The News Tribune (Lite) - Economic Darwinism claims many brands

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Section: Business

Economic Darwinism claims many brands

LAUREN SHEPHERD AND EMILY FREDRIX; The Associated Press
NEW YORK – Shoppers won’t be picking up ornate lamps from the Bombay Co. in the coming year. Or investing with Lehman Brothers and Bear Stearns. No flying to Hawaii on Aloha Airlines or buying cheap tickets on Skybus, either.

All those names vanished this past year, victims of the economy, the financial meltdown or other factors. This year could mark the end of even more well-known brands as the now-yearlong recession puts more struggling companies on life support.

“I think 2009 is going to be a bloodbath,” said Scott Testa, a marketing professor at St. Joseph’s University in Philadelphia. “I think it’s going to be very, very ugly.”

For some companies, 2008 was no beauty. The woes of the nation’s retailers began before the year even started. The Bombay Co., known for its home accessories and furnishings, filed for bankruptcy last fall and shuttered the last of its stores in January because of slow sales – an ailment that hurt other companies as the economic downturn turned into a recession.

The casualties weren’t limited to retail. Travelers also bid adieu to some airlines in 2008 as jet fuel prices soared and consumer spending on extras like travel plunged. Aloha, ATA, Skybus and Champion Air all grounded their planes.

With sales and profits dropping this year and lenders leery of granting new credit, a number of retailers failed. Home goods seller Linens ’N Things began liquidating its stores after originally filing in May for Chapter 11 bankruptcy protection. Apparel chain Steve & Barry’s did the same later in the year. Specialty retailer Sharper Image Corp. also vanished. KB Toys is in the midst of restructuring its business and is liquidating its more than 400 stores.

Of all the brands to disappear in 2008, Testa said, consumers may miss department store chain Mervyns the most since so many shoppers had a connection to the store.

“That’s a brand that’s been around for a very long time,” he said.

Mervyns, which had operated for five decades, said in October that it would have to liquidate its stores after filing for bankruptcy protection this summer.

Beyond the brand names customers will no longer see, people may find many familiar businesses looking different. Retailers may operate far fewer stores or sell their goods only online. Banks may become subsidiaries of those that bought them or their names may be joined.

Circuit City Stores Inc., the nation’s second-biggest electronics retailer, is closing more than 150 stores and laying off thousands of employees as it keeps operating and attempts to restructure under Chapter 11 bankruptcy protection.

Testa said the economic Darwinism will mean only the strongest stores survive, and they’ll use the downturn to get more powerful.

“The really smart companies, when things are bad, take the opportunity to really grow their brand,” he said.