NeoMugwump Express: The Sears Saga Edition

July 28, 2020

This is the latest edition of the NeoMugwump Express. Sorry for the long time in between issues. Hopefully, I will be less sporadic in my writing.

The Framing of Amazon

Sometimes it’s Big Finance, not Amazon that’s to blame for the collapse in retail.

My brother-in-law’s family lives in Mayville, North Dakota, a small town midway between Fargo and Grand Forks. They had a small discount store chain, Alco that went bankrupt. The city was able to get Shopko to come, which was another discount store chain found in small towns in the Midwest. But Shopko also went bankrupt last year and that store was closed. There is a Dollar General next door, but if you are looking for a discount store like a Target you are out of luck. Dollar Generals have lots of cheap stuff, which is not good because…there’s lot of cheap stuff.

This article from MinnPost explains how small towns are trying to use the space left when retailers leave town. More and more it seems like those discount retailers like Sears, KMart, JC Penney and others are disappearing from the scene. Most people will say that these businesses are closing because of Amazon and the retail apocalypse. But is that really the case? There is some evidence that the end times for retail is a myth. Also chains that are doing terrible in America are doing quite well in other countries. Sears has basically disappeared here in the States, but it’s doing quite well in Mexico. The same goes for KMart in Australia. Why are these stores doing so well in other countries, but dying here?

It’s important to know that Sears and KMart in Mexico and Australia are separate from their American counterparts. But I think the big problem is not Amazon, but finance. In short, it’s private equity and hedge funds that are ruining American retail far much more than Amazon ever could. CNN did some great reporting on how hedge funds and private equity is wreaking havoc in American retail. The Atlantic did a report on the New York City grocery chain Fairway and how a private equity firm has pushed the chain into bankruptcy for the second time in five years. Eileen Applebaum and Andrew W. Park exaplain how these firms “hallow out” once profitable businesses:

Most companies mean to stay in business for the long term, and those in the industries most exposed to the business cycle know that low debt and no rent are the keys to surviving hard times and then prospering when the good times return. The motivation is very different for private-equity owners, who operate under a shorter time frame, often just three to five years, before moving on. For them, low levels of debt and high levels of real-estate ownership present a get-rich-quick opportunity.

The low debt means that private-equity firms can acquire retail chains by putting up very little of their own money and can take on high levels of debt that the company, not the investors who own it, must ultimately repay. The real estate gives investors an opportunity to sell off some of it and pocket the proceeds, leaving the stores to pay rent on properties they once owned. Especially attractive to private-equity owners is the high cash flow in retail operations. Private-equity owners have not been shy about putting their hands in the till to pay themselves exorbitant dividends.

Unfortunately, private-equity owners are far more accustomed to taking money out of retailers than to putting money into them, and the hollowed-out chains they own are ill-equipped to meet today’s competitive challenges. Brick-and-mortar stores need to invest in e-commerce, same-day delivery, and the technologies and logistics that success in retail now requires. While all traditional retail faces these challenges, chains owned by private equity make up a disproportionate share of businesses that have failed. This record is not just a product of markets; it’s a matter of morality as well. Private-equity firms profit as the companies they own tumble into bankruptcy.

This is where my brother-in-law’s story comes in. Shopko had a store in Mayville and then it closed, and not long after the chain went bankrupt and was liquidated. Shopko was owned by a private equity firm. The end of Shopko meant a lot of smaller communities in the Midwest are now without a good retailer.

In a 2018 Atlantic article, one suggestion is to make sure these firms have some skin in the game. Countries like Germany and Denmark make sure these firms pay severance which means they have to give up something before they layoff people. Some on the left want to go further and ban leveraged-buyouts altogether.

This is important to remember when we see retail chains close. It’s not all about Amazon. Jeff Bezos is not necessarily to blame for the downfall of firms like Shopko or Sears.

I’ve been following the Sears Saga for years. Read some of my past articles to get an understanding of how a hedge fund killed off this leading retailer. The links are below:

There’s More for Your Life At Sears (Just Not in the US) July 2020

Sears, Trump and the Age of Bull (May 2020)

Amazon Didn’t Kill Sears (November 2019)

It Didn’t Have to End Like This (September 2019)

Why Amazon Should Buy Sears (January 2019)

Can Sears and Kmart Come Back from the (Near) Dead? (October 2018)

Death Without Dignity: The End of Kmart (April 2017)

After the Fire

What comes after “Burn It All Down?”

