The Softening Slide of Sears


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There was quite a bit of noise in the business media when Sears announced its latest financial results in early December. The Hoffman Estates, Ill.-based company announced that it lost $548 million on about $7.2 billion in revenue during the most recent quarter. Those figures continue a steady trend of slowing sales and rising losses for the giant mass merchandiser, which once was the gem of American retailing.

No one should be surprised. After years of mismanagement, poor merchandising moves and terrible press, Sears—and its sister operation, Kmart—has become an after-thought in domestic retailing, a retail business that has simply lost its way. From this angle, it looks like it will not get better anytime soon. Consumers have moved on from Sears and Kmart, seeking other retailers that offer either more hip and savvy merchandise or better values.

Having failed at reinventing the company, Sears’ top executives seem to be accelerating the chain’s switch from a retail operation to one that focuses on the value of the land its stores are operated on. In other words, it is all about the real estate at this point.

My, how the mighty have fallen.

Sears is a textbook example of what retailers should not do as they plan for the future. More than a decade ago, the company’s executives made the decision to switch the chain’s merchandising strategies, at first trying to compete for higher-end consumers, and then backtracking and going after lower-middle-class shoppers. In the end, the company was left with very few loyal customers, though it did manage to quickly become the brunt of late-night TV jokes, far and wide.

Pet retailers take note. There is no guarantee that the retailer eating up market share in a particular area is going to be able to maintain that momentum forever. Things happen at companies, especially large ones, where demands for growth sometimes cloud the common sense needed to maintain a steady ship. When they come to the fork in the road, some companies actually go down the street that leads to a dead-end.

Staying ahead of consumer behavior is the most important facet of any retail operation. But, as officials at Sears can tell you, trying to outguess shoppers comes with its own set of risks. Sometimes these are risks that should be avoided at all costs.

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