From $11 Billion To Bankrupt – 6 Reasons Sears Lost it All
Table of contents
BONUS CONTENT INCLUDED THROUGHOUT THIS POST:
As long as you aren’t a member of Generation Z, then you most likely have memories of walking through Sears with your parents excited as you searched through rows and rows filled with products shown to grab your attention (as well as your parents’ wallets).
Whether you were shopping for Christmas, Back-to-school, or killing time as your mother tried on dresses, Sears was a staple in most people’s’ lives and the thought of the big-box retailer closing down seemed impossible.
Well, the impossible has come true. On October 15th, 2018, Sears has officially filed for bankruptcy and while you still may be able to find a location within your vicinity, they are planning on closing an additional 142 stores by the end of the year. When Sears first merged with Kmart back in 2005 when it purchased Sears for $11 billion, they had about 3,500 stores. Now, both chains currently only have about 894 locations in the United States left. This is alarming, especially for those who remembered Sears as the titan of its industry it once was.
While seeing such a large brand come tumbling down may instill some anxiety amongst business owners, there are many things you can do to assure your business doesn’t fall victim to a similar fate. One example is to use employee scheduling software to save on time spent scheduling, overtime, time theft, payroll, and more. Download this Workforce Management Calculator for free to see if your business could take advantage of employee scheduling software.
<div id="Sears1"><strong>Sears in its heyday (1880s-1990s)</strong></div>
To properly understand how Sears was able to be taken from its throne, you first must understand how Sears got the throne in the first place. Back in 1888, Sears first launched their famed Sears catalog during a time where most Americans were still making their own clothes as well as their own furniture. Sears helped introduce the idea of mass-produced items as well as products that helped reduce labor like washing machines, dryers, as well as a number of other items that saved people time when doing everyday household chores. Sears stores were also instrumental in the building of suburbs all across America as neighborhoods were sprung up around malls that contained their stores.
To add onto to all of that, Sears was also the nation’s largest employer during its heyday. Sears was on top of the world, until Walmart and Home Depot came along and started to give them a run for their money. Then the 21st century began and the internet came along and brought on a whole new host of challenges for the retailer. Continue reading as we go through and detail exactly what happened that caused the downfall of Sears.
<div id="The"><strong>The arrival of Walmart in the 90’s (1990s- early 2000s)</strong></div>
While Walmart is a household name in present times and most Americans couldn’t drive more than 20 minutes without passing one. In the early 90’s, Walmart was barely known. But it didn’t stay like that for long, the now iconic brand kept trudging along and before anyone knew it, Walmart emerged as a solid competitor to Sears.
Of course, this was a gradual process and didn’t happen overnight for Walmart. They had to figure out where the hole in the market was and think of methods of how they could fill it. The retail sector is a beast and any company looking to break in has their work cut out for them.
This quote by Barbara Kahn, a Wharton School Professor of Marketing, perfectly sums up how Walmart was able to become so dominant:
“Sears and Kmart did not differentiate themselves from the competition. Walmart came along with its great service and low-prices, other retailers started to innovate more with products and service. Sears and Kmart simply trudged along and thought that was good enough.”
Walmart had the prices, the locations, along with the customer service. They steadily began to climb the ranks while Sears decided to stay complacent instead of finding innovation to boost themselves and take advantage of the wide margin of dominance they had over every other retailer. This gave Walmart the opportunity to build their brand and to eventually overtake Sears as the size of their stores steadily grew in size as Sears, for the most part, stayed the same.
<iframe src="https://datawrapper.dwcdn.net/9UsmX/1/" width="710" height="227"></iframe>
Another aspect of Walmart’s success was their steady devotion and investment in technology focused on improving the experience for their customers, operations, as well as their employees. This can be seen in their recent release of a new mobile POS system for their lawn & garden centers that makes it easy to check out customers and print receipts out on the spot.
This POS system demonstrates Walmart’s commitment to customer service that convinced a size-able portion of the market share to ditch Sears and make the move to Walmart for their immediate retail needs. They saw that customers had issues paying for products when shopping in the lawn & garden center and would often have to spend time looking for an associate just to purchase items. They listened to their customers and came up with a modern solution to fix their issues.
Sears, on the other hand, has seemingly had the same interior since the early 2000s and hasn’t made any major changes to strengthen the functionality of their stores. As a result, their customers have been subjected to a retail experience that hasn’t kept up with the times, a mistake that Walmart has made sure not to make.
