There is a theoretical basis for a mass merchandiser, but in capitalism it seems they all require life support to get to mega-status. Currently, very many names are in trouble: Best Buy, Micky D, Sears, Walmart, Petco, Office Depot, Aerospatiale, you name it, they got troubles!
How can you go under when you can get free credit and you are huge?
Now comes Sports Authority, with this tidbit:
Reuters, citing sources close to the matter, reports that Sports Authority intends to file for Chapter 11 bankruptcy as soon as next month and close up to 200 of its 450 locations.
The move was initiated after the company missed a $20 million coupon payment on Jan. 15, which triggered a 30-day period, ending Feb. 14, to work out a compromise with its creditors....
The retailer, which has an estimated $643 million in debt, was reportedly in talks with lenders on a deal to reorganize its operations in Chapter 11 bankruptcy proceedings.
If you owe a buddy $643 and promise to pay him $20 next week, but when the time comes to pay $20 you must tell him you don't have the $20... your buddy, and no one else, is going to lend you any more money. Nor will they extend you any credit. you go to cash basis.
Well, Sports Authority cannot go to cash basis. The entire operation is predicated on massive finance by Cantillon effect credit (Cantillon spoke of money, but the principle applies to malcredit, too).
In short, the early receivers of the new money will increase spending according to their preferences, raising prices in these goods at the expense of a lower standard of living among the late receivers of the new money or among those on fixed incomes who don't receive the new money at all.
So, here we go... Sports Authority starting in 1973 (again with the Nixon going off the gold standard lite) began rolling up smaller sporting goods stores, family operations, using bank malcredit and enjoying the Cantillon effect, to wipe out anybody who refused to sell out.
(The one defense was to go up market, selling $800 ski pants instead of cheap-o discount stuff that burdens Sports Authority shelves today.)
By the 1980s, all of the USA manufacturers who had sold to Sports Authority were wiped out by the folly of discounting. And just then China was open for business, and willing to extend this new malcredit they discovered from capitalist USA. Not only were good manufacturing jobs not coming back, incalculable know-how was transferred to China, robbing USA of generations of innovation and improvement. Advantage China. But Lenin did say the capitalists will sell the communists the rope used to hang the capitalists. Just so.
Today, even though malcredit is no-cost, since Sports Authority is in trouble, the pension plans and investors will no longer direct malcredit their way. Although banks are sitting on mountains of undeployed malcredit, and can create more anytime they like, they are disinclined to all more Zombie businesses to their loan portfolio.
Like all of the other dinosaur roll-up thugs, Sports Authority's insurmountble problem is our economy has decimated Sports Authority's customer base. Can't get around the fact not enough people coming through the doors to keep the doors open. Also, the malinvestment and misallocation of malcredit-based buying power demanded a selection of goods and services for that false economy which no longer exists. Wrong inventory selection, wrong stuff in the supply pipeline. New product needed for real customers.
So all those Chinese factories putting out product for Sports Authority now have excess production capacity.
But Sports Authority has studied the situation and come up with a plan - go upscale:
Sports Authority launched new store brand "S.A. Elite" in mid-2010, based on consumer research and testing. These stores are smaller than typical Sports Authority outlets and carry high-end sports apparel and accessories.[7][8]
It won't work. Micky D and Best Buy have tried this. Fail. They have the wrong skillset, wrong overhead, unworkable financing and wrong commercial real estate regime to make it work.
On the other hand, anyone with a passion for sporting goods who finds joy in sharing the best in each category can fill the void and meet the demand at retail by doing as a family business what Sports Authority is trying to do as a dinosaur on life support.
And then at the wholesale/supplier level can do so by contracting that now excess production capacity in China with better designs and specs.
And eventually, as the company grows, to relocate production back here in USA, once capitalism fails and free markets get to work on commercial real estate rates, wages, etc.
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