Once-giant Sears nears the end
Sears appears to be nearing the final stage in its monumental decline
In 1989, Sears Roebuck ruled America as its biggest retailer. It loomed over rivals from a perch high above Chicago, inside what was once the world’s tallest building — one bearing the company’s name.
The fall from that height may finally be nearing an end.
Over almost three decades, the company experienced what industry observers describe as one of the most monumental collapses in business history. Despite its union with Kmart — the second-largest retailer from that era — and a stated belief that it can still turn things around, Sears is teetering on the edge of disaster.
The latest bad news was revealed in March, when Sears acknowledged “substantial doubt” about its future, sending the stock plummeting.
The combined decline of Sears and Kmart, in terms of sales, is unprecedented, said Greg Portell, an analyst at consulting firm A.T. Kearney.
The seeds were planted by poor decision-making in the 1980s, he said.
“The management mistake that Sears made, in retrospect, was that they never got to a spot where they could stop the free fall,” said Portell.
It has been a slow, painful fall for these once-dominant brands. Sears, in particular, was synonymous with suburban American consumerism. It dominated retail and changed the way people shopped through its revolutionary catalogue business — the Amazon.com of its era.
Kmart accomplished a lot as well, rising to a spot right behind Sears by peppering the nation with its Super Centre big box shops and luring shoppers with deep discounts.
In 1994, Sears and Kmart raked in a combined US$ 111.4 bill i on, compared with Wal-Mart Stores’ haul of US$111.9b.
Since then, Sears and Kmart have watched their customer bases shrink amid a never-ending string of store closures. Wal- Mart’s sales grew almost fourfold over the next decade, as it tripled its locations and embarked on mass international expansion. Sears and Kmart each chose to trudge along, with little change in strategy.
In 2002, Kmart filed for bank- ruptcy protection after years of weak sales and stiff competition from WalMart. At one point, Kmart’s biggest food distributor stopped shipments after the retailer was unable to make payments. Kmart would emerge from bankruptcy under the control of hedge fund billionaire Eddie S. Lampert and his f i rm, ESL Investments.
Then came the merger, at the time the biggest tie-up in the annals of retail. Since then, Sears and Kmart have been slowly dismantled by Lampert.
Little cash was funnelled back into reviving physical stores. Chunks of the business were sold to keep the lights on. In January, the company sold the famous tool brand Craftsman to Stanley Black & Decker for about US$900 million ($1.3b).
“He did nothing to maintain the stores — nothing to spiff them up and make them a nice place to go shopping,” said Robin Lewis, a longtime industry analyst and chief executive of the Robin Report. “You’ve got young people today that don’t even recognise Sears as a place where they would go. I think people will just forget about it.”
The Sears catalogue had an even bigger impact in 1900 than Amazon has had today Professor Robert Gordon
Once, Sears was the disrupter — not the disrupted. When the Sears catalogue first appeared on doorsteps in the 1890s, it fundamentally changed how Americans shopped. Back then, much of the population lived in rural areas and they bought almost everything from little shops at rural junctions. These general stores had limited selection and charged exorbitant prices.
“The Sears catalogue had an even bigger impact in 1900 than Amazon has had today,” said Robert Gordon, a professor at Northwestern University and author of The Rise and Fall of American Growth. Like today’s e-commerce powerhouse, the Sears catalogue gave shoppers more choice than ever before, and at lower prices. “The cost of living went down the minute Sears became available,” said Gordon.
Searching for parallels for Sears’ fall through business history, Gordon could find none.
“There is nothing like the decline of Sears and Kmart,” he said.
Howard Riefs, a spokesman for Sears, said the company had made strides in combining physical stores with digital initiatives, such as allowing consumers to purchase online items they can later pick up.
As for the risk disclosed in the March filing, Riefs said that while historical performance prompted that statement, Sears’ financial plans and forecast “do not reflect the continuation of that performance”. Sears was focused on improving and had made “decisive actions” in recent months.
“As shopping behaviours have changed, our focus is on how we can make shopping easier,” said Riefs. “We believe the key is to truly integrate the shopping channels. It’s a combination of store and online and mobile. It’s not just one thing anymore.”