They also released Walmart pay, which makes it way more convenient for their customers to pay for their products. In regards to their employees, they released their very own app called My Walmart Schedule, which makes it easy for employees and managers to see their current schedules, claim unassigned shifts, as well as keep an eye on their vacation days and time off.
While Walmart did a number of major blows to Sears, you can’t forget about the internet conglomerate that is Amazon.
<div id="Birth"><strong>Birth of Amazon (Mid 1990s-2010s)</strong></div>
Back in 1994, a young man by the name of Jeff Bezos quit his job as an investment banker for D.E. Shaw and settled into Bellevue, a Seattle suburb, with the unique idea of selling books using this new phenomenon referred to as the internet. He used a garage as the base for his business and originally incorporated it as “Cadabra” which is short for “Abracadabra”, but after some debating he finally decided to rename it to Amazon in reference to the world’s largest river. 20 years later, Amazon has annual sales of over $100 billion and Jeff Bezos has a net worth close to $150 billion.
Amazon is a perfect example of a retailing platform that took advantage of the internet and used it to its strengths rather than letting itself be left behind. Many retail business owners make the mistake of ignoring the internet and relying on their brick & mortar store as a sole revenue of profits when they could start a site, sell their products online, and be opened up to a whole other avenue for profits.
While people may assume that the internet killed everyone and that every other major big-box retailer may suffer from the same issues as Sears, the reality is that Lowe’s, Best Buy, and Home Depot have all seen their stock share prices double while Amazon has increased by nearly 33-fold. Sears, on the other hand, has seen 96% of their value disappear since trading under their current ticker name (SHLDQ) in 2003.
<div id="Sears2"><strong>Sears and the Internet Revolution (Mid 1980s- Present day)</strong></div>
You’re probably expecting this section to begin with a long detailed story on how Sears never embraced the internet and why that was eventually what caused their downfall. In reality, the irony is that Sears was ahead of the curve in regards to online shopping. I know that it may be odd to hear the words, “Sears”, “Online Shopping”, and “ahead of the curve” in the same sentence, but let me explain.
Back in the very early days of the internet (80’s to early 2000s), Sears merged with Prodigy (an online service that gave its subscribers access to a wide range of networked services like games, weather, shopping, stocks, etc.) This showed that Sears was taking the internet seriously and were selling a wide range of hardware and appliances online at a time where Amazon was only selling books. In fact, back in 2002, the online component of Sears was dubbed the “New Sears” catalog and Sears was praised for its swift entrance into the online market. The problem wasn’t that Sears missed the internet, it’s that they were still anchored to their retail past and refused to move on.
This is especially evident when analyzing their sale of Prodigy in 1996. Despite the strides Sears made in the internet realm, they seemed to halt the progress they made and refocus their attention on retail. The problem was that Walmart was no longer playing the “little brother” role and had grown to dominate the retail industry in the early 2000s. So much so that consumers were losing interest in Sears and were instead turning to Walmart to fulfill their retail needs. This was hurting Sears retail revenues, so they refocused on retail.
Another problem was that, due to Sears constantly shifting their focus, they weren’t taking the internet as seriously as they should. A brand that was taking the internet seriously was Amazon and it was all too late for Sears to take control of the internet as they hoped they would. Amazon provides better prices, better customer service, better delivery options, as well as a more established brand online. In other words, Amazon gave people no reason as to why they should choose any other brand for their online shopping needs, especially Sears. To make sure you aren’t stuck in a similar situation as Sears, make sure you’re keeping up with all of the latest innovations in your industry and are staying up-to-date with what your competitors are doing.
A good example can be seen in the back & forth between Apple & Android. When Apple made fingerprint scanners part of their iPhones, Android went and added the same technology to the Galaxy. This tug-of-war continues and if either were to come out with a new type of technology, then you can be assured that the other will be soon to implement the same tech within their own hardware. Your business needs to display the same competitive spirit in terms of your retail operations. If you run a pizzeria and the pizza place across the street starts to offer catering options, then you should try to come up with your own competitive offer. If you’re running a bar and your main competitor offers many happy hour specials that attract a large crowd, you should do your best to also offer happy hour specials so you can cut into some of their customer base.
Every retailer needs to take an inward look at their business practices to assure they aren’t missing out on the next big wave. One way to do this is by analyzing your competitors to see if they’re being profitable on an idea you haven’t moved on yet. You should also pay close attention to what’s going on within your industry so you don’t get left behind.
Sears failed to change with the times, make sure you don’t let the same happen to your business. One way to assure your retail business doesn’t fall victim to a competitor taking you out, is by staying on top of the value of your store’s inventory so you know you aren’t losing money on sales or running out of products.