How Sears could have avoided bankruptcy
The most impressive statement to make about Sears as it seeks bankruptcy court protection is also the most damning: Sears was the Amazon of its time.
Impressive because Sears really was that influential long ago. Damning because the company’s decline wasn’t preordained. Sears could have maintained pre-eminence and, in the digital era, elbowed out Amazon and other retailers. Some companies do preserve and build on success through reinvention. Look at McDonald’s, to choose another great Chicago-area company that has survived challenges and remains the iconic name in its industry. There was no law that said the biggest hamburger chain of the 20th century should still be competitive in 2018. McDonald’s kept up with changing consumer demands. Sears instead became a victim as its customers found other retailers who would better meet their needs.
On Sunday night, Hoffman Estates-based Sears filed for bankruptcy protection. The company’s future now likely rests with outsiders, including its creditors and a federal judge.
The dominance Sears squandered is breathtaking to consider. Richard Sears and Alvah Roebuck founded the company in 1893—a remarkable 125 years ago— to sell watches by mail. As recently as the 1960s, Sears was known as the “colossus” and “paragon” of American retailing. By 1972, 2 of every 3 Americans shopped at Sears in any three-month period, and more than half of households had a Sears credit card, according to “The Big Store,” an engaging 1987 biography of the company by Donald R. Katz. The Sears Tower rose in downtown Chicago as “a lasting monument to the invincibility and boundlessness and extreme profitability of a company that now accounted for fully 1 percent of the Gross National Product,” Katz wrote.
Parallels to Amazon are uncanny: Almost 2 out of 3 U.S. adults purchased something via Amazon in a three-month period in 2017, according to market researcher Packaged Facts. Amazon’s $177 billion in revenue last year is in the neighborhood of 1 percent of GNP. And like the announcement that Sears would erect the world’s tallest building in Chicago, Amazon soon will make a dramatic pronouncement in real estate terms about its own boundlessness when it chooses a location for a second headquarters. Wouldn’t it be fitting if Amazon chose Chicago?
The question of what befell Sears isn’t hard to answer. It was internal attitude as much as external forces. Katz’s book explored the hubris and insularity of a behemoth that couldn’t imagine being usurped, and thus didn’t anticipate the rise of mall competition or discounters or, eventually, the internet.
The company survived the turbulence of that era, then slowly lost relevance. Sears could have morphed into another Walmart or Target or Amazon—that is, it could have kept Chicago the Goliath of retailing cities— yet missed every opportunity. The last decade was one long slide downward. Now its existence is on the line.