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<DIV><FONT face=Arial size=2>Thanks Jeff</FONT></DIV>
<DIV><FONT face=Arial size=2>This is what I thought happened and it had nothing
to do with Wal-Mart.</FONT></DIV>
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style="FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black"><B>From:</B>
<A title=jeffh@moscow.com href="mailto:jeffh@moscow.com">Jeff Harkins</A>
</DIV>
<DIV style="FONT: 10pt arial"><B>To:</B> <A title=joekc@adelphia.net
href="mailto:joekc@adelphia.net">joekc@adelphia.net</A> ; <A
title=vision2020@moscow.com
href="mailto:vision2020@moscow.com">vision2020@moscow.com</A> </DIV>
<DIV style="FONT: 10pt arial"><B>Sent:</B> Friday, January 27, 2006 9:43
AM</DIV>
<DIV style="FONT: 10pt arial"><B>Subject:</B> Re: [Vision2020] Re: Kay Bee
Toys - Tell the whole story!</DIV>
<DIV><BR></DIV>Joe, <BR><BR>I am surprised that you would wander off to
support a business organization that has devised a business plan to "suck
dollars from the local community" and have no physical presence in the local
community. The fact is KBToys was not a superior business to WalMart -
and it failed to meet the market test. It is now reorganized, mostly as
an LLC - which reduces tax consequences and provides some legal protection to
shareholders.<BR><BR>Since WalMart also operates a web commerce division, it
will be interesting to see if the Shaw Group can make a go of it. Shaw
has made a total commitment to e-commerce which will save them considerable
dollars in infrastructure and it is possible that they can obtain enough
market share to survive.<BR><BR><BR><BR>Here is a link to what ultimately was
the downfall of Kay Bee Toys (this is a description of the class action
lawsuit for unfair and/or deceptive pricing, 2002) against Kay Bee.<BR><BR><A
href="http://www.krislovlaw.com/cnotes_kbtoy.htm"
eudora="autourl">http://www.krislovlaw.com/cnotes_kbtoy.htm</A><BR><BR>Here is
what ultimately happened to Kay Bee: (please pay attention to the italicized
red print highlight)<BR><BR>
<DIV align=center><FONT face="arial black" size=4>D. E. SHAW AFFILIATE
ACQUIRES ONLINE ASSETS OF KB TOYS<BR></FONT><I>New Company to be Named eToys
Direct, Inc.</I> <BR><BR></DIV><FONT face=arial size=2><B>New York, NY and
Denver, CO. May 11, 2004</B> - The D. E. Shaw group announced today that one
of its affiliates has completed the acquisition of the online assets of KB
Toys, Inc. The acquired assets include the inventory, equipment, leases, and
proprietary technology of KB Online Holdings LLC as well as eToys trademarks,
URLs, and associated intellectual property. Former members of KB Online
Holdings senior management, including Michael J. Wagner, supported the
transaction and will hold a significant minority equity stake in the new
company, eToys Direct, Inc., formed to own and operate the acquired assets.
Mr. Wagner will be the CEO of eToys Direct, which will be headquartered in
Denver. <BR><BR>eToys Direct, Inc. will own and operate the eToys Web site (<A
href="http://www.etoys.com/" eudora="autourl">www.etoys.com</A>) and a 650,000
square foot state-of-the-art fulfillment facility in Blairs, Virginia, and
will continue to operate the KBtoys.com Web site (<A
href="http://www.kbtoys.com/" eudora="autourl">www.kbtoys.com</A>) under a
long-term licensing agreement with KB Toys. eToys Direct will also continue to
provide merchandise, order fulfillment, and customer service to other online
and catalog retailers through its various retail alliances. <BR><BR>"We're
excited at the prospect of growing the eToys Direct business, especially by
expanding alliances with established online and catalog retailers," said Max
Holmes, a managing director of D. E. Shaw & Co., L.P. and head of the
firm's distressed securities group. "In addition, the acquisition will be an
excellent complement to the online business of FAO Schwarz, which we acquired
in January." <BR><BR></FONT><FONT face=arial color=#ff0000 size=2><B><I>The
sale price includes approximately $7.4 million in cash plus a minimum royalty
payment to KB Toys, Inc. of $500,000 per year for the next three years. In
addition, a wholly owned subsidiary of D. E. Shaw Laminar Portfolios has
agreed to provide a $20 million line of credit to eToys Direct. The
acquisition was approved by Judge Joel B. Rosenthal of the U.S. Bankruptcy
Court, District of Delaware on April 29, 2004. <BR><BR></I></B></FONT><FONT
face=arial size=2>eToys Direct, Inc. will operate as a subsidiary of D. E.
