For awhile part of the Sunday morning newspaper-reading ritual at my house has been to dig through the "guy toy" inserts from Lowe's, Home Depot, CompUSA and Best Buy.
Three of those companies are doing pretty well (in fact, Home Depot just opened another store within walking distance of my house). One is doing very poorly: CompUSA, which announced Friday that it's throwing in the towel and will close its stores after the holiday sales.
Oddly enough, there's a lesson in this for newspapers.
CompUSA isn't a technology store. It's specifically a computer store. While it has non-computer electronic entertainment devices, it's not positioned as such in the marketplace.
Moore's Law describes how computers get more powerful over time. A side effect is that for N amount of power, price declines. While computer retailers are desperately trying to maintain prices at 2001 levels by stuffing more power into the box, reasonably powerful computers are relentlessly heading toward a $200 price point for desktops and a $350 price point for laptops.
As the unit prices decline, unit sales at CompUSA haven't been rising to offset that decline. Instead, consumers are finding cheap laptops at an array of new competitors. Walgreen's, a corner drugstore for cryin' out loud, was advertising laptops last week.
Trapped in a business model that assumes $1,000 desktops and $2,500 laptops, CompUSA can't cover its fixed costs and its obligations. And because of the power of its brand, it can't easily segue into selling $2,000 flat-panel HD televisions like Best Buy can.
This is very much the trap that many newspapers have wandered into.
A newspaper isn't a media company -- it's a newspaper company. The core product -- news information -- is no longer rare and expensive. An array of new competitors enter the business. Media consumption is actually growing like mad, but the growth is all in a new kind of media consumption, focused on personal entertainment, practical utility and communing/communicating with others. The powerful brand of the newspaper puts it in a box, and it can't easily segue into the growing space. Revenues decline, obligations mount, trouble follows.
And as CompUSA shuts down its local stores, one more source of advertising revenue for the daily newspaper goes away.