LATE BREAKING NEWS: Sears Survives Near Death Experience. Click Here.
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| Bottom line: Sears died from the top down. The lack of leadership in making the right diversification decisions at the executive suite level killed the company. |
GUEST BLOG / By Dora
Mekouar, Voice of America--In the late 1960s, while fledgling new retailers
Walmart, Kohl's, Kmart and Target were hard at work establishing a foothold in
the hearts, minds and wallets of the American consumer, the nation's dominant
retailer was busy building the world's tallest building.
FOUNDERS.
Left: Richard Sears (1863-1914) and Alvah Roebuck (1864-1948).
In
pouring its funds and focus into Chicago's Sears Tower, America's original
super-store may have unwittingly become the architect of its own long, slow and
painful demise.
“Walmart,
the strongest of all those four, wasn’t anywhere near where Sears was for a
couple of decades," says James Schrager, professor of entrepreneurship and
strategy at the University of Chicago's Booth School of Business. "So, if
Sears was on top of things, even in the early 80s, they could have been Target
or a better version of Kmart, they could have been any of that. But they sat on
their hands and built their tower in 1969 instead.”
It's
been a precipitous fall for the one-time retail powerhouse, which in October,
2018 filed for bankruptcy after years of losses.
Established
123 years ago, Sears was literally the place where America shopped, as its
tagline boasted.
Sears
had everything from clothing and toys, to tools and appliances. It even sold
housing kits. Thousands of Sears homes still stand across America today. For
decades, American families eagerly awaited the delivery of the retailer's
several-inches thick mail order catalogues.
The
secret to Sears' success was being able to stay ahead of the market, according
to Schrager.
From
small stores in small towns, to big stores in downtowns in the 1920s; to a
thriving catalogue business for smaller outposts, the main way America shopped
right through to the 1950s and 60s; and then the switch to anchor stores in
shopping malls through the late 1970s, Sears was always on the move, changing
with the times.
But
as soon as Man went to the moon then Sears seemed to stop evolving.
While
the Walmarts and Targets of the world recognized the value of moving away from
shopping centers and opening massive spaces in strip malls where customers
could park right in front of the store, Sears stayed at the mall.
The
competition also developed individual identities and expertise. Target became
known for its upscale, fashion-oriented approach, Walmart for superior
logistics in smaller towns, and Kohl's had fashion-only soft goods, says
Schrager.
Meanwhile,
Sears seemed to lose its focus.
“Sears
slowly lost track of its retail business by being fascinated with other
things," Schrager says. "In 1969, they began to build the tallest
building in the world, that took a lot of time away from the business.
They
bought a stock brokerage company, which they had no business doing. They bought
a real estate company, which they had no business doing. They developed a
wonderful credit card called Discover, which has nothing to do with
retailing."
And
along the way, the type of people at the top, the people making the business
decisions, changed.
“Merchants
are the lifeline of the business and Sears allowed them to wither,"
Schrager says. "How do we know that?
Because,
after a while, Sears wasn’t getting a merchant to run the business. They were
getting a financier or a marketer or someone other than a dirty-fingernails
merchant who spent their life trying to beat the merchant down the street.”
Edward
Lampert, Sears' most recent CEO and majority shareholder, is a hedge fund
billionaire. He took over in 2013 and expressed hopes of turning the company
around.
Although
Sears just filed for bankruptcy protection last October, Schrager believes the
final death blow for the retailer occurred back in the early 1990s. That's when
previous company executives decided to sell off the profitable parts of the
business, while keeping the failing stores.
In
1993, Sears shed the Discover credit card, its real estate company Coldwell
Banker, and its Dean Witter Reynolds stock brokerage. Allstate, its insurance
company, followed in 1995.
“There’s
nothing left. Retail walks by you," Schrager says. "You can’t stand
still, and Sears has been standing still since 1969. That’s a very long time.
The world has evolved two of three times since then…it’s over."
While
one-time competitors like Walmart, Target and Kohl's continue to change and
thrive, Kmart, which is now operated by Sears Holdings, is also in financial
trouble because, Schrager says, it too failed to change with the times.
As
for the one-time king of the pack, the next time consumers get excited about
buying something at Sears could be when the bankruptcy court rules that the
place where America once shopped must itself now be broken apart and sold off
for the best possible price.
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Floorplan
of Sears Magnolia kit house from the 1921 Sears Modern Homes catalog. (Right) A
Sears Magnolia kit house located in Benson, North Carolina.
Once
the world's tallest building, the 110-story Sears Tower in Chicago is now known as the
Willis Tower, Nov. 7, 2013.
