How can the nation’s second largest anything go bankrupt?

Even in the toughest of times there should be room for at least two competitors. Smaller, weaker players tend to be the ones that run out of cash, customers and time, while the biggest companies use the advantages that come with size to ride out the storm. At least that’s how it normally works.

The obvious reason for Circuit City’s demise is the economic tsunami that is swamping every retailer. But it’s not the only reason. Industry leader Best Buy, while also suffering the ill effects of unprecedented market tectonics, is in nowhere near the trouble Circuit City is (or was). As the Wall Street Journal recently reported, “competition from Minnesota upstart Best Buy caught Circuit City flatfooted in the 1990s, and its market share steadily declined.” Best Buy simply outmaneuvered its once-larger competitor, changing the industry’s dynamics by paying hourly wages instead of commission and building larger, better-stocked stores, among other things.

Best Buy’s moves—and Circuit City’s mistakes—put the latter on the ropes well before it was hit by the current crisis. Weak as it was, Circuit City simply couldn’t withstand the most recent, devastating blow.