There are many ways to look at America, and it seems like most of them have been tried. People attempt to figure out who we are and where we’re going by looking at the arts, or popular culture, sports, public policy, religion or whatever.
I’ve always thought that you could tell a lot about the U.S. by looking at the nation’s largest retailer. Someday that will be Amazon, and we can probably get a glimpse into our future there, but the current number-one is Walmart. If you spend some time at one of their “supercenters,” I think you can gain some insight into our present state of affairs.
You can also learn a lot about the past by looking at the company that used to occupy that position, and you don’t have to go back all that far to get to the pre-Walmart era. When my partner and I started our business in 1984, the largest retailer in the world was Sears.
I’ve always liked hearing the founding stories of businesses large or small, and I find the Sears story particularly instructive. In 1886, Richard Warren Sears was working as a railroad station agent in North Redwood, Minnesota, when he received a shipment of watches from a jeweler in Chicago.
The watches were intended for a local jeweler, but for some reason that merchant refused to accept delivery. Railroad men, of course, were very interested in timepieces, so Sears decided to buy the shipment himself and sell the watches to his colleagues for a profit. His plan worked so well that he ordered more watches and devised a mail-order catalog to sell them. Within a year he had moved with his new business to Chicago and taken on a partner named Alvah Roebuck.
Sears and Roebuck began adding other merchandise to their line, such as sewing machines and sporting goods, so in 1893 they took the word “watch” off their 300-page catalog. By 1896, Roebuck had sold his half of the company to a group of Chicago businessmen, the catalog had reached 532 pages, and the product mix included dolls, stoves and even groceries.
In the early 20th century, Sears expanded into nearly every category you can imagine, including dry goods, drugs, hardware and furniture. It started selling cars in 1905, and houses in 1908. Bizarre as it may seem now, tens of thousands of families would buy their homes in kit form from the Sears catalog over the following three decades.
Sears was not the first mail-order business, but they consistently expanded at a breakneck pace, eventually dominating the distribution of products to rural America. They took that trade from thousands of general stores, which could not match Sears in selection or price.
If that sounds like Amazon to you, well, it does to me, too. Sears did not open its first brick-and-mortar store until 1925 (Amazon opened theirs last year) but it became an innovator there as well. It was the first to cater to both men and women, the first to offer self service, and the first to realize that shoppers were becoming motorists.
Over the decades that followed, Sears created or purchased numerous major service providers, like Allstate Insurance and Coldwell-Banker realtors, and developed household name brands such as Craftsman tools, Kenmore appliances, Diehard auto parts and Discover credit cards. In 1984 it partnered with IBM to launch one of the first e-commerce ventures, called Prodigy.
That brings me to the part of the story that you probably already know. Through the 1990s, Sears’ position as a generalist was hammered by the growth of Walmart and Target. Meanwhile, Lowe’s and Home Depot were tearing away the home improvement business, and discounters like Kohl’s and T.J. Maxx were siphoning off budget-minded apparel shoppers.
In 2004 it merged with its old rival, Kmart, but it was kind of like two lifeboats strapping themselves together. Neither of them was suffering from not being big enough. They were suffering from the lack of a strategy that was relevant to the 21st century. The rise of e-commerce may have been the coup de grace, but there were plenty of sharks in the water already.
So it came as no great surprise when the company announced that it lost $2.2 billion in 2016, its sixth consecutive 10-digit deficit, and that it would close 150 more stores. That leaves 1,400, which is down from 3,400 in 2006. The same month, it sold the Craftsman brand to Black & Decker.
Like the railroad engineer who takes an axe to the wooden rail cars, Sears has broken up just about everything that will burn. Although it sold the iconic Sears Tower long ago, it still has extensive real-estate assets, but it needs them to guarantee the pension fund.
There was a time when Sears could claim that one out of seven Americans either worked for the company or had done so in the past. It currently employs 140,000 people, down from 355,000 just 10 years ago.
On March 21st of this year, in its annual report, Sears warned investors that it could not be certain it would remain in business for another year. It went on to express optimism in a new turnaround plan, but such a statement in that context is surely not a good sign.
Big retailers have been going under at a rapid clip. The Limited and Sports Authority were recently shuttered, while Radio Shack and American Apparel are teetering. Macy’s, Staples, and J.C. Penney have announced major store closings.
Still, it’s a bit of a shock, at least for someone my age, to hear that such an iconic American brand may disappear. To a young person, it would be like waking up and finding that McDonald’s was gone.
You may be wondering what the demise of Sears has to do with you, since they aren’t really a player in art supplies. (I’m sure they were at one time.) That actually may be the basic problem, that no one any longer thinks of Sears first when you mention any particular product category.
Amazon tries to be all things to all people. Walmart is all things to some people, whereas Staples wants to be some things to all people. I guess you could define specialty retailers as merchants who wish to sell some things to some people.
One lesson from the Sears story is that size isn’t everything. It’s more important to know what you’re trying to sell, and to whom.
You can e-mail Kevin at kfahy@fwpi.com.
