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The Sears Bankruptcy – The Long, Slow Demise of a Power Brand
Think back to when you were just a kid. If you’re more than 50 years old, you probably remember the Sears catalog. The really big one, the 1000+ page “Wish Book”, came in the mail just as people were starting to think about Christmas. Kids would page through the toy section, dog-earring the pages as they went. Parents would check out the household goods, sewing machines, hunting and fishing gear, bikes, and appliances and just about anything else you could want for your home.
If you’re of the younger persuasion and have no idea what we’re talking about, imagine if Amazon put everything they sell into a ginormous print catalog, and delivered it to your door. That’s what Sears was doing. It was a huge marketing effort that paid off for decades. Sears put out its first catalog in 1888, taking advantage of the Post Office to bring their products into people’s homes. It wasn’t until 1925 that Sears opened its first brick and mortar store. By the late 1960s, Sears was the largest retailer in the world.
Sears was a power brand that introduced other power brands to America – Brands like Kenmore, Craftsman and AllState Insurance.
A Series of Bad Business Decisions
A series of bad business deals and bad business decisions certainly contributed to the downfall of the once powerful Sears. Sears spent a lot of money buying other companies such as Dean Witter Reynolds and Coldwell Banker. Then they spent a lot of money launching the Discover credit card nationwide. The result of their own shopping spree is they weren’t spending enough on their core retail business to stay relevant with the growing competition. As a result, Sears began a downhill slide in the early 1990s.
But it didn’t have to be that way.
The Amazon of Its Time
Some have described Sears as the Amazon of its time—maybe we should actually say that Amazon is the Sears of today. They pioneered shopping from home with their catalog business. They brought big town shopping to every nook and cranny of rural America. They delivered their products right to your door.
The problem is, Sears didn’t evolve with the changing times, and started losing out to Big Box stores like WalMart and Target, who offered lower prices and many more items, including groceries. And Best Buy became the go-to store for appliances, while Lowes and Home Depot ate away at Sears; hardware, home improvement, and outdoor equipment sales.
Cutting Costs Instead of Rebranding and Evolving
Instead of reevaluating their catalog business to take full advantage of this new thing called the World Wide Web, in 1993, Sears closed its catalog business. They also closed nearly 100 stores and cut 50,000 jobs. They lost out on a huge opportunity to become an online sales powerhouse. Amazon was founded in 1994 and went live online in 1995.
Sears missed another opportunity by failing to reinvent their business model and customer experience. They could have cut the number of products they offered to focus on a few things they could do really well, instead of trying to be all things to all people.
They failed to reinvest their money into developing a great customer experience for a younger market and updating their marketing in a way to attract younger customers. Cutting so many employees resulted in poor customer service and a poor customer experience. And everything Sears did appeared to be old and stale. Ask yourself – when was the last time you shopped at Sears? Do your kids ask you to take them to Sears? Is there even a Sears store in your town? Did there used to be? Did you miss it when it closed?
What Can We Learn From Sears?
What can we learn from Sears’ mistakes? What changes should they have made to stay relevant to today’s consumers? Sears, like so many failing companies before it, has left behind a blueprint of some of the biggest mistakes you can make in business. Ultimately, Sears is to blame for its own demise – don’t blame Amazon, Walmart or any number of big box stores. Sears strayed into other businesses, and ended up losing sight of what they are about in the first place. And then they didn’t make the needed changes to get back on track.
The following are some of their big mistakes, with suggestions of how you can avoid making the same ones:
1. Not understanding the importance of loyal employees.
One of the first things Sears did when they ran into trouble was cut tens of thousands of employee positions, and move full-time workers to part-time. Your employees are the foundation of your business, and often the face of your business. Many of those employees who lost their jobs in the first round of cost cutting went across the street to the competitors. Before cutting your work force, see what other changes you can make.
2. Focusing on the national at the expense of the local.
Sears and other big brands tend to pull back local decision-making and standardize efforts. While this can lower costs, it can also end up alienating local customers when they can’t find the local products they want. Focus on your customer’s wants and needs, no matter how big your company is. If you have clients in more than one state, or both urban and suburban communities, what is popular and trendy locally will likely be different in each location. One size does not fit all. Target each market segment at the local level.
3. Failing to prepare for changes in the way shoppers want to shop.
Sears eliminated their catalogs and shut down their direct-home delivery service to cut costs at the same time the internet was beginning to modernize the at-home shopping experience. Your business needs to stay close to your customers shopping needs and make things easy for them. Consider soliciting customer feedback on the shopping experience, and be sure to monitor online reviews.
4. Not adapting to how the customer communicates.
If consumers want to shop online or communicate through Facebook or Twitter, your business has to adapt. If you have a brick and mortar shop, it may be time to consider an e-commerce website. And if you don’t already, make sure you have a business website with a contact form that prospective customers can use to contact you 24/7. Engage in social media, and use it as a way to provide useful information to your customers, as well as a way to communicate.
5. Failed to change up marketing efforts to reach customers where they are.
Can you even remember the last Sears commercial you saw? Did you ever see anything from them online? Don’t be like Sears. Utilize videos on your website, YouTube channel or business Facebook page. Write timely and informational blogs. Start an email newsletter with helpful tips or news from your industry. The key to remember is that while tri-fold brochures and direct mail pieces still have their place, a majority of the people who might become your customer spend hours online every single day. Develop a social media marketing strategy and use SEO to get your website front and center in the search engine results.
And What About the Sears Brand?
Aside from their business blunders, Sears missed the mark on updating their mark. In 2010 they switched to an all-lowercase thin font for their logo with no other identifying mark. The trouble with it? Think to yourself about the Sears logo. You’re probably thinking of the 1980s version, the thick blue letters with a line running through the centers. Did you recall that Sears had a new logo? No? It’s not memorable. What is memorable is the older version, and the older ideas associated with the brand. “It’s where my grandmother shops” is a common sentiment. Sears has yet to find a way to make their brand relevant to younger consumers and, equally as important, have their imagery be memorable to younger consumers too.
The Bottom Line
If you want your business to succeed for decades to come, you need to embrace change now. Change can be scary, but it can also be exhilarating, and lead to new possibilities. With an ever-expanding marketplace and the exploding impact of social media, you can reshape your business to meet and exceed the needs of today’s consumer, all the while delivering a superior customer experience. You don’t want to be that person who says, “But this is the way we’ve always done things.” Doing the same thing, the same way, is an ineffective strategy in our changing world.