Some figures picked up in the media from research house ShpperTrak showed retail sales on Black Friday up 3%, which was much better than the most gloomy forecasts. The level of consumer spending may not stay high, but it is an indication that the holiday may not be a complete wash-out for a retail industry which was already on the ropes.

For the last several years, e-commerce holiday sales have grown faster than in-store revenues. That trend may be coming to an end.

The latest numbers from comScore show that Black Friday online revenue was up a measly 1% this year, to $534 million. 

For the holidays so far, beginning on November 1, e-commerce revenue is now off 4% to $10.4 billion.

If would be an odd reversal for futures if bricks-and-mortar stores showed better gains this year than online "stores" did.

The stock market may be anticipating just such a turnabout in fortunes. Over the last three months, shares of Wal-Mart (WMT) are off less than 5%. Shares of Target (TGT) are off 35%. But, the stock prices of Amazon (AMZN) and Ebay (EBAY) have both fallen almost 50% for the period.

Shopping online may have lost its charm, especially in a poor economy. At least in a story a shopper can bargain with the sales person. In a recession, the is pretty important.

Douglas A. McIntyre

The new Wal-Mart (WMT) super-store in Columbia, Kentucky is longer than the aircraft carrier USS Enterprise which is docked on the West Side of Manhattan. The retailer outlet’s ceilings are taller than those below the flight deck, probably forty feet from the floor. And, Wal-Mart is a ship of war all its own.

The location draws from five counties, bringing in people from as far away as 50 miles. That must hurt retailers in cities and towns from Russell Springs to Burkeville to Campbellsville. The LGA food supermarket in Columbia used to demand immodestly high prices. When the Wal-Mart came to town those prices came down.

The parking lot outside the store probably holds 800 cars. At 4 AM, it is partially full while a street cleaner works its way around the area to make sure that the roads and spaces are pristine. They are remarkably so, in a way the no other retailer could afford to manage.

Inside the Wal-Mart,  there are a bank. 2 Delicatesins, a pharmacy, and sections with fresh food, consumer electronics, sporting goods, furniture, clothing, toys, appliances, CDs, jewelry, and almost anything else a shopper would want or need. It would actually take hours to make it down all of the aisles and look at most of the items.

The first two impressions most people would have moving around the super-center is that almost all of the food and merchandise is of extremely high quality. The black angus beef is fresh and is priced at less than half of what it would cost in most big cities. The 50 inch plasma TVs run well under $1,000. A good Acer PC goes for under $350.

Across almost every section of the store are signs that call attention to remarkable bargains. Looking through these, the promotions are no exaggeration. It is difficult to see how Wal-Mart makes any money on much of this merchandise.

A little less quickly a visitor will notice that almost all of the people in the super-center are working class, many lower-working class. There are probably not more than handful of cars in the parking lot that are worth more than $30,000. Almost no one is at the Wal-Mart there to “shop”. They don’t have the discretionary income. They are there to buy what is on a list and with a very modest budget. It is unlikely that most of the people are willing tospend more than a few dollars beyond what is on that list.

Wal-Mart does not need an apologist. Under CEO Lee Scott the company took plenty of PR beatings. Scott was never much good at defending how Wal-Mart put local businesses out of business or why the firm kept workers from organizing. He did a remarkably poor job of explaining why Wal-Mart tried to move “upscale” with more expensive clothing. A lot of what went on under Scott did not work very well. He is retiring now. The most important part of his legacy may be that Wal-Mart’s revenue went from $165 billion when he became CEO in 2000 to $375 billion last year. Usually that part gets left out.

A lot of press and analysts believe that Wal-Mart has come into its own again recently. A recession drives the middle class and lower class alike to look for good stuff that costs as little as possible. As discretionary income disappears, “everyday low prices” take on a remarkable appeal. Wal-Mart did not back into its current success. It has been waiting for its natural customer base to expand. In any normal economy Wal-Mart would be viewed as a working class person’s dream store. When home prices were doubling every five years and home equity loans grew on trees, the value of the dollar got lost along the way.

Having met Sam Walton several times, it is easy to see why he was so successful. Walton was gracious enough, but all he really wanted to talk about was the company and he was forever on his way to get into his two engine plane to travel to one or two stores a day for pep rallies with the “associates”. Lee Scott was never a big rally man. He is rich enough to have someone fly the plane when he wants to leave Bentonville.

