The Great Sears Demise: What Can Retailers Learn?
It had been predicted by multiple retail analysts for quite some time, but the long and winding road for Sears finally reached its inevitable conclusion — bankruptcy. The filing represents perhaps retail’s most dramatic “riches to rags” story, and is an unfortunate indicator that even the biggest industry leaders can be toppled if they don’t have a forward-looking strategy.
The RTP team shares what the industry should take away from the demise of Sears, and how struggling retailers can avoid the same fate.
Debbie Hauss, Editor-in-Chief: Because Sears was such a retail icon for the past 130+ years, it’s painful to watch its demise. It definitely was, in some ways, the Amazon of its heyday. You could purchase just about anything from Sears, including a home. The Sears catalog also cemented an important place in history, by enabling African-Americans to shop for the same products white Americans could buy. Sears barreled ahead through the decades: The company had the largest revenue in the U.S. until 1989, when Walmart finally caught up. In 2017, Sears was the 23rd largest retailer in the U.S. But the company leadership did not keep up with changing consumer preferences and online competition. Don’t count out the brand just yet, though: Chapter 11 does not mean the retailer is completely disappearing. We’ll all be watching to see if there’s one last chance for a Sears miracle revival.
Adam Blair, Executive Editor: By necessity, retail is totally present-focused. If the product a customer wants isn’t on the shelf at the moment she wants it, it couldn’t matter less if it was there an hour ago. Nevertheless, it’s interesting to take a historical perspective and learn that, once upon a time, Sears was both a retail innovator and a force for social and political change — just like a certain company named after a Brazilian river is today. This NPR story reveals how, during the Jim Crow era, the Sears catalog gave blacks, particularly those in rural areas with limited purchasing options, the same access to consumer goods as white Americans. Because this type of commercial equality was a threat not just to white store owners’ businesses but also to the very structure of Jim Crow, they would actually burn Sears catalogs in public in an attempt to intimidate black customers and maintain their selling power. Who knew the “Wish Book” played a part in changing the world?
Glenn Taylor, Senior Editor: It’s hard to compare many retailers to Sears because of its size at its peak, as well as its operations up top after Eddie Lampert took control of the company (including Kmart). Don’t get me wrong, both retailers had been struggling for years even as they merged in 2005. But the retailer flat-out chose “downsizing” at every turn, in hopes that customers would come back, but none of its efforts worked. If anything, struggling retailers should realize that their most valuable stores and assets are likely valuable for a reason. They can’t abandon (or sell off) top brands and assets for quick capital, and they must still reinvest in their own business as they seek to follow consumer trends. Sears has made no serious reinvestment efforts; its ratio of capital expenditures to sales dipped from 1.01 in 2012 to 0.48 in 2018. Obviously, there’s more to keeping a business alive than just throwing money at the next shiny new toy, but pivoting to new customer preferences requires critical thinking — and yes, an expanded budget.
Bryan Wassel, Associate Editor: Many have already pointed out that Sears was the Amazon of its time, but while Amazon is today’s powerhouse, Sears also was once at the forefront of innovation. The company expanded its brick-and-mortar presence as the American suburbs grew, so a more apt modern comparison to the old Sears might be 1-800-FLOWERS.COM. This is a retailer that has strived to stay on top of retail trends as they appear, first shifting from phone to Internet ordering, and more recently shifting from a “mobile-first company to an AI-first company,” according to CEO Chris McCann at the 2018 Retail Innovation Conference. Sears started declining when it stopped innovating, not necessarily because it stopped being the Amazonian giant of the day, and retailers should take heed at how even the mighty can fall when they fail to keep up with the times.