How Sears Missed The Digital Era
Case Study: Not Reading The Tea Leaves Disaster
John Smyk, CPA, MBA
Business creator and facilitator for growth
Just how many of you remember the old classic ad jingle ‘Sears is where America shops’? With only 12 stores left in this once iconic retail chain, the sun will soon set. The Chicago skyline for close to 40 years no longer bears the Sears Tower name. The downfall of this once mighty retailer is a quick and stunning reminder that an innovative company can fall. As a result, Sears missed the digital era.
Briefly, I’ll take a chronological dateline for Sears leading us to the current status of this downfall. As retailing has seen a tremendous change of the business model, personal tastes, and demographics, how much was missed by Sear’s executives to adapt to those changes? The answer is catastrophic. Further, this is where strategic management lies to make those difficult choices by listening to customers and paying close attention to evolving industry trends.
Sears Missed The Digital Era
Back in the day, my sister and I used to race for the drop off of the Sears Christmas Wish catalogue. The most important pages of this catalogue was obviously the toy section. Then, the Sears Christmas Wish catalogue became a staple with my own children years later.
In 1993, Sears discontinued their catalogue due to high distribution costs causing the decline of sales and profits. In fact, Sears dismissed about 50,000 workers who were responsible for fulfilling customer orders.
Then, looking back, had Sears reorganized their catalogue distribution business, this outcome would be different today. Also, why did Sears Canada have an e-commerce service up to their divesture in 2015?
Additionally, an efficiency reorganization of the catalogue division would reduce costs by using new automation with lower cost delivery logistics. Then the evolution of technology into the 2000’s would transition into a digital catalogue for online orders.
Contrast today with the giant online Amazon service that capitalized on the void left behind by Sears. But Sears had no foresight to adjust their catalogue service due the overspend in the diversification of non-core services. Therefore, eventually leaving their retail stores vulnerable.
The Timeline Of Sears
Let’s put the Sears, Roebuck and Co. era into perspective to gain an understanding of its rise and fall. However, as any founder will tell you, a company’s failure is heart wrenching to witness. So, let’s go with the timeline.
- 1886 Founded as R.W. Sears Watch Company
- 1892 Became Sears, Roebuck, and Co., Richard Warren Sears and Alvah Curtis Roebuck
- 1906 Reincorporated by Richard Sears and Julius Rosenwald to start mail order catalog
- 1906 Initial public offering (IPO) worth $40 million was first major retailer
- 1925 Opened first experimental retail location in Chicago, Illinois
- 1931 Diversified into creating Allstate Insurance
- 1933 Launched its Christmas catalog known as Sears Wishbone
- 1920's to 1950's Expansion into Western Hemisphere and Spain
- 1974 Opened the 110 story Sears Tower in Chicago, Illinois
- 1985 Sears rolls out the Discovery credit card
- 1990 Walmart surpassed Sears as United State's largest retailer
- 2003 AEW and MetLife gained control of the Sears Tower
- 2004 Kmart Holdings acquires Sears, Roebuck, and Co, Item
- 2006 Company's profits peaked at $1.5 billion
- 2010 - 2016 Company lost $10.4 billion
- 2014-2024 Sell off brand names, balance sheet sell offs, and store closures
While, the catalogue service was in distress to render it unprofitable. The brick and mortar stores were unable to weather the storm of retail changes with the threat of the e-commerce revolution. While, I also recall that many of my female colleagues did not shop at Sears for their clothing. Sears was battling more updated clothing labels and their more modern styling. Additionally, Sears was peddling their well establish brands, as Craftsman and eventually Kenmore.
End Of The Sears Era
With only 11 Sears retail stores remaining, the end of a retailers era can’t be too far away. Sears made too much of service diversification in the 1980’s into the early 1990’s, then instead focusing on its core retail business. Although, Sears was profitable for a number of years to come, debt was becoming a factor leading to Sears being acquired by Kmart in 2004.
In conclusion, much of Sears business model turbulence occurred in 1993 with its catalog distribution center inefficiencies. Had Sears spent time and resources on addressing their catalogue operations, we may be seeing a completely different leader in the e-commerce space. However, the missed opportunity is always 20-20 hindsight looking back. If only Sears, had focused on its core competency. Another failed case study for the business schools to teach on lessons learned.
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