A lot of small merchants, labor organizers, and local governments would like to see Lee Scott go to hell. He may. But, he will be joined there by all the mom and pop storeowners who used their mini-monopolies on prices and all the town council men who made a buck by picking up a few extra dollars for keeping the “big box” retailers out.

The people who can’t afford to shop somewhere other than Wal-Mart without having to walk out of the stores with junk don’t really care.

Douglas A. McIntyre

Near the Detroit Metropolitan Airport, visible from several major highways, is a four-story tall replica of a Uniroyal tire. It was built for the 1964 World’s Fair in New York and was moved to its present site after that event closed.

Back then, Akron, Ohio was the “Rubber Capital” of the world with the headquarters of most of the major tire companies including Goodyear and Firestone just a little over 100 miles from Detroit. It was one of the twenty largest cities in the US and Detroit was in the top five. Tire executives could make it up to GM in two hours to grab a three-martini lunch and be home by dinner.

Akron was run by evangelists then, led by the world class TV minister Rex Humbard who broadcast services from “The Cathedral of Tomorrow”, probably the largest church building in the Midwest. Hubbard’s theology was that the righteous would find prosperity on Earth. In Akron, there was not any evidence to contradict him. Detroit was run by the UAW. It had cut contracts with the car companies which gave workers salaries and benefits which were unprecedented in the history of the American work force. No one seemed to care much who was in charge. There was no foreign competition. Everyone was making money. People did not know that they should also pray for a prosperous future. Things were too good in the present to bother.

Now that Akron barely has enough people to fill a high school football stadium and Detroit is close to bankrupt, the entire world that relies on the US auto industry wants a part of the Paulson bailout money or any other capital Congress might vote to give it. Public, press, and government opinion about the future of The Big Three runs from allowing them to fall into Chapter 7 to be liquidated  or to the creation of a full-scale salvage program which would keep all of the domestic car companies and their employees as well off as they were when they were making money.

Detroit has probably done more for America over the last century than San Diego, Phoenix, and San Antonio, even though each has more people than the Motor City today.

It is fair to argue that Detroit and the satellite cities around it did more to create the American middle class than any other region. Its factories gave hundreds of thousands of workers, most of whom had never seen the inside of a college, remarkable incomes and economic stability. In addition,the American car did make a great deal of the nation’s population mobile.

Detroit also played a critical role in WWII. Its factories were converted to weapons manufacturing operations. The war might have lasted longer without the extraordinary amount of ordinance the facilities shipped to both theaters of the conflict.

Americans are not much for rewarding behavior that has made it to the history books. Saving industries which are no longer viable is not a part of this culture. If a segment of the economy falls apart, it can always be replaced by something newer and better, something which replaces lost jobs with better ones. It is a nice theory which rarely seems to work.

The advocates of keeping The Big Three afloat argue that closing the domestic car companies could cost three million jobs and tens of millions of dollars in lost tax revenue. Several states, with Michigan out in front, would have to go into receivership and essentially be taken over by the US government.

Free market advocates assume that foreign car companies and private equity firms will take the car company assets which still have value and leave shareholder, debt-holders, and the UAW with little to show  for hanging onto a sinking ship.

It is hard to see how Detroit will be helped by government loans. These could paper over the problems of high labor costs and burdened balance sheets. The tire industry hit hard times two decades ago. Much of the ownership of that business is held outside the US today.

Auto executives have argued that Detroit can be resurrected if they are given the time and the tools to cut down debt and labor costs. They argue that American car companies can make vehicles as fuel –efficient as those from Japanese companies, especially Toyota and Honda (HMC). At this point it may only take a year or so for Toyota to pass GM’s US market share and for Honda to pass Ford.

Sisyphus never got his rock back to the top of the hill. American car companies are doomed to the same fate.  The simple reason that Detroit is finished is that it would take several years for it to become competitive in operations, product development, and innovation. The Japanese and Europeans won’t stand still. By the time the American companies reach the point where their rivals are today, the competition will have moved miles and years ahead.

No matter how much the American government and American sentiment would like to cure Detroit, it has already bled out. Some of its pieces may prosper, but they won’t be in the hands of The Big Three.

The Uniroyal tire won’t have a place in Detroit anymore because the car companies will have gone.

Douglas A. McIntyre