In reality, the decline of any large organization happened over time although when people in senior management look back it seems there were catalysts. On You Tube there is a clip 5 reasons why Sears went bankrupt. This means you can learn from them and have warning signs for you investments. The You Tube interview 3 people but the ideas are valid.
- Diversification in the mid 1990’s Sears bought a stock brokerage company to complete its Financial Services division. This was at a time when it was generally thought that companies had to scale up and offer customers something for everyone. Sears previously owned Allstate Insurance for decades, and had credit cards, so why not make the step into stock brokerage? The reason most of Sears customers did not have brokerage accounts and those that did were not going into Sears to do there business. The business began to take away senior management’s eye on the retail stores.
- In 1993, the last of the Sear Wish Books was given to every household in the country. People had grown up with it, they identified with the company and equally important, but now a missed opportunity, Sears gained a great deal of information about their shoppers. The information was is an asset to Amazon, was not put to use by Sears.
- Softer Side of Sears ad campaign. The good news it was aimed at the female shopper and many of the shoppers are female. The bad news, the customer when asked where they bought a piece of clothing wanted to say the Gap or any other store besides Sears. It was the rise of semi independent companies and Sears missed out.
- K-mart merger – Sears bought K-mart but the synergies were not good, the average Sears shopper was more affluent than the average K-mart shopper. The average Sears shopper was not going to shop at K-mart and the average K-mart shopper was not going to shop at Sears. After World War II, the suburbization of America happened and Sears rode the wave, they expanded to the suburbs and the malls and because of their national name, rents were very inexpensive relative to the rest of the mall. K-mart was a second tier company and did not get premier mall space or they were in secondary malls or nearby the big malls in stand alone stores. The real estate was not a reason to buy K-mart.
- Edward Lampert – the present owner of the chain. Mr. Lampert saw value in the real estate and is not a retailer. Over the past number of years to his companies, he has done very well in the selling of the real estate but he is not interested in same sales growth of the stores or retailing except for some high end aspects.
Linking to dividend paying stocks, when insiders and people who care about companies look back and see opportunities taken and missed, there will have been some mistakes, but somewhere along the line the exectuion will be the most important thing. The Sears people who were rewarded by shareholders for a long time missed more opportunties than normal. The stores were in decline for years, a number of years ago the Wall Street Journal ran a story about a reporter going into the store to see how the manikins were dressed in the ladies clothing – the stockings had runs. That is not to say all manikins had stocking with runs, it is to say, but standards in the biggest malls were going down. Looking back one can see when the retailer lost the way, however, to make money you have to ensure you believe the corporate strategy is the best one and is being excuted to the customer’s satisfaction to be a repeated customer.
There are more questions than answers, till the next time – to raising questions.