ClubIT = FAIL!

[madmat]

For those of us familiar with ClubIT it's too bad to see that they too have fallen into the black hole that is the US economy. They closed up shop today and tomorrow they're filing for chapter 7. I kind of wonder how long before we start seeing other PC enthusiast focused etailers falling into the same plight.

 

[Kougar]

The economy has seen better days, but no where has it turned into a black hole... at least not yet. We're not even in an official recession yet.

This would have been big news to me, but browsing over to ClubIT they appear to be operating as normal. ClubIT had most of the best Black Friday deals last fall, and I sure hope they stick around. I shop more from them than I do from ZZF these days. They have a press release though that might be of interest.

http://www.clubit.com/company_news_details.cfm?fid=F300389A-3048-2E46-40C3D0E3D7174E28

 

[madmat]

That's great news. I'm glad to hear that they got saved, that's a lot of people that won't end up on the streets looking for work.

While it might not be an official recession, I lived through the recession of the early '80's and this is going to be just as bad if not worse. We'll be headed into gas rationing soon which isn't going to help matters any but that's beside the point. First Comp USA goes belly up now ClubIT/PC Club fails... It's not like these were small operations, they both had been strong operations and a combination of bad business leadership coupled with a weakening dollar and economy killed them. I am glad that there was someone with enough money to bail PC Club out by absorbing their debts. There are other outfits that have gone under with Monarch computer being an example. Heck, the manufacturers are feeling the pinch as well, MGE failed, Chaintech failed as well, they were making everything from motherboards to audio cards to video cards. They ended up being bought due to financial losses and restructuring. Yeah, this isn't the major 250 point slide we saw in the late '80's but it's still going to get ugly.

 

[Kougar]

CompUSA was a joke, IMHO. You would go out of business too if you sold computer parts at prices more than 30-60% or higher still above online stores. They were selling ATI 2600XT cards for $280, and that was after 20% off while they were closing. It took them 40% off before they were selling AMD Phenoms at the same price as Newegg. Microsoft slashed prices on Vista Ultimate and Home Premium, but they never did lower their prices to reflect that so 20% off was still above market prices for the operating systems, they had tons left....

As far as the economy goes, it makes for an interesting case study (blame my finance class). My only real concern is the gas situation. If it wasn't for that food prices wouldn't be the issue they are right now.

The market/economic problems in the 80's are much worse than they the same market indicators show right now. For example, inflation then was significantly higher than even the inflation we had within the last 6 months. Unemployment is still below 5.5%. For almost all of the 80's unemployment was 6-11% with the average in the 7 ballpark.

In my 24 year old opinion the US has grown acustomed to not having recessions as frequently or as severely post Greenspan's term of Chairman. We had a single very brief recession for part of 2001, and another during 1991. Those are the only recessions on record since 1984 or 85. It is still possible we will not even hit a recession, but if we do then underperforming or weak businesses are going to fold. It's when companies like AMD can be almost insolvent yet still run a business that perspectives on businesses get skewed... many of them shouldn't have lasted as long as they did.

AMD launched K8 in 2003, and they spent the next 5 years selling K8, is it any wonder they are now in trouble? Phenom is basically two K8's in one with some enhancements anyway...

Just because businesses fail doesn't mean the economy tanked. Businesses make stupid decisions all the time and half of them tend to pay for them too. Chaintech was in a very tight business selling GPU/mainboards/sound cards all of those are markets that are hard to get into or have almost vanished within recent years as is the case of the sound card market. In the case of Monarch computers... they reaped what they had sewn. They got their just rewards.

 

[madmat]

Well man, I work in the production industry... printing in fact and I read a lot of interesting things in company statements and there's a lot of talk in them about weathering the current ecconimic issues and remaining profitable and it sounds like things are getting tighter. That's not to mention the fact that the whole printing industry is unusually slow right now. Normally all the shops around here are humming along 24/7 and while our shop has been busy (this is owed to us being bought by another large print company from Europe) the rest of the shops are having a tough time keeping everyone working 40 hours. It's been slacking for the last year and a half. Since our industry is directly tied to the sales of merchandise it serves pretty well as a weather vane on how well things are going.

 

[Kougar]

Hmm, well good to know. I couldn't agree more, things are definitely tightening and the gas situation is hurting quite a few things. I wouldn't argue any of that.

I just don't see the doom and gloom side of the story fleshing out, but if gas continues to spike and that in turn continues to raise food & energy costs, then I can see some serious problems. But that aside I just don't see it as anything more than a light recession. For this year, Real GDP (which is already inflation adjusted) is still positive, surprisingly. I'm not saying this dismissively, but my point is when the media shouts recession long enough, people believe it and change their habits accordingly, especially major businesses. Sure, the trouble is there... but I still think it got blown completely out of proportion than what it actually is. To date, as of last month there is no actual recession, just a big slowdown.

At this point one could still very well happen, or then again it might not happen at all. I'm watching how the usual summer surge in fuel demand impacts prices, I bet at least a portion of it is speculation driving crude prices to where they are.