In an era before e-commerce was around; the king of all retail was a chain called Sears. If Amazon was a physical store, it would look like a 20th century Sears. Their megastores could be found across the United States and had an unmatched variety of products.
Sears was founded way back in 1893 by Richard W. Sears as a mail-order company. They opened their first retail outlet in 1925 and experienced impressive growth in the early 20th century, as the rise of the automobile led to improved accessibility to retail outlets. They continued to dominate the retail market for decades as they diversified their product offerings and expanded across the states.
Business was good, and Sears was showing no signs of slowing down thanks to their wide range of offerings and rapid expansion.
Sears rose to fame with their annual mail-order catalog, which was hundreds of pages long, and included everything from clothing to houses. People referred to their massive catalog as the “wish book”; it was the modern-day equivalent to surfing through Amazon’s site offerings. The company grew quickly as they heavily invested in retail and made key early acquisitions like Kenmore Appliances, Craftsman Tools, and Allstate Insurance. Sears took off during the post-WW2 economic boom, and they were a billion-dollar company by 1945. By the 1950s they had over 700 stores nationwide and served as an anchor for the rising shopping mall industry.
Sears was the clear leader in retail with its impressive product line, and annual sales reached $10 billion in the early 1970s. In Chicago during 1973, they opened up the famous Sears Tower, which was the worlds tallest building at the time.
What Went Wrong?
In the 1960s and 70s, Sears was starting to feel pressure from low-price retail competitors like Target, Walmart, and K-Mart. The retail price war did not bode well for Sears, and in 1990 Walmart surpassed them as the world’s largest retailer.
In 1993, Sears decided to discontinue its famous catalog to cut costs. In hindsight, this looked like a major mistake to throw away the catalog because they could have utilized it as a foundation for an e-commerce business in the coming years. If they had successfully transitioned the catalog to the internet, Sears could have been as big as Amazon.
They were losing battles left and right to their retail competitors. Walmart and Target had stolen the price-sensitive shoppers, category killers Best Buy and Home Depot stole the home appliance and electronic market, and Amazon’s e-commerce business was eliminating the need to go to retail stores.
Sears had fallen into the dangerous category of being unextraordinary. Customers no longer had much incentive to shop there with all the superior alternative options.
The demise of Sears worsened after acquiring K-Mart in 2004. The pairing of these two declining retailers did not work out at all, and their primary asset of real estate was crippled after the 2008 recession. The company was in a free fall and lost $10.4 billion from 2011 to 2016. Sears number of stores shrunk from 3,500 to 695 from 2010 to 2017. In October of 2018, they were forced to file for chapter 11 bankruptcy.
A diminishing value proposition along with a poor transition into e-commerce instigated the downfall what was once the world’s largest retail chain.
Once the retail industry became competitive, it demanded businesses to bring maximum value to the consumer. Whether it be low prices or high-quality products, it is vital to carve out a competitive advantage over your competition. People shop at Walmart for the low prices, and Best Buy for their great selection for high-quality electronics. If a company is unable to have a strong value proposition, then it is unlikely to survive.
The rise of e-commerce has increased the difficulty for retail chains and has left many big names in the dust. In today’s retail landscape, it is more critical than ever before to find a niche in the market and provide value to consumers to keep them coming back.
Today, Sears serves a go-to case study in the business world. They were on top of the retail industry, but are now all but a distant memory. They serve as a reminder that being the first to market does not make you immune to competition. A business is defined by its value proposition, and Sears was unable to communicate theirs clearly once a sea of competitors rose up.
Retail is an exceptionally competitive industry and it is imperative to give consumers a clear reason to choose you over the numerous alternative options.
The phrase “jack of all trades, master of none” is an accurate metaphor for what went wrong for Sears. They were unable to find their niche and give customers a reason to keep shopping there.
In a highly competitive industry, if you are not extraordinary, then you become invisible.