Recently Bed Bath & Beyond announced bankruptcy and are closing all their stores. We will miss the 20% off coupons, but you had to go. Going out of business is a normal part of a free enterprise system that rewards creativity, financial sophistication and the ability to listen to your customers. The penalty for free market failure is death and Bed Bath & Beyond was fatally mismanaged. They took on mountains of debt but the stake through the heart was ignoring the obvious shift in how their customers wanted to do business. While BBY was sitting on their hands, Amazon was inventing one-button shopping and prime delivery, Walmart developed a website that sold products they did not have to inventory and Target ramped up same day delivery. Customers voted with their dollars and BBY has to go.
Businesses in a capitalistic, free market economy within a democratic political system can thrive and produce amazing goods and services because of the "invisible hand", coined by Adam Smith, which states an individual's self-interest causes them to work harder and be more creative and produce a better product at a lower cost so that they reap the profits. A modicum of greed really is good. Consumers benefit and the interests of society are advanced.
But what happens to those businesses that can't adapt to new demands by consumers, that can't evolve and can't adopt new technology?
Like the wildebeests who are unable to outrun the lion, they must die to strengthen the species. We should cheer on their death and wish for fast failures which provide more time for success.
Failures stop the destruction of scarce resources and allow the lifeblood of any business, cash-flow, to be redeployed to a higher and better use. Failure and death stops the misallocation of time and money.
It can happen to big businesses and small. For example, in 1902, Schlitz was the largest selling beer, but couldn't stay big enough to stop an acquisition by Stroh and later Pabst.
Eastern was once one of the big four airlines but ran itself into the ground financially by paying 17% to borrow money and was crushed by labor disputes. It was liquidated in 1991.
We feel sad for the businesses no longer here but are still part of our history and fond memories, whether the business was gobbled up because it could not grow to crush its competition, or whether it fell by the wayside because it could not keep up with its customers. There are many examples of both:
TimeSaver stores were ubiquitous, but most of their profits were from gas and cigarettes and in the 1980's when the economy changed and gas price margins shrank, the name disappeared when they failed to diversify.
Seafood City once owned the crawfish market and their jingle was on every New Orleanian's lips. Although the commercials were hokey, they were the best word-of-mouth advertising any business would crave. The big store at 1826 North Broad closed in 1994.
The list of local brands no longer around extends to Ponchartrain Beach, McKenzie's, Kreegers, Kolbs, K&B, D.H. Holmes, Krauss and Gus Mayer. They were all great businesses. They just could not evolve and adapt. They got old and sick. Then they died. We miss them fondly, but we now vote with our dollars for their successors and competitors who serve us better.
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