for electronics. It's called RadioShack. Any retailer that strives to be more like RadioShack is going down the hole.
Since the 2008 financial crisis, Amazon's stock has soared from about $50 a share to about $222 last week. Its market cap is nearly $100 billion. Best Buy, meanwhile, has gone from about $30 a share to about $20 last week. Its market cap is just shy of $7 billion as it continues losing mass.
Wal-Mart Stores, the largest black hole roaming the Earth, has a market capitalization of about $230 billion. It once ate nearly every small-town retailer in its path. Now its electronics offerings tug on Best Buy, too.
Imagine being caught between the destructive gravitational fields of two roaming black holes. If Best Buy goes private, at least holders of its publicly traded stock won't be turned into spaghetti. They will have Mr. Schulze to thank for buying them out. He's a real starship trooper.
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Al Lewis is a columnist for Dow Jones Newswires in Denver. He blogs at tellittoal.com; his email address is al.lewis@dowjones.com
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