There has been an argument going on within the NeverTrump world. Should the goal be to just get Trump out of office or is it to go after Trump and those in Congress who didn’t stand up to him or as some are calling it, “Burn it All Down?” NeverTrumper commentators Matt Lewis, David French and Christian Schneider are all hesitant in rooting for the GOP to lose the Senate because that would put the Democrats in charge of everything in Washington. The Bulwark’s Charlie Sykes and the Lincoln Project are ready to light the match. I reluctantly agreed with the “burn it all down” folks but there remains a bigger question to ask after November. Will we rebuild?

In our world today, we have people ready to bring everything down. President Trump was elected because many in his base wanted to burn it all down. But after doing that, is anyone going to rebuild? Some people are beginning to talk about that, but I think for the most part, people aren’t thinking about it now. But will they after the voting and Trump (hopefully) loses? There is a part of me that doesn’t think so. I’ve been on the outer edges of the GOP for years and it’s been fascinating to see people who might have some interest in changing the party, get frustrated and leave. The drive to modernize the party is weaker than the elements that want to put up the “whites only” sign. I think that’s still true today. I just don’t see anyone that has that interest in building something positive from the ashes.

Related to that, is the fact that the media seems very skeptical that anything can change. McKay Coppins had his doubts that Maryland Governor Larry Hogan, an outspoken Trump critic, could lead the party in a new direction. But four teenagers from Massachusetts believe the party can be changed to be more inclusive and less divisive. GenZGOP is a group for this new generation coming of age and it’s patterned not in Trump’s image but in the image of Massachusetts Republican governor, Charlie Baker.

I wish them well. But I also know that the internet is littered with the dead websites of organizations geared towards doing what GenZGOP is doing. Many of those groups have disappeared. I hope they don’t meet the same fate.

The Vanishing Indian

Some Native American mascots were designed by Native Americans.

I’ve always been interested in what I can best call “counterstories.” These are stories that might take on the same topic, but from an angle that most of the news media isn’t taking. I’ve seen that twice this year when it comes to Indian mascots. In April, Land O Lakes removed the sitting native woman that graced their products for decades. The reason is what you would expect, that the image was considered demeaning to Native Americans. An indigenous lawmaker from North Dakota went as far as saying the young maiden was responsible for Native women being sex trafficked. What most people didn’t know is that the current version of this young woman was designed by an Ojibwe man from Minnesota. His son, Robert DesJarlait, explains:

After I was born in 1946, my family moved from Red Lake, Minn., to Minneapolis, where my father broke racial barriers by establishing himself as an American Indian commercial artist in an art world dominated by white executives and artists. In addition to the Mia redesign, his many projects included creating the Hamm’s Beer bear. By often working with Native American imagery, he maintained a connection to his identity.

I was 8 years old when I met Mia. My father often brought his work home, and Mia was one of many commercial-art images I saw him work on in his studio.

With the redesign, my father made Mia’s Native American connections more specific. He changed the beadwork designs on her dress by adding floral motifs that are common in Ojibwe art. He added two points of wooded shoreline to the lake that had often been depicted in the image’s background. It was a place any Red Lake tribal citizen would recognize as the Narrows, where Lower Red Lake and Upper Red Lake meet.

So, the recreation of Mia was a way of one Native American of having some control over how people like him were represented in society.

The other story deals with Washington’s Football Team when it had its old name. A recent article talks about the changing nature of the word “redskin,” but I want to focus on the logo. Before 1971, the logo was the letter “R” set in front of a white circle. That changed at the urging of Walter “Blackie” Wetzel, a former Blackfeet tribal chairman. The logo is a rendition of a Blackfoot chief, John “Two Guns” White Calf. Wetzel thought it was important to have something that not only showed Native Americans in a positive light but showed them at all.

I share these stories not to make an argument to keep the logos, but as a lesson on how persons of color have worked for representation over the years. We might think these logos are shameful now, but they were created decades ago in order to give a sense of control over how, in this case, Native Americans were portrayed. That was also the case in a story by former NPR host Michelle Norris as she recounted her grandmother playing the party of Aunt Jemima at county fairs. Instead of playing the “mammy” she reinvented Aunt Jemima into someone that less of a stereotype. The viewpoint of removal has not always been the way to deal with representation. In another time when persons of color didn’t have as much freedom to demand change, they made change incrementally through the system. As we retire names and logos that we deemed offensive, we should remember those people that worked to make sure their people were fairly portrayed in a white man’s world.

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Dennis