The death of a major retailer rarely comes as a surprise. You can usually see the signs years ahead: the half-empty shelves, the dreary displays, the dim lighting, the odd combinations of merchandise as store managers struggle to fill space on the floor. The impending demise of Sears is no different. While the courts may have to decide whether Eddie Lampert, its chairman, has looted the company, as some investors claim, the truth is that by the time he took Sears over, in 2004, even a merchandising genius couldn’t have turned the chain around. Lampert made a bad situation worse when he combined Sears with Kmart, but he would have been hard-pressed to make it better.
Lampert is a financial guy, and like most financial guys he keeps his eye on the balance sheet. When it comes to retailing, though, the balance sheet doesn’t reveal the whole story. It will tell you about cash on hand — a valuable piece of information, to be sure — and about leases and credit card receivables, but it doesn’t capture the worth of a retailer’s most valuable asset, its brand.
There was a time when the Sears brand connoted reliability: whether you shopped in the store or ordered from the catalog, you expected quality merchandise at a reasonable price. It started to lose that reputation in the 1980s, when management was seduced by the glamour of selling stocks and real estate and lost interest in toys and underwear. By the time Wal-Mart began its nationwide expansion, in the 1990s, Sears had already forfeited much of its standing. Middle-class shoppers still went there for Craftsman tools and Kenmore appliances, but the rest of the business began to die.
The recovery plan involved buying Land’s End, the mail-order clothing retailer, in 2002. Land’s End, slightly trendy but definitely not haute couture, offered a plausible way to infuse a bit of excitement into Sears’s fashion offering without driving away long-time customers. But Sears couldn’t figure out what to do with it. Should Land’s End live alongside store apparel departments? Should it be the Sears apparel business? Management couldn’t decide, squandering an opportunity to restore a bit of the company’s diminished luster. All this occurred before Eddie Lampert loaded the company up with debt and Amazon induced consumers to do much of their shopping online. By the time of those events, Sears was already yesterday’s store.
To someone who has studied the rise and fall of the Great A&P, this story is familiar. Like Sears, A&P terrified its competitors for decades. Its stores were everywhere, and its commitment to low prices and its uncanny feel for changing consumer tastes made it the world’s largest retailer for more than 40 years. But in the 1950s, under managers who preferred to collect fat profits rather than investing in the business, A&P lost its edge. Customers complained that the stores were dowdy, and store brands like Ann Page and Jane Parker lacked the allure of the brands advertised prominently on national television. A&P became the place where grandma shopped, its name in such disrepute that the company tried to disguise its ownership of chains like Waldbaum’s and Food Emporium. No business strategy had a prayer of bringing A&P back.
Whatever the bankruptcy courts decide to do with Sears, I expect that the company will follow A&P to that great retail graveyard in the sky. A place where no one wants to be seen shopping doesn’t have much of a future in retailing.