SEARS – AT THE TOP OF THE GAME – 1970’S AMERICA

We talked yesterday about restaurants that had once been at the top of their game and were struggling to regain some of those glory days.  Sears is the poster child for the loss of status in the retail world.

In the 1970’s the company dominated retailing, boasting the tallest office building in the world, in downtown Chicago.  As my mother-in-law can attest, a job at Sears (in her case, a company accountant) brought all sorts of assurance of both the good job and generous bonuses, stock options.  As Walmart entered the marketplace, joining the stock market in 1972, the times they began to change.  Pressure was put on Sears’ pricing and merchandizing, and Sears executives at the time discussed a variety of strategies that would assist in continuing to make Sears unique in the eyes of the customers, such as joining with Best Buy, or Home Depot, and/or offering a company that featured “socks to stocks” – the idea being that the company offered financial services so that middle America could participate in 401(k)s with a company they trusted.  By the 1990’s, without any real intervention, there were serious issues to be faced, such as the catalog business and the stores.  The CEO at the time, Arthur Martinez, was intent on having Sears stores located in the going business venue of the day, the shopping malls, and he wanted the stores to focus on apparel sales, because that was traditional in the malls.  Thus, even though research showed that customers were willing to drive 25 miles to purchase the popular Sears appliances, both the appliances and the other popular brand – hardware and tools – were shuffled to the back of the mall stores.  In this same time period, the Sears catalog – although highly popular – was deemed too expensive to print, and alternatives were not sought – even though this was the beginning of the computer age (Martinez was CEO from 1995-2000) where some sort of arrangement could likely have been devised.  Thus the catalog was scrapped, along with the 50,000 people who were staff to the effort.  So, I’d say that scrapping the catalog without giving it a second thought was mistake #1 – along with the decision about malls stores and their layouts.  In his own words, Martinez says: “I came to the conclusion that we couldn’t do two jobs – fixing the stores and fixing the catalog [Whyever not?] – The catalog was the easy choice to be sacrificed.”  Indeed!  Clearly, Martinez didn’t do much research on the matter – the catalog was very popular and attracted a lot of customers to Sears – even those who didn’t use the catalog stores for their purchases, tended to look first at the catalog before going into regular Sears stores to purchase merchandise.   And, then, mistake #2 was sacrificing floor space to apparel versus appliances and tools, both of which carried far more profitable sales.  And, then Sears compacted those mistakes by deciding to try to become “more hip” and attract younger customers.  This same mistake is being made by some retailers currently, by the way – with the same results.  The sad truth is that middle-aged and older people are those with the money – it might seem cool to try to generate “younger” merchandise, but those sales are small and generally unprofitable.  So, three strikes and the company was nearly out.  But, wait –  the crowning blow to Sears’ demise was to turn the company over to Eddie Lampert and his hedge fund and allow him to bring K-Mart in as a loadstone around Sears neck while proceeding to slash spending and divest the company of all of its money-making opportunities like appliances and tools.  And, thus, the story pretty-much ends for Sears.  Regrettable – and, certainly, preventable.  But one thing that most of the former executives at Sears, and certainly Lampert himself, failed to pay attention to was – and is – that it’s the service to the customer that ultimately counts the most and keeps the customers coming back as loyal shoppers.  Even in Sears’ heyday, staff at the stores were not well-trained and were disinclined to be of assistance to the shopper – and for appliance service, the lack of good service for Sears’ appliances was well known and likely jinxed many a potential sale.

So, as we’ve often said: ALL THE MOVING PARTS – IT’S ALL THE PARTS OF A COMPANY, LARGE AND SMALL, THAT ACCOUNT FOR THE INTERACTIVE PROCESS THAT SPELLS SUCCESS AND SUSTAINMENT.

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