News of the eventual bankruptcy, perhaps liquidation of what once was one of the most iconic brands in retail is anti-climactic. This was an outcome that has been long anticipated somewhat painful to watch, especially from a supply and demand network capability perspective.
Sears represented a brand that was killed by short-term thinking and context.
This Editor can long remember as a child, of the arrival of the three-inch thick Sears Catalog. It was a compilation of just about any product that an aspiring household would need in so many broad categories. Rather than stocking all such products in a retail store, a consumer could mail order a product. Yes- Sears was what Amazon is today, without the existence of the Internet, any whizz-bang technology, or instantaneous delivery.
Yet, the Sears brand was the manifestation of customer trust in brand and product quality that was passed from generation to generation.
Many editorials and case study commentaries will come forward regarding what happened to Sears, what led to its reckoning. Some will frame the narrative as failure to embrace the inevitable changes in consumer buying preferences. A lack of vision, the deep pockets to invest in technology like Amazon, Walmart or other existing large retailers. Some will frame the narrative in how not to leverage an iconic retail brand.
Our Supply Chain Matters observation reflects on an industry that literally responded as deer in the headlights to the online revolution. An industry that became the purview of private equity strategists, each with a notion of how best to harvest the online buying revolution but doing so with a shorter-term returns bias. Invest in process and technology but not before added private equity debt payments came first.
The notion in retail was always that brand and sales merchandizing always rules. The retail supply chain was viewed as a cost center, one that always had a cost control or avoidance orientation. Order inventory in optimized quantities to transportation cost, push inventory into retail stores, promote and markdown that inventory when it did not move to plan. Hopefully make money along the way.
Than Amazon came along and disrupted industry business models. Brand was converted to the notion of an online platform where consumers could easily order products and have them delivered directly to the home or business. The brand stood for reinforcement of a consistent buying experience that consumers learned to trust and embrace. Merchandising was converted to having the most up-to-date intelligence relative to individual consumers and their buying habits.
Supply chain capability was embraced in the notion of Amazon Prime membership making Free Shipping the rally cry for today’s online fulfillment. Despite billions in transportation costs, Amazon accomplishes its business model through diversification of its business strategy, namely a cash cow business such as Amazon Web Services (AWS) providing the up-front funding to scale-up customer fulfillment capabilities. More importantly, founder Jeff Bezos had the arrogance to stand-up to constant Wall Street cries for shorter-term profitability, instead articulating a model of Amazon as the ultimate long-term industry disruptor.
In a March 2017 blog, we highlighted that after several years of cumulative billion-dollar operating losses coupled with selling off valued real estate and associated branded businesses such as Lands’ End, Sears Hardware Stores and the Craftsman’s tool brand itself to compensate for operating losses and maintain working capital needs, landlords, suppliers, services providers and indeed, consumers, would make individual judgements.
Hedge fund manager and Sears CEO Eddie Lampert wanted it all ways.
Leverage two retail brands, Sears and Kmart that catered to two entirely different consumer segments. that did not really relate. Failure to keep-up with needed investments in both online and in-store customer and brand fulfillment needs. Selling-off real estate and other assets, neutering the iconic Kenmore brand for individual gain and failure to grasp the inevitable- Sears was dead brand walking. Each strategy moves had a shorter-term focus and each had a focus on shareholder vs, customer needs.
The demise of Sears is now inevitable, even if the chain attempts to participate in one last holiday season. Suppliers, employees and the consumers have already written-off the brand despite Lampert’s pleas to each for added consideration, loyalty and efforts.
Bob Ferrari
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