Shaw Laminar Portfolios, L.L.C., whose activities include the deployment of
capital in connection with the restructuring of companies with valuable assets
that may currently be experiencing financial distress. D. E. Shaw Laminar
Portfolios is a member of the D. E. Shaw group, a New York-based investment
and technology development firm with approximately $8 billion in aggregate
capital. <BR><BR><BR><BR></FONT>Here is how eToys tells the story:<BR><BR><BR>
<DIV align=center><FONT face=arial size=2><B>The eToys Direct, Inc. Story</B>
<BR><BR></DIV>eToys Direct, Inc. began in the early days of online shopping as
a tiny start-up called Brainplay.com. Our early success caught the attention
of some big retailers. In 1999, we formed a joint venture with Consolidated
Stores, Inc., then the parent company of KB Toys. We launched the new
KBtoys.com web site in June of 1999, and our staff worked non-stop to get it
ready for the holiday rush. That year, Media Metrix, Inc. ranked KBtoys.com
the 12th-most visited site during the season. And the Wall Street Journal
named us the best overall toy retailer. <BR><BR>The online retailing landscape
changed dramatically during the next year. In 2001, we acquired most of the
assets of our former competitor, eToys, including its high-tech warehouse.
Since that time, we have used the Blairs, Virginia facility as our primary
fulfillment center. <BR><BR>In 2002, we partnered with Sears Roebuck & Co.
and Kmart, merchandising and fulfilling toys and video games featured on
sears.com, in the Sears Wish Book® and on Kmart.com. In 2003, we expanded our
relationship with Sears, designing and producing the Wish Book® as part of a
licensing agreement, and providing catalog customer support. QVC.com joined
our growing list of partners in 2003, and we launched a co-branded toy
department on Buy.com. <BR><BR>We separated from KB Toys, Inc. in May of 2004,
after our management successfully bid for our company's assets. The following
month, eToys Direct, Inc. acquired most of the assets of the My Twinn Doll
Company and launched the new My Twinn web site in September of 2004. That same
year, we added Amazon.com, FAO Schwarz, Macys.com, Circuitcity.com and
SmartBargains.com to our growing list of partners. <BR><BR>In 2005, the
company acquired Silvestri, Inc., which specializes in wholesale giftware,
collectibles, accessories and home décor. A wholly owned subsidiary of eToys
Direct, Inc., Silvestri is based in Beverly, Massachusetts. <BR><BR>eToys
Direct, Inc. owns and operates the eToys and My Twinn web sites, owns
Silvestri, Inc. and operates KBtoys.com under a long-term licensing agreement.
We look forward to providing our customers and our current and future
partners' customers with an incredible selection of toys, video games, custom
dolls and wholesale gifts, an outstanding shopping experience, fast, friendly
customer service and speedy order fulfillment as eToys Direct,
Inc.<BR><BR><BR></FONT>At 07:36 AM 1/27/2006, you wrote:<BR><BR>
<BLOCKQUOTE class=cite cite="" type="cite">Gary, <BR><BR>You asked for an
example where an inferior business beat out a superior one and I gave one.
