Why did Sears fail? : Lessons to Learn
Once a titan of retail, Sears has become a cautionary tale of failure to adapt and innovate. As a researcher following business trends, I wanted to analyze what led to Sears’ downfall and extract lessons that other companies can apply to avoid the same fate.
A brief history of Sears’ rise and fall
Sears began as a mail-order catalog company in the late 19th century, bringing a wide array of products to rural customers. The catalog was essentially an early e-commerce site, allowing people across the country to browse and order items for home delivery.
In the mid-20th century, Sears expanded into suburban department stores and became the largest retailer in the nation. At its peak, Sears accounted for over 1% of America’s GDP.
However, Sears struggled to adapt its catalog business to an online e-commerce model. Meanwhile, big box stores like Walmart and digital disruptors like Amazon lured customers away.
Sears merged with Kmart in 2005, which only delayed the inevitable. Even massive store closures and asset sales couldn’t stave off bankruptcy. Today, only a fraction of Sears and Kmart locations limp along.
Here’s a timeline of their rise and fall:
| Year | Event |
|---|---|
| 1886 | Richard Warren Sears founded the R.W. Sears Watch Company in Minneapolis, Minnesota. |
| 1887 | Alvah Curtis Roebuck joined the company, which was renamed Sears, Roebuck and Company. |
| 1893 | The company was formally incorporated as Sears, Roebuck and Co. |
| 1925 | The first Sears retail store opened in Chicago as part of a mail-order plant. |
| 1933 | The first Sears Christmas Book (Wish Book) was published, becoming a holiday tradition. |
| 1973 | The Sears Tower, the world’s tallest building at the time, was completed in Chicago. |
| 1981 | Sears purchased Coldwell Banker and Dean Witter Reynolds to diversify its operations. |
| 1993 | Sears discontinued its general merchandise catalog, a staple of the business for over a century. |
| 2005 | The merger of Kmart and Sears was completed, creating the third-largest retailer in the U.S. |
| 2010 | Sears began to experience significant financial losses and declining sales. |
| 2017 | Annual sales dropped below $17 billion from a peak of over $53 billion in 2006. |
| 2018 | Sears filed for Chapter 11 bankruptcy protection. |
| 2019 | Following bankruptcy proceedings, 425 stores remained, and ownership transitioned to a new entity, Transform Holdco. |
| 2021 | The number of remaining operational Sears stores dwindled to under 50. |
| 2022 | Further closures saw the numbers dropping to fewer than 20 Sears stores nationwide. |
Key mistakes that led to Sears’ failure
Looking at Sears’ history, we can pinpoint strategic errors that other companies should avoid:
Failure to innovate
Sears dominated with its mail-order catalog but was slow to create an online version. The website it built lacked key features competitors offered. Sears missed the boat on digital retail and never caught up.
Lesson: Industry leaders need to aggressively pursue innovation, even if it means disrupting their own existing business models.
Inferior customer service
While new entrants like Amazon put customer service first, Sears stores grew cluttered and staff poorly trained. They lost out to retailers offering better experiences.
Lesson: Customer service and experience build loyalty and prevent switching to competitors.
Loss of brand identity
Sears was once a trusted household name known for value and selection. However, it failed to adapt its brand identity to changing consumer tastes. Meanwhile, Target and Walmart crafted hip, affordable brand images.
Lesson: Companies must reinvigorate and modernize their brands over time while preserving core values.
Bureaucracy stifling innovation
As a legacy company, Sears suffered from multiple layers of bureaucracy that slowed radical innovation. Newer competitors moved faster with flatter, nimbler structures.
Lesson: Bureaucracy can prevent necessary pivots; streamlined management allows for flexibility.
Failure to create stickiness
Sears’ catalog and stores lacked stickiness—there was little reason for customers to remain loyal. Competitors like Amazon Prime offered convenience that was habit-forming.
Lesson: Customer loyalty requires creating an ecosystem or appealing service model that’s sticky.
Could Sears have saved itself? Hindsight on what it could have done differently
It’s easy to criticize Sears in hindsight, but I wanted to offer constructive analysis on moves Sears could have made to possibly save itself:
- Pursued innovation aggressively: Sears should have rushed to build a world-class online store, while still leveraging its catalog history. It could have innovated around fulfillment like Amazon.
- Fostered a customer-centric culture: Training employees to provide amazing service could have set Sears apart. Monitoring satisfaction scores and feedback in real time could have flagged problems.
- Revamped and modernized its brand: Sears could have updated its brand image for contemporary times while preserving its heritage. Creative branding and marketing could have made it feel relevant.
- Streamlined management and fostered innovation: Cutting bureaucracy by empowering creative internal teams and running small tests of ideas could have allowed Sears to innovate faster.
- Built membership and loyalty programs: Offering discounted prices for members and rewards for loyalty could have driven retention and habit-forming behavior. Customers may have stuck around due to convenience.
Of course, this analysis has the benefit of hindsight. And an entrenched company like Sears would have found it difficult to make major changes quickly. But the above actions may have given Sears a fighting chance.
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Key takeaways – Lessons all businesses should learn from Sears’ decline
Sears’ failure provides important cautionary lessons for other businesses:
- Customer obsession – Provide amazing service and experiences that build brand love, trust, and loyalty. Make customers the top priority.
- Continuous innovation – Be willing to disrupt yourself and aggressively pursue innovation. Falling in love with legacy business models leads to obsolescence.
- Lean management – Cut bureaucracy and empower teams closest to customers to drive agility and innovation.
- Brand rejuvenation – Keep branding fresh and relevant over decades, while preserving core brand values. This builds a recognizable, resonant brand identity that attracts youth.
- Sticky experiences – Create habit-forming and convenient experiences via memberships, rewards programs, and other incentives that drive retention and loyalty.
- Agility and speed – Be able to pivot faster than competitors. Slow reaction times killed Sears.
Today’s rapid pace of technological change means all businesses are at risk of disruption. Companies that avoid Sears’ mistakes and learn these key lessons give themselves the best chance of thriving in the future. Though its tenure was impressive, Sears teaches us that no company can rest on its laurels indefinitely.
