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Bye-Bye Circuit City - Does Competition Suffer?

Many bloggers, including this one, have suggested that the demise of Circuit City, an acknowledged large player in the appliance and electronics industries, also will make those industries less competitive. 

Concerned? Don't be. 

First, we are hardly in an economic environment where reatailers will collectively sense an opportunity to raise price.  It simply can't happen.

Second, Circuit City went belly up because they already weren't competitive - the industry and the consumers eliminated a player that couldn't compete.  Circuit City was done in by the economy, by Walmart, by Amazon.com, by eBay, by ABC Warehouse and countless other retailers that are all more diversified than Circuit City - they are all better able to ride out a slump in one or more segments of their business.

Third, the industry is too diverse to suggest that a near-collusive effort to raise prices can actually occur.  Diverse retailers are often only too willing to use the type of product Circuit City sold as a loss leader to attract sales to other aspect of their business.  This will continue.

Businesses go out of business because of competition.   It ultimately proves that competition works.  Just as the demise of Circuit City will not mean a windfall of new business for any single retailer, it also means that consumers should not fear that competition in the industry suffer. 

You can bet your big-screen on it.

Reader Responses:

Nate
Circuit City was not well-run. Their staff didn't know the product, and their prices weren't the best. I won't miss them.

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