You might analyze why KB Toys is no longer in Moscow differently than I
would but the main point is that they are not here any longer and the
average person has fewer choices because of that. What the example proves is
that the free market does not always lead to the best businesses and the
most choices. That claim is nothing but a rhetorical slogan.<BR>--<BR>Joe
Campbell<BR><BR>---- "g. crabtree" wrote:<BR><BR>=============<BR>Joe,
Excellent try but short of the mark I'm afraid. Stand alone toy stores are
struggling everywhere for a variety of reasons, not the least of them being
the internet. Perhaps we should argue against E- commerce? Almost all of the
complaints that you make would apply, plus no local jobs, no local taxes,
and all money made goes out of the area. Moscow does not have a population
large enough to effectively support a toy store. KB toys was undergoing a
certain amount of financial disorganization at the time the local store
closed. The latest trends in toys tends toward computer/video games which
are heavily marketed at other retail outlets such as Circuit City, Hastings,
Costco, Shopko etc. And last but not least, the fact that you are using a
subjective, anecdotal example. If it were valid then I would think that
Hodgins would have been toast long ago. Wal Mart sells all the products that
they do, (prescriptions, OTC remedies, toys, sundries ) and yet they still
exist. Might this be attributed to superior service, good product selection
(toys) and an over all commitment to their customers?<BR><BR>I am rather
fond of Moscow also. We already have a Wal Mart and I'm fairly sure that it
isn't killing us. Plucking out of thin air numbers like 98% 2% and attaching
them to a poison pill arguments is pure sophistry.<BR><BR>Try
agin?<BR>Gary<BR>----- Original Message -----<BR>From:
joekc@adelphia.net<BR>To: g. crabtree<BR>Cc: Andreas Schou ;
vision2020@moscow.com<BR>Sent: Friday, January 27, 2006 5:24 AM<BR>Subject:
Wal-Mart - was Doug Jones Says It Clearly<BR><BR><BR>Gary,<BR><BR>I didn't
think Mr. Schou's analogy blew but here is a real world example of an
inferior business beating out a superior competitor. The mall used to have a
toy store: Kay-Be Toys, or something like that. I went there frequently when
my son was younger and my wife let me spoil him more. Wal-Mart drove Kay-Bee
Toys out of business. Kay-Be Toys had a far superior selection of toys and
was by any set of standards a better toy store than Wal-Mart. (Neither are
as good as Hodgins Drug Store but that's another issue.) What happened was
that kids go to toy stores with their parents but parents buy other things
besides toys, things that are not sold at Kay-Be Toys. In short, Wal-Mart
offers low-cost and convenience. That is it. It is 'superior' to other
stores for these two reasons only. But that is enough to drive out some
businesses. Once those businsesses leave, the folks in Moscow will have
fewer choices, not more choices.<BR><BR>You note that "many communities that
are co-existing with the worlds largest retailer to the betterment of its
residents." But many are not. It was noted in Tom Trail's post that two
communities like ours were "sucked dry" after a Super Wal-Mart moved in. For
the sake of argument suppose that 98 communities like ours were not sucked
dry. Would you take a pill that had only a 2% chance of killing you if you
didn't need it and you were getting along fine without it? I don't think so.
I love Moscow and low-cost and convenience are not enough reason for me to
risk sucking it dry.<BR><BR><BR>--<BR>Joe Campbell<BR><BR><BR><BR>---- "g.
crabtree" wrote:<BR><BR>=============<BR>Mr. Schou, Your analogy blows. It
seems clear to me that you have very<BR>little understanding of how an 'all
in" bet works but rather than educate<BR>you on the finer points of poker
allow me to propose an analogy of my own. A<BR>player comes to the game and
bluffs outrageously each and every hand. Soon,<BR>his fellow gamblers see
him for what he is and call him. His weak hands are<BR>revealed, his
resources dwindle and very soon he is out of the game.<BR><BR>This appears
to be the tactic of the common garden variety wal-mart<BR>opponent. Exclaim
loudly how WM will be the ruination of civilization and<BR>will bring about
the heat death of the universe and so on. When folks see<BR>that there are
many communities that are co-existing with the worlds largest<BR>retailer to
the betterment of its residents our protester is revealed as at<BR>best,
wrong and at worst, a dupe.<BR><BR>Getting back to the original heart of the
discussion, hows about some real<BR>world examples of inferior business'
beating out superior competitors. I'll<BR>be waiting, watching the pages of
my calendar flit by.<BR><BR>gc<BR><BR><BR>----- Original Message
-----<BR>From: "Andreas Schou"<BR>To: "g. crabtree"<BR>Cc: ;<BR>Sent:
Thursday, January 26, 2006 4:48 PM<BR>Subject: Re: [Vision2020] Doug Jones
Says It Clearly<BR><BR><BR>>You are right about my confidence in a free
market. Perhaps you could give<BR>>me a few examples where an inferior
business beat out a superior one.<BR><BR>Let me use a poker analogy. If I
had a trillion dollars, played poker<BR>for a living, and won every poker
game I played by going "all in" on<BR>every hand, would I be the best poker
player that ever lived? Hint:<BR>no, I would not.<BR><BR>This is Wal*Mart's
business model: saturate the market, make<BR>monopsonic agreements with
suppliers, and run as thin a margin as<BR>possible in new stores until all
the other business goes under. Is<BR>this a good business strategy? Yes.
Does it contribute to market<BR>efficiency -- which is generally how a
"superior business" is<BR>understood to work? No. It does not.<BR><BR>--
ACS<BR><BR><BR>_____________________________________________________<BR> List
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