Sears Holdings, the parent company of Sears and Kmart, announced in its annual report that “substantial doubt exists related to the company’s ability to continue as a going concern.” The long, slow death of a retail legend appears to be inevitable.
The death of Sears, while not imminent, brings to a close a significant chapter in American history. For nearly 100 years, Sears dominated the retail and catalog business in America. In rural America especially, Sears “wishbooks” opened a world previously unknown to farmers with reasonable prices for washing machines, ice boxes and other appliances as well as durable goods.
The arrival of the Sears catalog was an event, as families spent hours poring over the hundreds of pages containing everything from snake oil medicine cures to the latest fashions. America was, at last, a nation united in that everyone could share in this new consumer economy.
Sears stores revolutionized the way Americans shopped. But their failure to modernize those stores and come up with a strategic vision to survive the e-commerce boom ultimately led to their impending doom.
As with many retailers who have lost relevance to the consumer, Sears, once the largest and most powerful retailer in the world, will end its life, as T.S. Eliot said, “not with a bang but a whimper.”
Year after year of dreadful sales performance has led to comparable store sales declining for nearly a decade. You would have to go back to 2007 to find the last quarter with a comparable store increase. Since then, the store base has shrunk from 3,800 units to just over 1,400 combined Sears and Kmart stores. Along the way, the company has attempted to spin off or shed operating units (i.e., Lands’ End, Orchard Supply, Sears Canada, Sears Hometown, etc.), license brands such as Craftsman, monetize the real estate assets and try and transform its business with a “member” and online focus.
While all of these activities are notable, and perhaps even clever ways to financially maneuver the company towards a more viable path, absent in these activities was any noticeable effort to transform the main asset—the Sears and Kmart stores that were the lifeblood of the company for over a century. Years and years of deferred capital expenditures have led to tired stores that no longer have appeal to consumers, particularly the next generation of shoppers attracted to more specialized offerings or the appeal of online competition. Sears lost out to its direct competitors as well as the explosive growth of e-commerce. But, while all retailers have seen their sales slow, Sears continues to post industry worst comp store numbers and ongoing losses from continuing operations.
The decline of Sears began long before the internet. Kmart, Walmart, and specialty stores like The Gap were eating away at Sears’ profits and market share before the 1980s. Eventually, they became a dinosaur as they lost their identity as a store for the American middle class.
Our children are likely to see the end of the brick and mortar department store, just as my grandparents lived to see the end of wheelwrights, blacksmiths, and tanners, and just as my contemporaries witnessed the end of the mom-and-pop grocery store as well as the viability of small-town business districts – supplanted by Walmart and other big box stores.
We call it “progress,” but is it really? The creative destruction of capitalism grinds the past to dust, leaving no trace of what used to be, only what is in the here and now, and opens a vista of possibilities for an unknowable future. It makes no sense to refer to this process as “cruel” or “pitiless.” It is what it is — a reflection of reality at any given time and place. The people have spoken loud and clear: Sears no longer fills their needs so they are spending their money elsewhere. And because of that, Sears has to die.
In the final analysis, it really is that simple.